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City earns good marks on state's new database

By MARC KOVAC and ELLIN WALSH Capital Bureau Chief/Reporter Published: January 29, 2017 12:00 AM
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COLUMBUS --Tallmadge fared well under a new financial ratings system unveiled by the Ohio auditor's office.

Republican state Auditor Dave Yost has unveiled what he's calling a "fiscal physical" of local governments' financial books, with hopes that officials will use the information to make changes before they face budgetary crises.

"Based upon the strong financial position that the city is currently in, I am pleased that the city received a 'positive outlook' on 15 of the 17 financial indicators that the Auditor's Office published," Tallmadge Finance Director Mollie Gilbride said Jan. 26. "I think it speaks to the solid financial operations of the city and shows that we have sound financial reserves to manage the city going forward."

The goal of the financial health indicators is to help county and city governments anticipate areas of potential fiscal difficulty before it's too late address them.

"The changes you make in a budget and your revenue and your spending, your cost structures, you debt structures, those things are all things where if you have more time to do them, they have much more limited impact on services and citizens," Yost said.

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Yost announced the fiscal tool Jan. 25 during a press conference at the Statehouse.

Over the past five years, his office pinpointed 17 indicators, identified as part of local governments' financial books, that could be checked to determine the financial health of a city or county.

General revenue fund balances, declines in tax collections, instances of expenses outpacing revenues and the conditions of capital assets were among the areas considered.

His office then ranked those indicators as "critical," "cautionary" or "positive," with a color-coded chart summarizing the findings for Ohio's 88 counties and nearly 250 cities.

According to 2015 financials, 16 cities and one county met thresholds to be considered under "high fiscal stress." Thirteen other cities and two counties were close to meeting that threshold. And overall, a majority of counties (82 percent) and cities (92 percent) had at least one cautionary or critical indicator. One area of caution and one critical concern were raised for the city of Tallmadge.

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" It is important that there is a complete understanding of what is driving the numbers in those ratios where a 'positive outlook' was not received," according to Gilbride, adding, "I have reviewed the report and looked at the two areas for which we did not receive the rating of 'positive outlook' to understand why.

"The city did receive a 'critical outlook' rating on one indicator due to the city spending more money than it had taken in for our government-type activities in 2014 and 2015," the finance director said. "On its face, this ratio could be cause for concern; however this is not the case for the city. In this case, the excess spending is not cause for concern because it was done so intentionally. The city's general fund balance had increased significantly from 2009 through 2013 due to operating efficiencies and conservative budgeting. Therefore, in 2014 and 2015 the city elected to spend some of those funds we had saved for additional road paving throughout the city. In 2016 expenses did not exceed the revenue."

Tallmadge received a "cautionary outlook" rating on the condition of its capital assets. "This indicates that, based upon the age of our assets, mainly the city's infrastructure, the city could be potentially facing some costly repairs or replacements of that infrastructure in the future," Gilbride explained. She acknowledged the city does have an aging infrastructure. "However, the city has financial policies in place to set funds aside to assist with the maintenance and repair of these assets when the need arises," Gilbride reported.

"The bottom line is local governments have done, by and large, a pretty good job on some choppy water," Yost said. " The disruptions that we've seen in the economy over 40 years in Ohio, migrations from manufacturing into more of a service and information-based economy, the increases in productivity, all have impacts on those local communities on the revenue streams and demands for service. We also have the impact of policy changes at the federal and state government levels that impact the revenue streams."

The full results are available through the auditor's website, online at OhioAuditor.gov.

Yost cautioned about pulling individual indicators out of context.

"You can't look at just one out of 17," he said. "This is everything. This is all put together. You've got to look at all the factors together. Having one or two lights might mean absolutely nothing It's important to look behind the numbers."

That said, Yost did voice concern about one category -- the condition of capital assets. Many cities and counties were ranked as "cautionary" on that indicator, meaning they have aging vehicles, equipment and facilities that may be in need of repairs or replacement.

"The deferral of capital investments is tried-and-true strategy when you're in a recession," Yost said. "When the recession comes, revenues shrink, you don't replace the roof at city hall, you patch it and you wait for better times.You don't buy a new fleet of cruisers, you patch them up and keep them on the road and hope that next year revenues are a little bit better and we can replace the cruisers then. So being this far into a recovery and having this number of governments that are still deferring capital investment is troubling to me."

He added, "What it tells me is while local government leaders have done pretty well managing the choppy waters, at the end of the day, they're not really flush. Most governments are not in a position where they can take additional revenue losses or operating cuts."

 

Marc Kovac is the Dix Capital Bureau Chief. Email him at mkovac@dixcom.com or on Twitter at OhioCapitalBlog.

 

Tallmadge Express Reporter Ellin Walsh contributed to this report.


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