LIMA — Local governments spend months creating an annual budget. With the coronavirus creating economic havoc, they’ll have to do it again.
Local government officials are estimating 10% to 25% reductions in revenue due to the economic shutdown. But it may be months until they have concrete figures.
“We know it’s going to impact us, but until we see April’s receipts, we don’t have really any idea,” Wapakoneta Mayor Tom Stinebaugh said.
Those on the county level have similar issues. Because sales tax revenue is collected by the state and dispersed to each county, the process creates a two-month lag separating budgets from on-the-ground realities. Accordingly, it may be June until Ohio counties know the full extent of the damage.
Allen County Commissioner Greg Sneary said Allen County expects a 10% reduction when those numbers come in, which equals $2.8 million in lost revenue.
“We know it’s going to go down, and the financial experts in the county gave us a number that we believe and we trust,” Allen County Commissioner Cory Noonan said.
Auglaize County, however, is estimating a 25% reduction for the year.
“We’ll be pleasantly surprised if it’s not that big of a hit,”Auglaize County Administrator Erica Preston.
Either way, local governments expect the reduction to be significant.
So far, that hasn’t meant layoffs or furloughs for most governments in the region. Lima Mayor David Berger, who estimated a 15 to 20% reduction in income tax for the city, said that may have to be an option down the line.
“We haven’t gotten to the point of making decisions on layoffs,” Berger said. “It is certainly a possibility, but it’s too early to pull that trigger.”
Governments across the state haven’t been so lucky.
The City of Cincinnati, for example, has estimated a $18 million gap in its budget for 2020. A total of 1,700 employees have been furloughed as a result. Other larger cities that have done the same include Akron, Dayton, Parma and now Toledo, which announced 326 furloughs Thursday.
To avoid similar outcomes, local officials said governments will begin planning for the reduction by taking steps that many cities and governments first took when reacting to 2008’s Great Recession.
Public employees can expect hiring freezes and no pay increases, unless contractually obligated. Some public works projects, especially those that haven’t received grant dollars, will be put on hold.
Those local governments that have been able to put together a rainy day fund will also most likely be able to weather the storm better than others. Noonan said his co-commissioner hasn’t let him forget about 2008’s economic downturn.
“We’re very fortunate to have the team that we have here in Allen County,” Noonan said. “We’ll work through this and come through the other side.”
Another option local governments have is to rely on the federal government. The latest stimulus bill passed by Congress, the CARES Act, made $150 billion available for the 36 U.S. cities with over 500,000 people, but that leaves almost 19,000 cities, towns and villages without help.
Cities in Ohio have the extra burden of largely relying on income tax to fund services — a tax structure that 98% of municipalities across the nation don’t have. As a result, The Brookings Institute placed Columbus, Cinncinnati, Toledo and Cleveland at the top of a list of cities that will be most affected fiscally by COVID-19 due to their reliance on income tax.
Ohio mayors are advocating for federal assistance for Ohio’s cities because of the discrepancy.
“It’s suicide for all of us to have to deal with a $100 million cut out of a $400 million budget,” Cincinnati Mayor John Cranley said. “It will set cities back for a generation.”
Some Ohio cities, Dayton Mayor Nan Whaley said, also have not fully recovered from the 2008’s economic downturn.
“There’s just nothing left to cut,” Whaley said.
Those in Wapakoneta, however, may be able to avoid some of the hurt other municipalities face this year. Due to increased demand for cardboard boxes due to more and more deliveries, Wapakoneta’s new largest employer, Pratt Industries, has added a significant revenue increase for the city, Stinebaugh said. While others see reductions, there’s a chance Wapakoneta will see a smaller decrease in revenue.
“We are probably in an enviable position,” Stinebaugh said. “We have a big new employer in town. That will help offset what we’re going to lose.”
Reach Josh Ellerbrock at 567-242-0398.