State and local governments are scaling back on next year’s budgets in response to the economic downturn.
In Northwood, companies like Johnson Controls, Oakley Industries and Faurecia - all auto parts suppliers – have cut hours from three shifts to just one, according to Administrator Pat Bacon. That means approximately $300,000 less in anticipated income tax revenue for the city.
Northwood expects to collect 13.5 percent less in income tax revenue next year compared to this year, said Bacon.
In addition, the city’s department heads were told to cut their budgets, she said.
Cutbacks include the purchase of two instead of three police department vehicles that are bought annually.
The city has also slashed its road improvement projects to just one next year. “We usually do two to three road projects per year,” said Bacon.
“I don’t know if we’re looking at a worse case scenario. We’re definitely looking at reality. We are cutting back,” said Bacon.
The city recently received some bad news on the retail front. Plans to renovate the Great Eastern Shopping Center, which has 156,000 square feet of available retail space, have been put on hold due to the sour economy. The owners were going to upgrade the site, and relocate some of the businesses at the center. An anchor store like Target or Kroger was also expected to move in. Now, with the economy in turmoil, all bets are off, said Bacon.
Bacon spoke with Centro Properties Group, owner of Great Eastern, in October.
“They have 500 shopping centers throughout the U.S. and the retail market is struggling. Foundation tenants, or anchor stores, want to downsize with less floor area. They’re trying to conserve,” said Bacon. “Those anchors are no longer interested. Centro is looking for a foundation tenant to locate at Great Eastern.”
.In the state legislature, budget cuts will be steep, according to State Rep. Matt Szollosi, of the 49th House District.
“The initial several months of the 128th general assembly will be devoted to completion of the state’s operating budget, which is a biennial, or two-year, budget. This budget cycle is going to be the most difficult in decades because of significantly reduced revenue and skyrocketing costs,” said Szollosi. “We are committed to significant reductions in spending and we have no intention of raising taxes to make up for the shortfall. The key is to reinvigorate our economic base and create jobs so that the state’s revenue projection increases without raising taxes.”
Governor Ted Strickland has already ordered a five percent, overall reduction in state agencies, said Szollosi.
“It’s going to be tight. The state has reduced the existing budget by more than $800 million since January of 08. We’ll need to look very closely at spending and budget allocations for every state agency. That’s just a starting point,” he said.
“We will be starting our budget deliberations right after the first of the year,” said State Rep. Peter Ujvagi, of the 47th House District. “We have to have it in place by June 30. In the balanced budget that we passed a year and a half ago, we had to cut $1.4 billion because of a decline in income tax revenue in the state. In September, we were $143 million below projections on income. And in October, we were $93 million below projections on income. We’re waiting now for the shoe to drop again. It’s very, very tough.”
In Oregon, a proposed $5 million senior center will sit on the backburner due to the economy, according to Oregon Councilman James Seaman, chairman of the city’s finance committee.
“We had preliminary plans drawn up for that, but it might be one thing we will have to hold up because of the tight financial situation,” said Seaman.
In addition, fewer dollars from the state means the city will have to keep an eye on other expenditures.
“We’re going to get less money from the state’s Local Government Fund next year. We got over $800,000 from the state this year. They held up in 2008 because they were already budgeted by the state. But as the state cuts back, we’ll get less. We have a rainy day fund of about $1 million we’ve been accruing over the years. The rainy day fund can fill in any shortfalls,” said Seaman.
“Still, the city is not as hard hit as other communities because its economy is more diverse. BP and Sunoco refineries, and Bay Park Community and St. Charles Mercy hospitals are among the largest employers in the city.
“We’ve been somewhat insulated by the downturn in that the refineries have been going strong, and the hospitals have been going well so far,” sajd Seaman. “All through 2008, our revenues have been good.”
In December, 2007, BP formed a partnership with Husky Energy, Inc., a Canadian energy company, to develop an oil sands business, which will result in an investment of approximately $2.5 billion in BP’s Toledo refinery.
The partnership will help guarantee a supply of advanced transportation fuels to major North American markets from Toledo.
BP and Husky plan to invest around $1.5 billion to upgrade the refinery to ensure its viability, with access to a reliable source of supply from North America, and result in many construction jobs.
“In the next 12 months,” said Garry Thompson, director of the Oregon Economic Development Foundation, “you’re going to see a lot more activity at the BP refinery, as that project with Husky continues to move forward.”
The health care industry, he agreed, has also helped prop up the economy.
“That sector continues to do well,” said Thompson, “because it’s a service people need.”
“Our businesses in the area allow us some comfort,” said Oregon Councilman Clint Wasserman, a member of the finance committee. “We still feel the crunch just like any other community. But when your chief industrial businesses are actually talking about expansion, and bringing money into the community rather than cutting back, it’s always a good thing to hear, from a public official’s standpoint.”
Budget hearings in the city start Dec. 1 at 6:30 p.m. at the municipal building on Seaman Road.