State calls Findlay's fiscal path 'unsustainable'

FINDLAY — Findlay Auditor Jim Staschiak again warned council that the city's financial footing is slipping, and now a new state review has formally flagged seven areas of concern, from shrinking reserves to falling income tax revenue. Staschiak delivered the city's mid-year budget review on July 22. The review is a formal check-in required by city ordinance and used to brief council on the city's financial condition halfway through the fiscal year. The session was held as a Committee of the Whole, a meeting format in which all council members sit as a single committee to receive detailed presentations, ask questions and discuss issues without taking legislative action. The Ohio Auditor of State's preliminary 2025 Financial Health Indicators list two critical and five cautionary outlooks for Findlay, including declining unrestricted net assets, declining unassigned fund balances, falling income tax revenue, negative revenue-versus-expense trends, and concerns about the condition of capital assets. Staschiak told council the state's assessment "just came out days ago" and reflects a trajectory "the state says is not sustainable." The city entered 2026 with a General Fund revenue budget of $36.8 million and a budgeted operational deficit of $5.8 million. Mid-year receipts totaled $18.1 million, or 49.1% of budget. The auditor's office currently projects a year-end carry forward balance of $4.06 million above the minimum reserve of $10.5 million, but Staschiak said the city's balances "are shrinking and they're shrinking notably." He reminded council that rating agencies expect reserves in the 40% to 50% range, while Findlay's minimum is 25%, and said council must be prepared to explain "in a positive, understandable, justifiable manner" how the city plans to reverse the decline. Income tax revenue continues to show volatility. Year-to-date collections are down 2.6% from last year and are running $700,000 below the city's projection of $31.49 million. Employer withholding, which accounts for 75% of income-tax revenue and 77% of General Fund revenue, is up 0.82% year-to-date. Individual payments are up 4.9%. Business receipts, the most volatile component, are down 36% so far this year. Staschiak said business tax performance "doesn't really matter until October," but advised council to be cautious with appropriations until those receipts arrive, noting "you can always end the year strong, but you can't unspend it once you've spent it." The review highlighted several structural challenges. The city continues to fall short of the state's recommended pavement maintenance benchmark of 6.6% annually. Based on Findlay's 200 miles of improved roads, the target is 13.2 miles per year, or 31.4 lane miles. Recent years have consistently fallen below that level. Replacement and improvement accounts are underfunded in multiple departments, and the auditor noted that long-term capital maintenance costs should be calculated and reported as part of the annual capital budget process. Water capacity remains a significant concern. The city's reservoirs hold a maximum three-year supply, and Findlay currently has no designated surplus water. Staschiak said much of the source water is already obligated for specific uses and warned that one new employer could require one to four million gallons per day. Before committing water to new industrial or regional customers, he said, the city must demonstrate adequate capacity for current residents and anticipated growth. He called the issue "a key concept for consideration" and said any misstep could affect "generations of Findlay's residents." Employment and wage trends continue to pressure revenue growth. Hancock County employment has fallen from 38,200 in June 2020 to 35,100 in June 2026, a loss of 3,100 jobs or 8.1%. Three-year income tax growth is down 9.5%, while five-year growth stands at 4.7%. Staschiak said increasing wages and taxable payroll jobs is essential for long-term stability, noting that a Findlay resident must earn $66,000 a year to afford a basic rental home, while the average local wage is between $24.37 and $25.19 per hour. Despite the challenges, the city continues to benefit from historically low debt. Outstanding debt has dropped 91.3% since 2011, falling from $1,106 per capita to $96 per capita. Staschiak said the city's practice of paying cash for capital projects and securing grants remains a major advantage, but warned that declining fund balances and ongoing operational deficits will make it harder to secure financing at competitive rates. He said the city lacks contingency plans for a major employer loss or revenue downturn and urged council to develop financial, capital and directional components for long-term planning. The auditor also flagged immediate legislative needs. A transfer of $521,600 from the General Fund to the Severance Payout Reserve Fund will be required to cover known unfunded liabilities through 2027. General Fund expenses are currently running 4.5% under budget, but eliminating the $5.8 million deficit would require expenses to finish the year 14.2% under budget. Staschiak encouraged council to strengthen its review of tax credits and grants, noting that Findlay's 1% income tax rate already provides a broad advantage compared to other communities. He said any tax credit should only be approved if the investment would not occur without the incentive and if the public benefit exceeds the public cost. He also urged council to engage more directly with the city's municipal advisor and to incorporate economic development strategy into regular discussions. Council members did not take action during the review but will continue budget discussions as year-end projections develop and business tax receipts arrive in October.