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With income decline, city eyes more savings
(by Sali McSherry - December 30, 2009)
With income decline, city eyes more savings
By SALI McSHERRY
Pepper Pike, with an annual operating budget of about $10 million, has reduced expenditures and realized savings through several city programs, according to a year-end report by Finance Director Prashant Shah.
With a clean bill of health by the Ohio State Auditor's Office for 2008, with no recommendations or citations, Pepper Pike has kept its Aa1 rating by Moody's Financial Services. But the city's financial position is expected to "decline significantly" following an anticipated fiscal shortfall this year, according to Moody's report released last summer.
This fiscal year, the city is anticipating a $3.4 million decline in cash balances with year-end balances expected to fall to a "narrower, though still satisfactory $1.3 million," according to the Moody's report.
The city's average take on inheritance taxes is $1.8 million annually, and Pepper Pike budgets very conservatively, Mr. Shah said, typically around $500,000 for inheritance taxes. This year, the city has received only about $250,000, he said. Also, he said, income-tax revenue has been more than 7 percent lower than last year. Although small in comparison, interest revenue decreased, and property taxes dropped 5 percent, Mr. Shah said. There are some positives relating to Pepper Pike saving money.
The city has generated about $100,000 annually for the fire department from its implementation over two years ago of ambulance billing. Only the insurance company is invoiced for ambulance transports provided by the Pepper Pike Fire Department. Payments from the insurance company are accepted as full and final and residents are not charged for their co-pays, Mr. Shah said. The current balance of $210,000 in the fund can be used for future capital expenses, he said.
The city also implemented a transitional work program, 10-step business plan and injury-leave pay which enables it to reduce workers' compensation claims and be invited back to a group rating program, saving $70,000 in premiums to the Bureau of Workers' Compensation, he said.
Through a grant from the workers' compensation bureau, the city implemented a drug-free workplace program for all employees, which will reduce the premiums paid to the bureau next year.
The city also renegotiated a deal with its payroll-processing company to lower costs by $3,500.
With the advent of a new rubbish-collection plan using scooters instead of mini-packers, the city will realize a savings of about $425,000 in 2010, Mayor Bruce H. Akers said. That includes not replacing two mini-packers and purchasing three four-wheel-drive scooters, which significantly will use less fuel, he said. The rubbish crew will be reduced from eight to four people, he said. Over a seven-year period, he said, the city anticipates saving about $2.5 million.
Pepper Pike also is offering an employee incentive buyout program in which six employees, three from the service department, two from the police department and one from the administration, would qualify, Mr. Shah said. The city would not replace those positions, except possibly one, he said. The city could save about $225,000, Mr. Akers said.
The city has deferred several projects, including a $90,000 cul-de-sac on Windy Hill Drive and fire-department equipment totaling about $88,000, he said.
The city will save about $30,000 in employee salaries due to the elimination of a part-time employee who helped Mr. Aker's executive assistant and the deferment of a request to make a part-time assistant in the building department a full-time employee, he said.
Smaller projects, such as the annual recycling calendar, will save the city $9,500 in printing and mailing costs. The city will communicate through its revamped Web site for residents who choose not to receive written correspondence, which also will save on printing and mailing, Mr. Akers said.
The city engineer is providing a five-year plan for the city's infrastructure needs, Mr. Akers said, and carefully analyzing priorities.
In late October, Mr. Akers announced the city had suspended design work on a new police station until the city's cash flow is sufficient to support the debt service required to finance the station. Income-tax revenue is down about 7 percent, but the most significant decline has been the drop in estate-tax dollars, Mr. Akers said. Pepper Pike has averaged annual estate-tax revenues in the range of $1.8 million to $2 million. Last year, it was $2.7 million. This year, it is $434,000, one of the lowest amounts the city has received in the last decade, he said.
If the city had proceeded with the police station at an estimated cost between $6 million and $7 million, the annual debt service would have been around $500,000.
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