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Fiscal emergencies return to Ohio

State auditor says problem still relatively small but could grow.

Eight local governments in Ohio have gone into fiscal emergency over the past 20 months, but Ohio Auditor David Yost said that’s no reason for concern.

The uptick — after two years during which no city, village or township in Ohio went into fiscal emergency — represents less than one percent of the state’s 2,240 governments.

“I would look at the very small number of problems we’ve had,” Yost said last week in an exclusive interview with the Dayton Daily News.

Still, Yost said his office was developing new controls to use in projecting potential emergencies in local governments around the state. The controls will help, particularly if state lawmakers push forward with changes affecting local government funding, Yost said.

“I’m very concerned about the continued financial health of our local governments,” Yost said.

Last month, one Warren County community, the Village of Waynesville, came off Yost’s office’s list of local governments on fiscal emergency, after six years.

“This was the government’s fifth attempt to take us out,” said Kimberly Kaan, chair of the village’s finance committee. “This has been a hard-fought, six-year process.”

Waynesville’s place as the 22nd Ohio local government in fiscal emergency was filled by Hamilton Twp., Warren County,    after auditors found more than $2.5 million in fund deficits in township accounts. The state has released 45 local governments from emergency since the 1980 law gave the Auditor of State’s Office fiscal oversight powers. That came after default in the City of Cleveland.

Yost’s office audits 5,800 public entities, including school districts, eight currently in fiscal emergency and two in fiscal watch.

Beyond this region, other cities, villages or townships with continuing emergencies include Manchester, a village in Adams County where the emergency was declared by the state auditor’s office more than 16 years ago after $105,447 in deficit funds were found; and Mansfield, a city in Richland County that requested the state oversight that comes with fiscal emergency after more than $3.8 million in budget deficits were found about four years ago, according to data on the state auditor’s website.

In addition, three local governments remain in fiscal watch, a lesser level of state oversight, while nine remain in fiscal caution, a new early warning category added in 2011.

After taking office in 2011, Yost’s office declared fiscal caution in the cities of Akron, Portsmouth and East Cleveland and Madison Twp., Richland County, before declaring a fiscal emergency.

On Aug. 30, 2012, East Cleveland’s level of fiscal distress was elevated to an emergency. Since then, seven more emergencies have been declared, according to the state data. Meanwhile, 11 local governments were placed in fiscal caution.

Each case is different, Yost said.

“It’s hard to draw a rule that sweeps even a majority of the entities we’re talking about,” he said.

In Hamilton Twp., Warren County, the emergency was the result of the inability of the fiscal officer, Jackie Terwilliger, to keep up with changes in the law and the community over 34 years in the elected office charged with managing the local finances, Yost said.

“It got to the point, she got kind of overwhelmed,” he said.

In Waynesville, Yost said, the emergency ended after voters approved an income tax, officials made cuts and complied with a list of criteria and guidelines that need to be met for a community to be released from fiscal emergency. Basically, the government need to cut expenses or raise revenues to end the financial problems, Yost said.

“You either need to spend less or get more money,” he said.

On Tuesday, Waynesville voters will decide whether to renew the 1-percent income tax, which expires on June 30, 2015.

Around Ohio, local governments are feeling the effects of about $1 billion a year in state funding, through cuts in local government funding and elimination of the estate and other taxes, according to Kent Scarrett of the Ohio Municipal League.

“We’re still feeling the effects of the state cuts and we’re still feeling the effects of the depressed economy,” Scarrett said. “The full effect of all that reduced revenue is on the doorsteps of our municipalities.”

Yost said more local governments could wind up in financial straits if state lawmakers further reduce local government revenues.

For example, proposed income tax uniformity laws, taking away local collections and requiring the governments to contract for the service, could cost municipalities, Yost said.

“I believe in local governments,” he said. “The most important government is the government that touches you where you live.”

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