Findlay's budget deficits getting bigger

FINDLAY — Wage concessions and reliance on windfalls may mean leaner times ahead for Findlay's budget. Hearings for the city's 2025 operating budget were held Tuesday. During the hearings, all city department present their budget requests to council. Projects show the city spending $41.5 million to operate in 2025, compared to an estimated $38 million in actual spending this year. Income tax collections in 2025 are expected to be $32.1 million. This year, the city will collect about $31.7 million. The city is projected to end this year with a carryover balance of about $21.2 million. The proposed budget shows the city drawing down that carryover significantly over the next two years. Estimates show the city's year-end cash balance dropping to about $17 million by the end of 2025, based on projections. Projections for 2026, show the year-end balance dropping to about $9.5 million, that's below the city's minimum reserve balance, estimated at $10.9 million for budget year 2026. In a letter to council dated Dec. 3, and included with this year's budget book, city Auditor Jim Staschiak said, "It is of significance that this budget proposes a $5.8 million deficit in budget year 2025 and a $7.6 million deficit for budget year 2026. This is the largest two-year deficit proposed since the great recession." Staschiak said the high level of deficit spending indicates that the city's budget has a "structural imbalance" that makes it unsustainable. At Tuesday's budget hearing, he said, "In the past, we have seen good times come. We've seen windfalls like we've seen in the last three years. Not to the amounts that we've seen in the last three years, but huge amounts of money have come into the city. "And then we've also seen in times, expenses catch up with revenues and things get a little bit tougher," he said. "All the work that we've been doing over the last 10-plus years, 12 years, have built to this point where we certainly have a budget which is going to present some expense challenges and some ideas that you have to look at." He said the city is well-positioned with its budget reserves to track spending and make some "institutional changes in operations" over the next two years if needed, "without incurring great frustration." Staschiak said wage concessions and the end of the "huge windfalls" in business taxes are driving the deficits. "We recognize that the budget before you is a larger deficit than we have had in the last couple of years. That is primarily related to the investment in our wage increase," said Muryn. "When we did the wage study both on the service side, as well as safety side: in service, for example, on average against Tiffin, Ohio, Findlay employees were making $3 an hour less than Tiffin employees. On the high end, we were closer to $8 less." A total of eight "comparable" cities were included in the wage study, the mayor said. "If we don't do our job, we are going to be in a more challenging position, but that is the responsibility that we have, and that is what our departments understand, and you'll see, even in your budget this year, some adjustments to try to accommodate," Muryn said Tuesday. Muryn said there is no discussion about the need for an income tax increase. New contracts New three-year contracts recently signed with the city's police and fire unions include a 12% per hour "market adjustment" pay raise for union members, along with a "flat 4% increase" in 2025. In year two of the contract, union members will receive a 1.9% pay raise. Any pay increase in the third year of the contract will be based on a formula that factors in the performance of the city's 1% income tax. Last week, Service-Safety Director Rob Martin said "The wage increase is frontloaded in year one in an attempt to leverage the city's current strong cash position with the need to regain a competitive edge in an aggressive labor market." Martin said the amounts were carefully evaluated and fit the city's current financial performance and will be sustainable into the future. However, Staschiak said the new contracts will have a significant impact on the city's payroll. He said in 2025, the base pay of all union members will increase by $2.31 per hour (the market adjustment), along with a 4% raise on the new amount. Staschiak said his office is still working to determine the impact on the city's budget, but should council extend the same terms to all city employees, pay increases could be as high as 25% for some city employees. Findlay now employs about 330 people full-time. That's down from 355 in 2021. Martin, who led negotiations on behalf of the city, said the percentage quoted by the auditor is "misleading and inaccurate," but Staschiak said he'll "stand on it." Staschiak said that initial projection did not include other increases in payroll expenses like pensions, Medicare and workers' compensation, which are all calculated based on wages. The wage increases "across the city" will increase Findlay's payroll by about $4.6 million, with year three still to be determined. A vote by Findlay Council on the city's salary ordinance is expected at its last regular meeting of 2024, which will be held at 6 p.m. Tuesday. The ordinance establishes pay rates for all non-elected officials and city employees. The city's entire budget proposal for 2025 is available for public review online at www.findlayohio.gov by Friday. It can be found on the auditor's page under "Budget Presentations."