MOUNT VERNON — Mount Vernon City Council members wrestled with several financial issues during Monday night's meeting, all stemming from COVID-19.
Council approved taking $10,000 from the reserve balance fund and contributing it to the Emergency Business Loan program administered through the county's revolving loan fund. Council members also postponed indefinitely the hiring of a second assistant law director.
Both actions came after Auditor Terry Scott updated council on the city's finances. Through last Friday, income tax revenue is off by 3 percent.
“That relates to about half a million dollars spread over seven different funds,” said Scott.
Of the shortfall, about 62% stems from business filings, 20% from taxpayers, and 18% from withholding tax.
“This is the makeup that we saw in 2010 during the Great Recession,” said Scott. “Businesses are willing to keep staff employed and are willing to take the reduction on business profits.”
On the expense side, Scott said that the general, streets, and cemetery funds are using less than 33% of appropriated money (18%, 27%, and 26%, respectively). The voted levy funds are using 35% of their appropriations.
“We are doing a good job being conservative on spending,” he said.
First-half property tax receipts are higher than anticipated (59% vs 50%). Scott said that could change in the second half depending on how the work force is affected by business shutdown.
He also anticipates reduced gas tax revenue and motor vehicle receipts due to the COVID-19 stay-at-home order.
The projections affected council's next decisions.
In a 5 to 2 vote, council waived the required three readings and voted to contribute $10,000 to the emergency loan program. Council members Janis Seavolt and Tammy Woods cast the dissenting votes.
The Area Development Foundation administers the revolving loan fund on behalf of the county. Once money goes into the fund, it stays in the fund and is used for future business expansion.
ADF President Jeff Gottke said that a dozen RLF applications over the past three or four years had Mount Vernon addresses, and nine or 10 were within the city. Three businesses within city limits are currently using loan money.
The emergency loan program is a newly created, temporary subset of the RLF. In explaining the program to council, Gottke said the loans will provide working capital to businesses affected by the COVID-19 shutdown.
The $10,000 will come from the city's reserve balance fund. Created in 2017, the fund saves money the city can use for unforeseen adverse events, unforeseen opportunities, or declining economic trends.
Calling the RLF a “very honorable fund,” Woods said that her no vote is not an issue of not wanting to help businesses.
“Philosophically, I am opposed to taking taxpayer money and putting it into something that will never be returned to the city,” she said.
“If it was being paid back, I wouldn't have a problem with it. I can't vote for it without it coming back to the citizens,” she said.
Auditor Scott said that he initially had the same concerns, but changed his mind when looking at the bigger picture.
“This will generate jobs. Jobs will generate income tax, and we will get some sort of a return on your dollars,” he told council.
Noting income tax receipts are down about $500,000 through last Friday, Woods said, “My concern is the city's $1 million in the rainy day fund isn't going to go very far.”
Council members Mike Hillier, Tanner Salyers, and Julia Warga see the $10,000 as an investment.
“We are not donating, we are investing, because we are going to see a return on this. The benefit of having a well-funded economic fund … down the road when many communities might still be struggling, you can't underwrite the value of that,” said Salyers, adding that the money stays in an economic development fund that will help years down the road.
“I think you will get it back,” said Hillier. “You just won't get it back with a check. This helps the city to be able to get businesses up and running and income tax coming back to the city.”
“I am hesitant to spend money, but I see this as an investment in the businesses, I see this as an investment in the community and essentially as an investment in our residents. Eventually this money will return to this [revolving loan] fund and will be reinvested in our community,” Warga said.
Council member Samantha Scoles voted for the legislation, but noted that she was not sure that the intent of the reserve balance fund was to spend the money outside of the city's line items.
Council President Bruce Hawkins was concerned that not passing the legislation would send the message that the city does not care about businesses.
“I think it would be perceived as a negative about helping out businesses,” he said.
Council was unanimous in postponing indefinitely Law Director Rob Broeren's request to hire a second assistant law director. The position carries a $50,000 salary and $30,000 in benefits.
In making the motion to postpone indefinitely, Scoles said, “I feel like if we postpone this indefinitely it allows flexibility for us to watch how our revenue streams are coming in. … Rather than kicking it down the road, we can watch how things are going financially.”
“I don't think it's a good move right now to spend $80,000 to bring in a new person to the city of Mount Vernon,” said Hillier. “Postponing it indefinitely means we can bring it back any time and move on from there.”
Salyers was hesitant, but supported the postponement.
“I believe this is a necessary position because we have not been having our own attorney look at our civil contracts, and that's a frightening thing,” he said. “Hiring this position doesn't even out the workload. We'll save costs down the road because we'd be lowering the liability by reviewing these contracts.”
Broeren said the city spent $32,500 last year in legal consulting fees. In years past, it has been higher.
“There are significant resources the administration has said it needs,” he said. “This is necessary so that we can protect the city.”
Safety-service Director Richard Dzik and Mayor Matt Starr both said they need more of Broeren's services.
Council's discussion included creating the position but holding off on hiring, postponing the legislation to a date in August or September, and Dzik's plan to present a restructuring of administration at council's next meeting.
Postponing the hiring legislation indefinitely means that it has to be brought back to council as a new piece of legislation, and the process starts anew. Council ultimately decided to look at June's financial numbers and Dzik's restructuring plan before bringing back new legislation.
Monday night's meeting included a Parks and Lands Committee meeting. Carrie Haver, marketing director for Ariel-Foundation Park, updated council on activities at the park. All events are canceled for May and June due to the coronavirus. Haver said the park might have to return sponsorship money for those activities and $9,000 in deposits. Fourth of July and the Rastin Challenge are among the events about which park officials are unsure.
Council also authorized appropriations, including $50,000 from the Ariel Foundation as a matching share for paving Spice Alley and $1,500.14 from the Federal Emergency Management Agency for self-contained breathing apparatus equipment.
Dzik said that the traffic light at Hamtramck and North Main streets might no longer be warranted. He will begin a traffic study today. After a one-week notice to the public, he will bag the light for a 90-day trial period. He also plans to look at the light at Sugar and Sandusky streets.
Broeren said that his office is working on guidance and enforcement efforts now that Gov. Mike DeWine is allowing some businesses to reopen. He has an ongoing investigation into two businesses who have not complied with the current guidelines.