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City could face cash shortfall at year’s end

WARREN — The city could end 2016 with a cash deficit between $200,000 and $400,000, regardless of whether taxpayers support a 0.5-percent income tax increase on the Nov. 8 ballot.

City Auditor Vince Flask told City Council’s finance committee Tuesday he will be able to fill many of the city’s budgetary holes — especially in the police and fire department wage accounts — through the transfer of unappropriated money from dozens of the city’s general fund departments.

However, Flask said even with these transfers the city could have a cash deficit at the end of the year. The amount of the deficit will depend on whether tax collections continue on an upward trend or level off to the amount projected at the beginning of 2016 and whether spending can be reduced.

Council is expected to vote tonight on transferring approximately $720,837 from various general fund departments into its police and fire department wage accounts, its fire department fringe benefit account and its fire department pension account.

The majority of the internal note transfers, $340,000, are to be placed in police wages and will come out of a dozen departmental line items currently directed for worker compensation. The money will be used to pay the police officers through the end of the year.

“We are able to do this because we already have enough set aside in the workers compensation accounts,” Flask said. “We will not be able to do this next year. We will have to pay into them.”

The city is taking another $221,243 from various city departments to place in the fire department’s wage account. Approximately $148,894 is expected to be taken from various city accounts to be placed in the fire department’s fringe benefit account. The fire department’s pension account is being provided $10,760 from the health department’s hospitalization account.

Flask told council members during Tuesday’s finance committee meeting that he will be transferring this money from unappropriated funds to the police and fire departments, as well as other departments that need the cash in their accounts to last them through the end of the year.

The city’s health department is receiving an estimated $11,800 in transfers to be able to pay its wages.

Even with these transfers and others, Flask said the city may have an end of the year cash deficit.

“I will have a better idea where we should be in mid-November,” Flask said. “Right now, in the worse case scenario, we will have a $400,000 cash deficit.”

“If income taxes come in greater than expected it would reduce the amount needed at the end of the year,” Flask said.

Thomas Gaffney, the city’s tax administrator, said income tax collections have been coming at a faster rate than what was projected at the beginning of the year.

The city projected in January it would collect $17,110,000 in taxes during 2016. Based on the rate of current collections, Gaffney said the city end of the year collections could be as high as $400,000 more than projected for this year.  The increased tax tax collections could be as low as $200,000.

“Most of it is employer withholding,” Gaffney said. “The reason for the increase could be more jobs in the city or people are simply making more money. Hopefully this trend will continue.”

Gaffney said he will not know until early or mid-December how much more taxes will be collected than anticipated for the year.

Flask said he already has figured in $180,000 of the increased tax projections into the city’s budget.

Councilman Dan Sferra, D-at large, said having end-of-the year transfers from one department to another to help balance budgets is not unusual, but he expressed concern about the amount happening today.

“If this tax does not pass, I don’t know what will happen next year,” Sferra said. “This level of transfers shows the desperate situation we are in today.”

Even with the passage of the tax, the city could not use that money to balance any of 2016’s budget shortfalls.  Money from the tax increase would not start being collected until 2017.

rsmith@tribtoday.com

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