On February 26th, Lakewood Alive held an informative meeting giving the public an overview of the financial challenges facing the city of Lakewood. The members of the panel for this discussion were: Mayor Edward FitzGerald, Finance Director Jennifer Pae, Councilman Mike Summers, Yvette Ittu, CFO Greater Cleveland Partnership and former Lakewood Finance Director, and Kevin Obrien, Executive Director for the Center of Public Management.

Jay Foran making introductions vowed to “put the moose on the table." Luckily I had worn my boots in case there was more than just the moose on that table. Joe Gibbons, an active member of the community, acted as moderator. Mr. Gibbons explained that Lakewood Alive was formed after the controversy surrounding the west end development to keep residents informed about important issues in the community.

The discussion began with a general overview and history of the city's finances presented by Jennifer Pae. This primer on municipal finance briefly explained the $100 million used annually to keep the city maintained and functioning. An informative chart explained individual funds, expenditures and revenues.

Revenue supporting the general fund, whose services include public safety, public works, health and other departments, comes from the 1.5 percentincome tax, license fees, permit inspections, service fees, court costs and $17 million of the total $81 million of effective real estate tax.

Enterprise funds include water distribution, sewer collection, waste water treatment and Winterhurst, whose revenues are generated by user fees. Other funding sources were mentioned briefly.

Ms. Pae said that the city's move to their own income tax collection in 2005 has saved the city $1 million, but that this gain has been offset by a loss of real estate taxes of the same amount. This recent revelation has put an additional strain on the already overtaxed general fund.

The next speaker was Yvette Ittu who quickly went over where we stand as a region. As a self-professed “positive person”she sees the cup as half full in our region during these challenging times, but then again, Lakewood has always faced challenges.

After an advertisement for the Greater Cleveland Partnership, she got down to business saying that many sectors, such as finance, health care and technology have seen growth, and that others, such as manufacturing, have not. The outlook for 2008 was looking up, though, thanks to an aggressive marketing campaign to bring businesses to our region.

Mortgage insurance companies believe that the second round of housing foreclosures and devaluation should not hit our region as badly because of our currently depressed housing costs. One item of interest is that new housing starts for our region have out-paced job production at a rate of two to one. Typically this rate should be one new home per two new jobs created. Luckily this over optimistic housing faux pas will have a much greater effect on outlying suburbs (take that Avon).

Kevin Obrien came out swinging with several factors that are effecting our regional economic development. These include the current housing crisis here and Ohio's elimination of the tangible personal property tax. On one hand, the tax reduction aids businesses willing to relocate to our area, but local and state governments have lost this revenue stream, adding additional financial stress.

Long term movement of residents from the city of Cleveland through the inner ring suburbs and eventually to out-lying areas has created an inner core of lower income residents, thus further eroding the tax base. Lakewood is less affected by this phenomenon because it more closely resembles an outer-ring suburb with a diverse, well-built housing stock along with higher household incomes.

Lakewood is challenged by a housing value that merely keeps up with inflation thus leaving tax collections flat. Gee, what a concept, government revenues growing at the rate of inflation (sorry, I couldn't resist.)

He also asserted that an aging population is making Lakewood's future dark, but the fact that the city offers more city services than other communities is a competitive advantage. After all, we are competing against Westlake and Solon, not Cleveland; with our great housing stock and community we should compete well in the changing market.

How does Lakewood reach a balance between providing services and the amount of revenue? Some communities have used a program budget which clearly sets forth spending on individual services beforehand. He also discussed consolidation of services, which the city already practices on a small scale.

In 2005 the city had 1016 businesses with 14,000 employees with a gross payroll of $110 million, although these numbers are slightly down this year. It is critical that these numbers remain strong and increase.

Finally, he wondered what are we going to be when we grow up? Will Lakewood invest in itself in order to attract people?

Thus, the historical portion of the presentation sadly ended and the talk shifted to the present and future.

Ms. Pae once again took the hot seat and explained that tax revenues have been relatively flat since 1999. Expenditures, on the other hand, have increased significantly, leading to the city's current financial crisis. Requests for 2008 alone have risen by a whopping $3 million.

In order to control costs, the city took a four-step approach that included: development of a financial strategy, a core services survey, creating a staffing comparison with other similar communities and creating a structural balance task force. The city was able to reduce expected expenditures by $2.5 million by following this strategy, not filling positions and reduced health care benefits for non-bargaining unit employees.

Mike Summers, the next speaker, explained the evolution of citizen involvement in solving Lakewood's current financial issues. He stressed additional commercial office space would boost our economy more than that of retail.

Born from the Grow Lakewood project initiated in 2004, City Council and the former Mayor created the structural balance group comprised of citizens from the private sector. This group evaluated 6 major departments by financial impact only. After speaking to the managers of these departments, the group submitted their final analysis in late 2007. Cost reductions of $1.7 million could be obtained relatively easily with an additional $2.5 million gained through more aggressive cost reductions. This report was presented to mayor and council.

Mayor Fitzgerald praised the panel and those who worked so diligently to find a solution to the city's financial problems. He proceeded to run through a list of “random notes” from his first fifty days as mayor.

He recalls that during the west end eminent domain debate those in opposition “made some very good arguments” against building another retail outlet, but at the time he felt that if something was not done then, more drastic measures would have to be taken at a later date.

The biggest political question facing the administration and council since 2003 concerning the impending financial imbalance was whether to nip it in the bud or wait to the last minute and make dramatic adjustments.

He expressed his belief that the past administration is culpable for the current city financial situation because the administration “holds the power” instead of the city council. (For those of you unfamiliar with the budget process, the administration generates the budget and provides this to council for their approval after countless hours of debate.)

The mayor went on to outline his plan of action: put everything on the table, establish a political team based on merit and form a better relationship with city council. Once this was accomplished, the administration could generate numbers that everyone, including the council and labor unions, would agree upon. This was important so there would be no suspicion on the part of unions as to the true financial condition of the city.

The city also contracted with the state to audit the books and found their estimate was within 2 percent of those generated by the city.

He perceives the city to have a $3.5 to $4 million deficit. Although the individual employees are not to blame, the cost of employees has been a major factor in the financial imbalance. Current budget numbers are unsustainable because the city is both providing more services and paying more to get the job done.

In reaction to these problems, the administration has had to examine the viability and cost of each department, except police staffing levels, in order to control costs.

Cost-cutting measures already undertaken have been imposed upon non-bargaining unit employees, such as passing on higher health care costs and reducing statutory benefits. Preliminary negotiations have been started with the unions representing city employees, and he stated that if concessions are not made, there will be significant layoffs. The goal is an additional reduction in expenditures by about $2.5 million over the cost-cutting measures already in place.

Although drastic reductions are necessary for those employed by the city, inanimate objects in this budget have fared better. A number of capital projects have been spared the budget axe.

He also teased the audience with a plan to be announced by mid-March that would increase the number of police on the street using more full and part-time officers.

The long-term budget wish list includes a health care consortium, regional fire service, a new jail on Berea Road, public and private partnerships to control costs in human services and citywide implementation of CitiStat.

He stated in closing that he feels that his job is “to make everyone hurry up” to solve these problems which at least must have triage by the March 31st budget deadline. He understands the frustration the public feels and asks that he be given him the benefit of the doubt, that he's doing the best that he can and doesn't want to make any of these cuts.