Rising fuel costs complicate budget process


By J Swygart - jswygart@limanews.com



Cory Noonan

Cory Noonan


Some of the guesswork of budgeting for fuel expenses in Allen County is taken out of the equation through bulk contracts put out for bid annually by the county Regional Transit Authority. The RTA in turn sells gasoline at a reduced rate to the sheriff’s office.

Some of the guesswork of budgeting for fuel expenses in Allen County is taken out of the equation through bulk contracts put out for bid annually by the county Regional Transit Authority. The RTA in turn sells gasoline at a reduced rate to the sheriff’s office.


Craig J. Orosz | The Lima News

An example of the anxieties associated with budget preparation is the burgeoning cost of gasoline and other petroleum-based products.


Craig J. Orosz | The Lima News

LIMA — To say the budgeting process for government entities is an inexact science is an understatement.

What elected officials must do, in essence, is take two constantly moving targets — projected revenues vs. anticipated expenses — and as best as possible come up with an educated guess where the two numbers might meet.

Stir in abnormal disruptions to the supply pipeline that seemingly grow more troublesome with each passing day of late and it all adds up to headaches for financial planners everywhere.

An example of the anxieties associated with budget preparation is the burgeoning cost of gasoline and other petroleum-based products.

County and municipal budget writers are forced to project fuel costs for heating months in advance. Similarly, they must try when crafting their annual operating budgets to forecast the price of gasoline for essential police, fire and emergency safety forces as well as other necessary services ranging from leaf pickup and street maintenance to mowing municipal parks.

Allen County Commissioner Cory Noonan this week said fuel costs are “a major component” of the county’s annual operating budget.

The national average price of gas rose to $3.38 during the week of Oct. 18, the highest price since September 2014, according to AAA data. The average price in Ohio remained at $3.17 for regular grade fuel earlier this week. What will that price be six months from now?

Noonan said piecing together budgets is always a matter of using the best information possible at any given time and then being prepared to adjust on the fly if necessary. That is particularly true when it comes to fluctuating fuel costs.

“Our budget is based on projections of revenue that will be coming into the county,” Noonan said. “Our budget commission — the county treasurer, auditor and prosecutor — provide us with very important numbers each December, and I’m sure they are working on that right now.

“When I think of fuel, I think gasoline for vehicles and also petroleum products for heating our buildings. All signs point to higher heating costs and we are preparing for those increased costs,” Noonan said. “When it comes to our safety services, each year at budget time you have to project an estimated number of miles that will be traveled and an estimated cost per gallon for fuel,” Noonan said. “You do your darned best, but at the end of the day those important people who protect us have to have fuel in their gas tanks.”

Buying in bulk

Some of the guesswork of budgeting for fuel expenses in Allen County is taken out of the equation through bulk contracts put out for bid annually by the county Regional Transit Authority. The RTA in turn sells gasoline at a reduced rate to the sheriff’s office.

In 2019 the contract for bulk fuel was $1.60 per gallon. The following year the price jumped to $1.74, while this year the RTA contract was for $1.47 per gallon. The sheriff’s office agreed to purchase 60,000 gallons of gasoline in both 2019 and 2020 and 50,000 gallons this year.

“During my tenure (as commissioner) gas prices have ranged anywhere from $2 per gallon to $4,” Noonan said. “We’ve constantly tried to take into account what could happen in the petroleum market. We meet regularly with department heads and elected officials and try to stay out in front of any potential issues. That way we can avoid knee-jerk reactions when costs go up or income goes down.”

Never was that approach put to the test more than it was in 2020 with the arrival of the COVID-19 pandemic. Noonan said the pandemic reinforced how best-laid plans can quickly go awry.

“When COVID hit halfway through the year we saw fewer dollars coming in (to the county budget). That’s when the team we have here in Allen County stepped up,” Noonan said. “Our department heads and elected officials said, ‘We need to pull back (on spending) and we’re going to get through this.’”

A similar process plays out annually, although on a smaller scale.

“Our budget is based on projections. You have to be conservative and ready to adjust,” said Noonan. “We went through that in 2020 (with COVID) and I couldn’t be more proud of the people I work with and how they stepped up.”

One possibility: Think hybrid

Steve Cleaves, finance director for the city of Lima, says one way to curb rising fuel costs is by looking to the next generation of vehicles: hybrids.

“In the last couple of years we’ve purchased four or five Ford hybrids for use by the police department’s detective bureau,” Cleaves said. “That’s an approach we’re taking, and it does help. As more heavy-duty hybrid vehicles become available we’ll phase into that as well.”

The finance director said the city solicits bids for the bulk purchase of fuel each year to limit the impact of price spikes on the municipal budget.

“Bids usually go out in the fall, although sometimes I’ll hold off on getting bids until the first of the year. This year with all the uncertainty (in gas prices) I decided to seek bids early,” he said.

City planners are currently putting the finishing touches on a General Fund budget that is expected to be approximately $38 million.

“We will submit the mayor’s estimate by Dec. 15 and then council will hold budget hearings in January. Following public hearings the budget is generally adopted in February,” said Cleaves.

Order early, order often

Rising fuel costs aside, changes to the way governments approach the budgeting process may be on the horizon … out of necessity.

According to Doug Spencer, chairman of the Auglaize County board of commissioners, delays in the manufacturing pipeline have forced government leaders to rethink the way business has traditionally been done.

“We can’t get the vehicles we’ve ordered,” Spencer said. “We’re being told that orders scheduled for delivery in 2021 will now arrive in 2022 … maybe 2023. So it’s back to the drawing board. We just can’t wait that long.”

He said the county’s “strong economic position” provides the flexibility to look further into the future than was once required.

Cleaves calls the approach “proactive budgeting.”

“On some of the equipment we’ve ordered, equipment we need badly, we’ve been told there could be a year’s wait. It’s even longer for larger items like ambulances and snowplows. We placed some orders earlier than we normally would have just because we need these vehicles,” Cleaves said.

“Fortunately our general fund is in pretty healthy shape, compared to most other cities in the state.”

Problems similar for large and small

From Allen County’s $34 million General Fund budget to a $1.1 million spending blueprint in the city of Ottawa, the problems for planners are universal.

Ottawa City Clerk-Treasurer Barb Hermiller said the city adopted its 2022 budget in July, “before we knew about rising gas costs, so we may be forced to adjust” some line items to compensate for higher-than-expected costs.

“We usually look at the previous year’s budget as a starting point when we set our annual budget talks. Fortunately, we’ve been able to maintain the fuel costs that were set in this year’s budget,” Hermiller said.

Cory Noonan
https://www.limaohio.com/wp-content/uploads/sites/54/2021/12/web1_Noonan-Cory.jpgCory Noonan
Some of the guesswork of budgeting for fuel expenses in Allen County is taken out of the equation through bulk contracts put out for bid annually by the county Regional Transit Authority. The RTA in turn sells gasoline at a reduced rate to the sheriff’s office.
https://www.limaohio.com/wp-content/uploads/sites/54/2021/12/web1_RTA_01co.jpgSome of the guesswork of budgeting for fuel expenses in Allen County is taken out of the equation through bulk contracts put out for bid annually by the county Regional Transit Authority. The RTA in turn sells gasoline at a reduced rate to the sheriff’s office. Craig J. Orosz | The Lima News
An example of the anxieties associated with budget preparation is the burgeoning cost of gasoline and other petroleum-based products.
https://www.limaohio.com/wp-content/uploads/sites/54/2021/12/web1_Gas-prices_01co.jpgAn example of the anxieties associated with budget preparation is the burgeoning cost of gasoline and other petroleum-based products. Craig J. Orosz | The Lima News

By J Swygart

jswygart@limanews.com

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