Cities Can Go Bankrupt - Lakewood's $30 Million Deficit

[Bill Call]

Cities can declare bankruptcy. See:

http://www.reuters.com/article/bondsNew ... 6420080221

Apparently the City of Lakewood is facing $30 million in deficits over the next few years. It's not surprising.

You can't go on a decades long hiring binge and not blow a big hole in the budget.

You can't offer sweet heart contracts to City employees forever.

You can't turn a blind eye to the Fire Departments state of economic war with the City with no affect on the budget. $1.5 million in overtime to fight 144 fires?

The City is a huge financial enterprise with less than $500,000 in the bank? Thank you Tom George.

Read the grim details:

http://www.cleveland.com/lakewoodsunpos ... xml&coll=4

Right now I can't think of any reason to support a tax increase of any size. Why? Because a tax increase will evaporate into another round of raises and benefit increases leaving the City right back where it started.

Lakewood is already one of the highest taxed communities in the country. An unending round of tax increases will increase middle class flight and discourage economic growth. Ultimately those tax increases will decrease total tax revenue. And then what, another round of tax increases?

[Richard Cole]

Read the grim details:

http://www.cleveland.com/lakewoodsunpos ... xml&coll=4

Lakewood is already one of the highest taxed communities in the country.

Are you sure? I thought it had been established on previous threads that this, was not in fact, the case at all.

The finiancial situation of the city is precarious, and the current administration is going to have to make some very tough decisions - I hope that they prove to be correct.

What I found interesting in the "cleveland.com" link was the 2nd page of the article and the references to the sale Kaufmann Park still being an option.

[Dee Martinez]

Read the grim details:

http://www.cleveland.com/lakewoodsunpos ... xml&coll=4

Lakewood is already one of the highest taxed communities in the country.

Are you sure? I thought it had been established on previous threads that this, was not in fact, the case at all.

In light of your post in the other thread, this is kind of funny. At some point, facts and context do matter. Mr Call has made an assertion which is technically right but contextually skewed or distorted.

Lakewoods INCOME taxes, which totally go the city, are in line with the rest of Cuyahoga County and most of Ohio. Lakewoods PROPERTY TAXES are in the Top 10 in the county, but these mostly benefit the schools.
So yes, Lakewood taxpayers pay a lot, but the city doesnt get the benefit.

One of the interesting things about the Sun article was the mayor's point that the city pays more in benefits than the schools. School employee benefits has been one of the things that Mr Call has harped on.

[Richard Cole]

Read the grim details:

http://www.cleveland.com/lakewoodsunpos ... xml&coll=4

Lakewood is already one of the highest taxed communities in the country.

Are you sure? I thought it had been established on previous threads that this, was not in fact, the case at all.

In light of your post in the other thread, this is kind of funny. At some point, facts and context do matter. Mr Call has made an assertion which is technically right but contextually skewed or distorted.

Lakewoods INCOME taxes, which totally go the city, are in line with the rest of Cuyahoga County and most of Ohio. Lakewoods PROPERTY TAXES are in the Top 10 in the county, but these mostly benefit the schools.
So yes, Lakewood taxpayers pay a lot, but the city doesnt get the benefit.

But Mr Call was referring to the country, not the county, hence my questioning of the assertion.

[Bryan Schwegler]

Lakewoods INCOME taxes, which totally go the city, are in line with the rest of Cuyahoga County and most of Ohio. Lakewoods PROPERTY TAXES are in the Top 10 in the county, but these mostly benefit the schools.

To the taxpayer, does it matter in the end who gets the money or how it's divided up or do they focus more on the total amount of tax they owe?

I would venture a guess that to most people it's the total and the don't care/know how it's divided up, just that they have to pay it.

[Dee Martinez]

Lakewoods INCOME taxes, which totally go the city, are in line with the rest of Cuyahoga County and most of Ohio. Lakewoods PROPERTY TAXES are in the Top 10 in the county, but these mostly benefit the schools.

To the taxpayer, does it matter in the end who gets the money or how it's divided up or do they focus more on the total amount of tax they owe?

I would venture a guess that to most people it's the total and the don't care/know how it's divided up, just that they have to pay it.

If they dont know or care theyre not making an informed decision.
Your income tax has much to do with schools as your cell phone bill has to do with gasoline prices. Sure it comes out of the same pocket but theyre totally separate companies and expenditures.

When you vote for a property tax levy you are not voting for police protection or garbage pickup. Youre also not voting for body armor for soldiers, social security benefits, or highways. Yes theyre all "taxes" but the word is about the only thing they have in common.

It might be different if the same PEOPLE were making the decisions about how the dollars were raised and spent, but thats not the case either.

[Bryan Schwegler]

If they dont know or care theyre not making an informed decision.

I'm not claiming they are, but you need to look at the reality of the situation. Most people are not that informed. To most people, it's the same pot of money, that's all they care.

Should they know more, absolutely. But in reality they don't, all they know is that the overall tax burden seems high or low.

[Jerry Ritcey]

If Lakewood goes bankrupt, will the city have to move in with Rocky River and sleep on the couch?

[Bill Call]

If Lakewood goes bankrupt, will the city have to move in with Rocky River and sleep on the couch?

I wonder if bankruptcy is the best option. The $30 million is just part of the problem. There are unfunded workers compensation costs, unfunded pension costs, unfunded buyout provisions and more. Under bankruptcy the courts could void union contracts. It is those contracts that are the root of the problem.

http://www.nbc11.com/news/15345539/detail.html

[Bryan Schwegler]

But Bill....what about the long-term stigma of being a city that declared bankruptcy? How do you attract quality residents and employees when you're "that" city?

Isn't that also a cost to consider...it's a soft cost for sure, but a very expensive one in the end.

To this day, Cleveland still hasn't shrugged off the past of going into default.

[Bill Call]

But Bill....what about the long-term stigma of being a city that declared bankruptcy? How do you attract quality residents and employees when you're "that" city?

That's a good point and one of the reasons I don't favor a bankruptcy filing at this time. The best solution is for City unions to re-open their contracts and give the City some relief.

Just between you and me, don't repeat it, this is strictly confidential, but I am not ruling out supporting a tax increase to fund infrastructure and development. I am ruling out supporting a tax increase just to give everyone a raise. The City's financial woes are structrual and cannot be solved by raising taxes.

[Shawn Juris]

Couple of thoughts on this topic. As this is a complex issue they seem to be interconnected.
* Lakewood schools do not have buses yet I understand that we don't show a lower overhead than other districts. With this in mind how much more do we pay per pupil than our counterparts?
* Schools are funded by property taxes- 54% of the population rents so those who pay the bill may not be accurately represented when levies come to a vote.
* The large number of rental units have created a favorable market for the renter but have made it unlikely that the taxes are really being passed on to the end user.

My first thought is that it would be more appropriate to fund the schools through income tax.

[Will Brown]

[quote="Shawn Juris"]Couple of thoughts on this topic. As this is a complex issue they seem to be interconnected.
* Lakewood schools do not have buses yet I understand that we don't show a lower overhead than other districts. With this in mind how much more do we pay per pupil than our counterparts?
* Schools are funded by property taxes- 54% of the population rents so those who pay the bill may not be accurately represented when levies come to a vote.
* The large number of rental units have created a favorable market for the renter but have made it unlikely that the taxes are really being passed on to the end user.

My first thought is that it would be more appropriate to fund the schools through income tax.[/quote]

I don't see what school funding has to do with the city's financial difficulties. They are separate entities and one may as validly relate Texas's income tax to Lakewood school funding.

I suspect renters are more likely to support a property tax, as they may not realize that the property tax is paid by the property owner with funds from their rental payments. Anyone who believes that a landlord would not increase rent to cover a propert tax increase should contact me; I have a great deal for you on slightly used lottery tickets at a substantial discount.

I also suspect that income taxes are an unreliable source of funding for education. Renters are usually transient, and the city does not appear to have much, if any, of a mechanism to collect income tax from renters who work outside the city. I would suspect that there are many renters who, innocently or not, do not pay income tax to the city.

I'm curious how the experts who evaluate municipal finances, the bond rating companies, could have assigned a fairly good rating to Lakewood's debt in1997, yet we appear to be destitute just over a year later. I know their ratings were based on representations that the income tax would be increased, and new contract have increased costs, but those factors don't seem to be enough to explain today's apparent shortfall.

I get a bit tired of reading how we have only 144 fires, and yet are paying for a full complement of firefighters (and EMT's). It seems to me we should have full staffing, and count ourselves lucky if we have fewer fires. In a town with so many flammable structures so close together, any fire has the potential to spread disastrously.

Perhaps we could save money by hiring that poster, who could schedule workers only when he knows there is going to be a fire.

[Dee Martinez]

I believe that under Ohio law an income tax that supports the schools must be on all income, not just earned income. So dividends, interest and even Social Security would be subjected to the tax.

Can anyone, like Mr. Markling, confirm this? This would be another way that Ohio legislators have worked the system to the detriment of schools.

[Bill Call]

I believe that under Ohio law an income tax that supports the schools must be on all income, not just earned income. So dividends, interest and even Social Security would be subjected to the tax.

Can anyone, like Mr. Markling, confirm this? This would be another way that Ohio legislators have worked the system to the detriment of schools.

All school funding reforms have one thing in common. The solution is to have someone else pay for it.

The City's financial problems are independent of the schools financial problems except to the extent that residents see that Lakewoods combined tax rates are much higher than other communities across the country.

Renters are not paying their fair share of the property tax burden because as someone else pointed out, the weak rental market means lower rents. The average two family in Lakewood rents for about $1,200 per month (both suites). The taxes are about $325, water about $50 and insurance about $100 per month. That's $475 in expenses before any mortgage payment. There is not a lot left over.

The question here is: Where will the City find $30 million to fund current operations? And how come everything was fine on December 31st, 2007 but on February 15th 2008 we find that there is a potential deficit of $30 million?