Fostoria gets updated recovery plan
City to be in black by 2020, out of emergency by 2022
Fostoria’s Financial Planning and Supervision Commission unanimously approved an update to the city’s five-year fiscal recovery plan Wednesday morning that projects the city to be in the black by the end of 2019, and forecasts the city to be out of fiscal emergency status by 2022.
The city was placed under fiscal emergency in May 2016 because of a substantial deficit.
Fostoria City Council and the Financial Planning and Supervision Commission, comprised of representatives of state and local government and Fostoria residents, are mandated by the state to approve a five-year fiscal recovery plan annually. The city budget, which mirrors the plan, was approved by the council Feb. 13. The plan and budget could not be officially implemented until receiving the commission’s approval Wednesday.
Belinda Miller, a representative from State Auditor Dave Yost’s office, said the General Fund projection in the 2017 plan was about $49,000 higher than what the city finished with. She said the plan projected the city to end the year with a $947,000 deficit, but the city finished 2017 with a $996,000 deficit.
Miller attributed this to using historical records as a basis for the projections, but not considering some changes that could have made that number lower.
“We were making that estimate based on info that had not been as clean as we’d hoped,” she said. “I don’t know if the historical information we based that estimate on was accurate enough.”
One example given was a reduction in local government funds received by the city.
Miller said for the city to be relieved of fiscal emergency status, it must have a three-month carryover in all funds, and last year, the commission and council members voted against plans that did not show that within a five-year period. This year, Miller clarified that the law does not specify an amount of time that a city can be under the fiscal emergency status.
“It’s not easy for a General Fund to recover $1 million that quickly,” she said.
Miller said the city began 2018 with a $1 million General Fund deficit, but the newly-approved plan shows the deficit erased by the end of 2019.
She said income tax projections in the plan are based on 2017 collections plus a “conservative” 2-percent annual increase.
Miller touted a $697,000 increase in income tax revenue from 2016 to 2017, but several city officials have said this statistic is misleading.
Finance Director Steve Garner said it is difficult to compare 2016 and 2017 figures due to a bookkeeping anomaly tied to Fostoria’s hiring of Regional Income Tax Agency. RITA was hired in May 2016 to help collect unpaid taxes.
He said in 2016, one month of income tax collections were reported as just $8,000 because of a transition to RITA reporting the tax revenue.
City Tax Commissioner Holly Cassady said the comparison is not fair.
She said the bookkeeping anomaly accounts for at least $350,000 of the comparison. She also said about $250,000 of the increase should be attributed to the city removing half of tax reciprocity, a tax credit that allows people who live in one municipality but work in another to be credited for taxes they pay where they work. Reciprocity is to be eliminated this year.
According to the plan, the projected General Fund deficit at the end of 2018 would be $320,708, but there is an expected surplus of $141,212 by the end of 2019. The plan forecasts the surplus to increase to about $362,765 by the end of 2020 and $368,085 by the end of 2021 before falling to $178,468 at the end of 2022.
Miller acknowledged the plan does not get the group “what we’re looking for” in five years, but she said much can change from year-to-year.
“Our initial concern is to get us back in the black,” she said. “Let’s take it one year at a time.”
Miller’s point is amplified by the carryover projections in the 2017 plan compared to the 2018 plan. In the 2017 plan, officials expected a carryover of $1,946,297 by the end of 2021, that number shrunk to $368,085 in the 2018 plan.
Mayor Eric Keckler said city administration spent months trying to make the plan acceptable.
“Some things are based on our assumptions,” he said. “We’ve got more work to do, there’s no doubt about it.”
Don Mennell, a resident representative on the commission, said revenue issues have been tackled with reciprocity being eliminated and a 6-mill property tax levy being approved, but he said the group needs to continue to consider making reductions on expenditures.
“We have to continue pushing,” he said.
Water, sewer rate hike possible
Also during the meeting, Keckler said the city would be undergoing a rate study this year for water and sewer to help pay for several expensive projects that are to occur in the water and sewer systems.
One example in the plan is the purchasing of two new screw pumps which are paramount for the operation of the wastewater treatment plant. Without them, water cannot be treated and raw sewage could back up into people’s homes.
Keckler said initial estimates to rebuild both were about $400,000, but he said Wednesday both will be replaced for just less than $400,000.
He said officials were considering “steep rate increases” but now he believes increases will be manageable.
“We are going to do a rate study, but I don’t see a significant increase,” Keckler said, before acknowledging some type of increase is likely. “I think we can get to a rate structure that won’t scare anyone.”