Revenues are projected at a million dollars less than expenses in 2013.
The fund balance has been raided for years.
Costs are going up.
Personnel cuts over the years have brought the staff close to its minimum contractually-mandated size.
At Monday night's meeting of Warren City Council and its subsequent budget workshop, members discussed some of the areas that are costing the city money and proposed ideas for spending less and making more.
The work session itself was a new step in the budget process. "This is a first for the City of Warren this process that you're participating in," Mayor Mark Phillips said to about 20 residents in attendance.
The city must submit its budget by the end of the year.
City Manager Nancy Freenock suggested a tax increase, expenditure cuts, and a limited draw-down of the city's fund balance to balance the budget.
"This is not a problem that is local to Warren," Freenock said. "The whole country at every level of government is going through this."
On Monday, in conjunction with capping the possible tax increases for 2013, council charged the city administration with checking on possibilities raised at Monday's meeting and bringing back an analysis of those ideas.
Some of the responsibilities of the building code office are being handled by an outside party. Council member Sam Harvey suggested cutting one person from the building code office.
As an immediate measure, council member Dr. Howard Ferguson suggested the city allow a vacant Department of Public Works position to remain unfilled. "We have to start somewhere," he said.
The city's union contracts include wage increases and much of the city staff has a contractual minimum personnel level. The contract expires at the end of 2014, so there is no room for negotiation for more than two years.
Freenock said she would look into the options regarding workers' compensation. Cancer presumption among firefighters, three claims, and "serious accidents" have led to the company that provides workers' compensation for the city to more than double its rate from last year.
Closing the city pool and canceling curbside leaf pickup did not gain much traction. Picking up leaves reduces city expenses for cleaning leaves out of the storm sewer system. The pool provides children with safe recreation, and neither represents a huge portion of the deficit.
Freenock said the city's annual liquid fuels allocation could be used for qualifying expenses without being used for paving projects. She didn't recommend skipping a year of paving, but said it would free up money for other uses. "Is it wise? I don't think so," she said.
Former Mayor John Nemcovsky brought up some possibilities that he admitted would not be popular.
"Maybe we need a volunteer fire department... a regional police force," he said.
If taxes are increased, the average worker is "going to have to work 19 or 20 hours extra to afford what you had" last year, Nemcovsky said. "It's not just taxes. It's your time. Do I want to work 20 or 30 hours more? No."
The option to work more is not available to many senior citizens and people who are disabled.
"The taxpayer takes it on the chin every single time," Nemcovsky said.
Former Director of Public Works Brent Ordiway stressed that many city services are used by non-residents. "Everybody will say that these services are absolutely essential," Ordiway said. "Not everybody that says that lives in the city."
He suggested that a method be created for having non-residents who use the services pay for them like residents.
The expenditures don't even include capital improvement projects - another $263,000.
Several possible tax increases were brought up. Freenock recommended a property tax increase of five mills.
Harvey suggested raising property taxes by five mills and decreasing the Earned Income Tax by three-tenths of a percent.
"I would rather see a budget that has three mills of property tax and 0.3 income tax," Council member John Lewis said. "When you have a bad year and you're not making as much, you're not paying as much."
One of the problems with relying on property tax increases to meet the budget shortfall is the way those taxes are handled. "We lose three years of money on real estate because we can't collect for three years," Lewis said. Property owners have three years to pay taxes before their properties are put up for sale due to delinquency.
Lewis suggested instituting a "substantial" fine for late payment of property taxes.
In addition to the likelihood of raising taxes, the city will look to sell assets and possibly make some money off of oil wells.
"Sell properties that are not being used for public good," Harvey said.
The property at the southeast corner of Pennsylvania Avenue and Liberty Street is likely to be one of the first on the block.
City Police Chief Raymond Zydonik said parking revenues are down since the construction of the Clark Street Parking Garage and removal of a great majority of the city's parking meters.
Dan Ristau of Warren Main Street reminded council that it has approved retaining a lawyer to explore the possibility of suing the now-defunct GRO-Warren. "The city is still out well over $500,000," Ristau said. "Less than a lawsuit is simply unacceptable."
The city's fund balance, something like a savings account, has dropped dramatically in recent years. According to Freenock, the balance held "well below $1 million" on Monday.
That number should be up to about $1.9 million by year's end, according to Financial Officer Donna Risinger.
There is no mandated minimum amount that a municipality must keep as a fund balance, nor a maximum.
"The Governmental Accounting Standards suggest 5 percent of operating expenses; most auditors with whom I have spoken suggest 13 to 15 percent," Freenock said.
The anticipated fund balance for the end of 2012 is about $1.9 million. That represents about 25 percent of the city's expenses. In 2011, the fund balance was about $2.4 million - almost 30 percent of the $8.3 million in expenses.
A higher fund balance is important in the city because the city collects taxes later in the year than most, Freenock said. "The city should have a much larger fund balance at the end of any given fiscal year in order to operate for the next eight to nine months."
"Part of the idea behind a fund balance is to pay operating expenses until tax revenues are collected," she said. "For most local governments, that is in April. In the city's case, however, that is not until September."
If the fund balance cannot fund the city's expenses through the lean times before taxes are collected, the city would have to take out a tax anticipation note (TAN) and pay interest. "In the future, TANs may become the norm," Freenock said.
The city used more than $300,000 of fund balance to balance its budget last year.