fiscal health indicators

Ohio Auditor Dave Yost says seven of Cleveland's 15 fiscal health indicators are negative.

(Dave Yost)

COLUMBUS, Ohio -- Akron, Ashtabula and Garfield Heights are among 10 cities showing signs they're on the road to financial trouble, Ohio Auditor Dave Yost said Wednesday.

Cleveland, Kirtland, Parma Heights and 12 other entities came close to making that list, according to a new "fiscal health" scoring system released Wednesday by Yost's office.

The new tool is a formulaic approach to evaluating all cities, regardless of size, based on past annual financial statements. The scores released Wednesday are based on audit reports from 2012 through 2015 and do not include fiscal information from 2016 or any recent changes, including an income tax increase in Cleveland that will bring in $80 million a year.

Yost unveiled the scoring system in a news conference the day after filing paperwork to run for state attorney general in 2018. City and county association officials said they appreciated the analysis and it shows many local governments are still struggling to cope with the recession and reductions in state revenue streams.

Yost said the tool will help cities and counties spot weaknesses before they are placed on fiscal watch, caution or emergency and aid lawmakers who will soon craft the state's two-year budget.

"Overall, Ohio's local governments are neither in as dire a condition as some would have us believe nor is the picture as rosy as some of us would have us believe," Yost said during the news conference.

Common weaknesses among cities and counties include a lack of investment in infrastructure, annual spending that exceeds revenues and declining property tax revenues. Yost pointed to the recession and cuts to state revenue streams for local governments as reasons for those weaknesses.

Yost said it would be problematic for lawmakers to further cut state aid to local governments.

"We count on local governments to carry out our policies at the state level on many occasions. It makes sense that there is some financial participation by the state as well," Yost said in an interview.

The auditor's office graded 247 cities and all 88 counties on 17 indicators of fiscal health using annual audit report data. Each indicator was given a green, yellow or red score for a positive, cautionary or critical outlook, respectively.

When applied to cities already in fiscal emergency, trends and patterns emerged. Generally, the greater the number of negative indicators, the greater the risk of fiscal emergency.

Yost's office identified cities and counties with eight negative indicators out of 17 total as being in high fiscal stress. In all, 82 percent of counties and 92 percent of cities had at least one negative indicator.

Akron

Akron had 10 negative indicators including six deemed critical.

Critical areas include:

general revenues weren't enough to cover expenses excluding program fees and grants

debt obligations total more than 15 percent of the budget

a small or negative percentage of assets available without restrictions on use

Akron Mayor Dan Horrigan said the city has taken steps to improve its finances overall since 2015, the latest year of data included in the report.

"I feel confident that, with input from residents and community stakeholders, we will implement additional reforms and measures that will help secure Akron's financial future," Horrigan said in a statement.

Cleveland

Cleveland had seven negative indicators -- two critical and five cautionary -- out of 17 total.

The two areas deemed critical by Yost's office were:

general revenues including local taxes don't cover expenses less program fees, income and grants.

a negative ratio of total liabilities to net assets

Cleveland city officials declined to answer questions from cleveland.com about the report.

The city income tax increase begins in July and a full year's impact won't appear in audit reports until 2018. Mayor Frank Jackson pitched the income tax hike as a way to maintain city services in the wake of state cuts and loss of other revenue streams.

Cleveland was among many cities with a negative mark for depreciation of capital assets and infrastructure, such as the condition of city hall and other government buildings or police cruisers.

"What this report says is that Frank Jackson was probably telling the truth that they were facing some significant pressures," Yost said.

Mobile readers, click here to see the fiscal health indicators for cities.

Mobile readers, click here to see the fiscal health indicators for Cleveland.