Finances again in red

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July 14, 2010

Mike Faher mfaher@tribdem.com The Tribune-Democrat Wed Jul 14, 2010, 11:23 PM EDT

— Johnstown core financial funds finished 2009 with a nearly $318,000 deficit, continuing a red-ink trend for the distressed city.

In fact, the deficit would have reached nearly $1 million if not for a late infusion of cash from a one-time source.

The long-term answer to these woes is, of course, to generate more revenue and spend less. And the city’s relatively new administrative-leadership team is striving to improve efficiency.

But for now, the bottom line remains bleak.

“There’s still a long way to go to get these core-service funds balanced,” said Joel Valentine of Wessel & Co., a city-based firm that handles Johnstown’s audit.

Those core services, which Wessel representatives reported on Wednesday, include the city’s general, parking, pension and debt-sinking fund. The audit found that, in those funds, the city spent $317,679 more than it took in last year.

Nonetheless, Finance Director Carlos Gunby said the city was able to meet its 2009 financial obligations.

That may not have been the case, though, if not for a critical move that replenished the city’s coffers.

City Council agreed in November to sell a portion of Johnstown’s delinquent taxes to a Luzerne County nonprofit.

In return for the right to collect on those back taxes, Public Asset Management Inc. sent the city an up-front payment of $668,331.

Without that check, Johnstown would have ended the year with a $986,010 deficit.

Still, even that would not have been out of line with recent years. The city’s core funds had year-end deficits of nearly $1.1 million in 2005, almost $1.2 million in 2006, and $1.55 million in 2007.

There were a few bright spots in 2009, with hospitalization costs declining by $188,000 while collections of mercantile and business-privilege taxes increased by about the same amount.

But the city’s financial problems are widespread and varied, and the 2009 audit again highlights some key issues.

Among them are pension costs, which surpassed $2.5 million last year. That’s more than a half-million higher than it was in 2005.

“That cost has increased drastically over the years,” Valentine said.

Also, the city’s parking fund continues to bleed cash, running up another $464,131 deficit in 2009. That’s due primarily to large, lingering debt obligations – for instance, the city still is paying debt for the Washington Street parking garage, which was demolished after a partial collapse in late 2008.

Officials have undertaken a review of all parking operations, attempting to drastically increase cash collections.

“The only way you’re going to get out of this parking (deficit) is to generate more revenue,” Councilwoman Marie Mock said. “Parking should be self-sufficient.”

Gunby, who’s been on the job for less than a year, also is overhauling the city’s outdated accounting procedures and upgrading software. He believes that will increase his department’s efficiency by 65 percent.

“Most important is an improvement in internal accountability and in meeting audit requirements,” Gunby said.

But, even as City Council made painful personnel cuts for 2010, Councilman Jack Williams contends that layoffs should have come last summer to avoid a 2009 deficit.

“If council had acted in late July or August, we probably would have wiped that (deficit) out or come pretty close to it,” Williams said.

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