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How city bookkeeping works

The first Tuesday in November – some may call it election day, but to Ironton city officials it could be judgment day.

Wednesday, October 03, 2001

The first Tuesday in November – some may call it election day, but to Ironton city officials it could be judgment day.

Ironton residents will meet at the polls November 6 to decided whether to pass legislation that will increase the city’s municipal tax 0.45 percent for three years. During that time, explained council chairman Jim Tordiff, the city will get "on its feet," financially.

Understanding why the city is in financial straits boils down to understanding how city monies is budgeted – a message city officials are trying to get out to the public.

Following the money: How city money is budgeted.

In simple terms, Ironton’s budget is divided into two funds: general funds and enterprise funds.

The two funds are as different as financial night and day. The funds provide money for separate department types that generate revenue in different ways.

Enterprise funds: Fees for needs

Enterprise funds are based on fees paid by consumers for a product, such as fees paid for water or sewage service. There are four major funds in the enterprise funds categories: water fund, wastewater fund, sanitation fund, sewage fund, and the fire fund.

The water fund relies on the revenues generated only from water fees. The money is dispersed to five departments that fall under the water fund: water administration, water treatment, water distribution, water meters and equipment replacement.

Revenues generated from sewage fees can only be used to fund three departments that fall under the wastewater fund: wastewater treatment plant, wastewater collections department (storm sewers), and equipment replacement.

Services for trash pickup to both residential and business properties generate the monies housed in the sanitation fund.

The money used in the fire fee is generated by the $4 fee for each residence and, or, $0.75 per 1,000 gallon of water used by commercial accounts. Money in this fund can be used for debt payment of an aerial truck, a new fire station, personnel and the capital need of the department.

General Fund: The city at your service

The general fund is the account which funds the city’s primary duty: provide services to citizens.

This fund does not rely on sales to generate money. Instead, tax dollars provide the money needed to keep the coffers full in the general fund.

The city’s municipal income tax provides the most money to the general fund – about 39 percent.

Other tax items also provide money to the general fund. Personal and general property taxes, rollback and homestead taxes provide money to the city after these monies are certified by the county auditor’s office. These taxes cannot be increased or decreased without seeking approval from the county.

The temporary municipal fee levied by city council also provides a block of money for the city. The municipal tax will raise about $108,000 for the 2001 fiscal year. This fee is temporary, though. The fee terminates on March 31, 2002 if the municipal tax increase doesn’t fly. If the measure does pass, the fee terminates at the end of this year.

The city also receives money from estate and inheritance tax but that financial well is drying out. Starting this year, the government signed legislation that will stop taxes from being assessed on estates less than $200,000 in probate assets. In 2002, the ante will be upped to $400,000 and, eventually, the inheritance tax will be phased out of existence.

Salaries and benefits are the main debts encumbered by the general fund. This account houses the payroll line items for the city’s service departments and for the flood fund, recreation fund, swimming pool fund, police and fire pension funds, street fund and health fund.

According to the city’s numbers, salaries and benefits equal 69 percent of the payout from the general fund. Transfers to other funds – money can be pulled from the general fund to shore up enterprise funds – equals 16 percent of the general fund’s expenses and another 16 percent is used for the operating costs of the general fund departments.

What offices are paid by the general fund?

The mayor’s office, finance department, fire and police departments, parking meter, municipal court, engineering, building maintenance, income tax department, civil service, attorney, city council, police dispatchers, community corrections, health department and the street department.

<B>The great divide: Transferring money between the funds<B>

So, if there is a deficit in the general fund, why not transfer money from the enterprise fund?

First, the city passed a law on June 3, 1980, that keeps the city from "robbing Peter to pay Paul."

Article V – Finance, section 5.05, states, in part, "any fund which, in its entirety, is provided by tax levy or service charge (such as money from enterprise funds) shall not be transferred to any other fund."

In most cases, this law prevents the transfer of money from enterprise funds into the general fund. The catch is if an employee paid out of the general fund works for a department in the enterprise fund, then money to pay the employee for the time worked in the enterprise fund department can be transferred.

For example, if an employee of the engineering department, a general fund supported department, is temporarily assigned to the wastewater department, an enterprise fund, then money can be transferred out of the wastewater line item into the general fund to reimburse the general fund for the money spent on the employees pay.

Some money from the fire fund is transferred into the general fund as well because this fund was established to also pay for three firemen.

Since the city hasn’t replaced employees lost to attrition, the city has been placed in situations where employees have been transferred to other departments to cover holes in departments.

Another reason why money cannot be transferred from an enterprise fund is that the departments in the enterprise funds may not have the extra cash to bail out the general fund.

<B>Where did the money go?<B>

One of the most common questions, city officials said, people ask is "where did the money go?"

Since 1999, Mayor Bob Cleary explained at last night’s meeting, the city has lost six major businesses that employed a substantial amount of people.

The year 1999 was the bleakest year in the city’s financial history. In that year, Cabletron, Allied Signal and Ashland Oil left the city.

In 2000, Matlack and Ironton Iron pulled out of Ironton and this year, River Valley Health System shut its doors. With less major businesses in the city, there are less employees paying 1 percent of their paycheck into the city’s coffers.

There is also a trickle-down effect that isn’t so easy to calculate. Businesses rely on businesses to make money. Local restaurants, gas stations, car dealerships, auto parts stores, and other retail businesses sells their goods or services to people in the community. When people suddenly become unemployed due to business closings, then they stop spending money in local businesses which begins to take measures against the brunt of losing customers. This normally equals layoffs or reducing the hours employees work.

<B>What will the increase do?<B>

Council chairman Jim Tordiff warned those at last night’s meeting that the increase in the city’s income tax will not allow the city to advance, but it will allow the city to stay afloat while officials try to get Ironton back on its financial feet.

Other city’s, Tordiff explained, has traveled down this same path. Tordiff speculated that 80 to 90 percent of cities similar to Ironton have already increased municipal income tax rates.

According to statistics from the Ohio Municipal League, a 1.45 percent income tax would be in alignment with the rate other cities levy against employees.

Ironton happens to be one of the last cities its size to increase the rate.

Census data shows Ironton having a population of 11,211 people. The city of Vandalia in Montgomery County, population 14,603, levied a 1.75-percent income tax.

Cities closer to Ironton also have a higher income tax than the city. Circleville, a city in Pickaway County, has a population of 13,485, has a 1.5-percent income tax and Portsmouth in Scioto County charges a 1.4-percent income tax. Portsmouth’s population is 20,909 residents.

<B>Temporary measures: The city’s efforts to hold out

<B>The city has taken temporary measures to keep the same level service to residents – but it’s like polishing the silverware on the Titanic, there’s still a gaping hole in the side.

So far, city employees have chipped in to help bail out the city. In a previous statement, Tordiff pointed out that city employees elected to not receive a percentage increase in their wages, even though they were entitled to the money.

The Mayor has also left job positions open once an employee leaves city employment. This has came at a price, though.

For example, the city’s street department is missing one key element – a labor pool. Because there aren’t any laborers, equipment operators are required to temporarily fill in for general labor duties.

The city also faces a dilemma when city employees are off from work when they are ill or on vacation. When there is an opening in one department, the mayor is required to transfer qualified personnel, on a temporary basis, from one department to another.

<B>The flip side: If the measure doesn’t pass<B>

If the legislation doesn’t pass then city council and the mayor will once again find themselves in a position of trying to reduce the city’s expenditures and this will probably mean a reduction in services.

City council is now working on a plan to put in place if the legislation gets knocked down in the ballot box and most plans calls for reducing the services the city provides for its residents.

The next town meeting will be at the Operation Be Proud office next Tuesday at 7 p.m. City officials are urging citizens to attend the meeting.