During Monday’s special meeting of the Delaware City Council, members of council were presented with the findings of a recently commissioned analysis of the city’s financial standing and projections in the years to come.
The analysis was conducted by Columbus-based economics and workforce analyst firm Regionomics, which is owned by Bill LaFayette. City Manager Tom Homan said on Monday he was familiar with Regionomics’ work in nearby communities and initially reached out about conducting the analysis two years ago as a continuation of the Delaware Together Comprehensive Plan efforts on identifying means for fiscal sustainability.
“I’d reached out to Bill (LaFayette) back at the end of 2020 when the city was obviously still in the pandemic and recognizing some of the challenges we were facing as a community financially given the pandemic and not knowing where that would take us,” Homan said.
According to the report, which was finalized in September, the study’s objective was to assess the city’s long-term fiscal sustainability and to estimate the impact of primary development types on net revenues. LaFayette said he conducted a “thorough review and projection” of Delaware’s general fund through 2035 to test the city’s fiscal sustainability.
“The real concern that I was looking for is what’s called a structural imbalance — an excess of ongoing expenses over ongoing revenues regardless of the current state of the economy. … My conclusion is that your excess of revenues over expenditures is positive for the time being but, unfortunately, not nearly positive enough,” LaFayette told council to begin the presentation.
He added a caveat that the report doesn’t include the looming Intel development, which he said is going to have “significant impacts on Delaware’s population and tax revenues” during the projection period of the study. LaFayette, who also sits on the board of the Mid-Ohio Regional Planning Commission, said the 3,000 people who will start at Intel in 2025 “are just the start,” and when fully developed, as many as 12,000 to 15,000 workers may need to be accounted for in future plans.
Also pertinent to consider, he said, is the type of housing variation that will be required in Delaware to facilitate that growth in the workforce, noting that many of the jobs will require workforce housing.
LaFayette stated the primary result from the analysis shows the city’s revenues exceeding expenditures as of now, but the city projects to spend more than revenues brought in beginning in 2033. However, he also noted that even though current revenues may exceed expenditures in the initial years of the study, when factoring in Delaware’s existing capital needs, the city is “already underwater” and will spend more than it makes far quicker under those considerations.
Few, if any, capital needs in the city pose a more daunting task than addressing the shortfall in funds needed for street maintenance. The report suggests nearly 42% of Delaware’s roads are in poor condition, a result of what it deemed as many as 20 years of deferred maintenance.
The report states, “Traditional sources of funding, vehicle license fees, and gasoline taxes, fall far short of the need, even with the recent increase in the state gasoline tax. Fully funding ongoing maintenance would cost $3.8 million annually, $1.6 million more than the amount currently budgeted. In addition, nearly $25 million in 2021 dollars is needed to address the current backlog of deferred maintenance.”
As for ways to address the shortfall in the general fund, the analysis suggests increasing fees at the airport and Oak Grove Cemetery, two “business-type activities” that depend on user fees to be self-sufficient but show either a modest revenue excess or, in the case of the cemetery, a deficit.
“The airport has a very modest revenue excess, but the cemetery’s expenses far exceed its revenues,” the report states. “The financial status of the airport could be improved if fees could be increased and/or expenses reduced, but the size of the deficit of the cemetery’s operations makes it unlikely that its operations could feasibly be brought into balance. Thus, the cemetery is likely to remain a city-subsidized service to the community. Efforts to increase revenues and/or decrease costs would be helpful to narrow the growing gap between expenditures and revenues.”
LaFayette added that, through the study, he doesn’t see any way for the cemetery to come “anywhere close to breaking even” and likely needs to be looked at as just a community expenditure moving forward.
Ultimately, the report suggests an increase of the city’s current income tax rate of 1.85% to 2.25% would be the most productive way to address the narrowing excess of revenues over expenditures.
“A limitation on the credit for income taxes paid to other municipalities should be maintained,” the report states. “A rate increase to 2.25% produces an additional $6.37 million in revenue. Reasonable voters will vote for a tax increase if the need is presented clearly and compellingly.”
The report adds, “This income tax rate increase may be enough to cure the developing structural imbalance and sustain the debt service on bonds to address the current street deficiencies. Fully funding the ongoing street maintenance program would require additional revenue, though.”
Diverting at least some of the income earmarked for the Fire/EMS fund to a street repair fund would be “reasonable, given the healthy balance in the Fire/EMS Fund,” according to the report. However, it noted the increase in construction costs and forecast increases in long-term interest rates have already increased the cost of the project and may soon increase the cost of financing it.
“Thus, time is of the essence,” it goes on to state.
Following the presentation, Public Works Director Bill Ferrigno thanked LaFayette for his work in the study and said he was not surprised to see the findings of the report as it pertains to the massive issues facing the city and its roads.
“We’ve been knowing we’ve been kicking the can down the road for 20 years, and now we’re here in a major hole with our ability to take care of our streets,” Ferrigno said. “Everything we’re hearing tonight is not necessarily new but now just with an exclamation point. … We really do have to, not just as council but as a community, wrap our hands around this and understand our future is in the hands of the decisions we have to make now. And the roads are just one of many issues that we are faced with.”
To view the study’s findings in its entirety, access the council agenda packet by visiting www.delawareohio.net and clicking on the agenda motion summaries link under the government tab.