Public sector finance programs can be a useful tool for small businesses in their efforts to start or grow. A variety of state programs are available in Ohio to assist small businesses with financing needs.

The Ohio Treasurer’s Office manages a linked-deposit program which focuses on strategic investments that target job creation, job retention, and local economic stability by supporting Ohio’s small businesses, farmers, and homeowners. On the Ohio Treasurer’s website important announcements and featured participant success stories are available regarding the Ohio Treasury’s flagship programs,such as GrowNOW, SaveNOW, and ECO-Link, Renew Ohio & Rebuild Ohio among others.

The GrowNOW Program

The GrowNOW program enables small business owners to receive a 3% interest rate reduction on their bank loan when they link the loan to job growth or retention in the State of Ohio. GrowNOW can reduce the interest rate on a new or existing loan up to $400,000, potentially saving business owners $12,000 per year. GrowNOWalso stimulates Ohio’s economy and rewards small business that drives it.

To qualify, businesses must meet the following criteria:

• Have less than 150 employees
• Be organized for profit
• Have offices and operating facilities in Ohio
• Must have a majority of employees be Ohio residents
• Link the loan request to job growth or retention in the State of Ohio by saving or creating one full-time or two part-time jobs for every $50,000 borrowed.

More information and the process for applying  can be found at grownow.ohio.gov or by calling 1-800-228-1102 (option #3).

Recent news about the Ohio Governor’s budget reductions for local governments has caused great concern for many cities across the state. This article is to update residents on the status of these provisions and the impact on the City of Montgomery.

During the recent downturn in the economy, the City has managed to weather much of the recessionary storm through sound fund balance strategies, prudent expenditures by staff and with higher than anticipated collections of Estate Tax. For the short-term, given any unforeseen catastrophe, the City’s budget is anticipated to be stable for the years 2011 and 2012; however, the cumulative effects of state funding reductions will challenge the City’s financial stability significantly in 2013 and beyond. The most significant budget reductions and legislative changes that will impact the City of Montgomery are as follows:

Reduction in the Local Government Fund

The state budget drastically reduces the Local Government Funds received by all cities. In 2010, the City received $284,531 for the General Fund from the Local Government Fund. The state’s budget will phase out 15% of the Local Government Fund revenues received by the City beginning with the 2011-12 state budget year and 50% for the 2012-13 state budget year.

Elimination of Tangible Personal Property Tax Reimbursement

In 2010, the City received $95,004 for the General Fund and $117,171 in the Fire/EMS Fund from tangible personal property tax reimbursement paid by the state.  The State’s plan was to gradually phase out this reimbursement beginning in 2010; however, in the governor’s budget, the timeline for reducing reimbursements has been accelerated and will begin with the State budget which took place on July 1, 2011.

The Elimination of the Estate Tax

The State Budget eliminates the estate tax for local governments beginning January 1, 2013.  Historically, the City has conservatively budgeted $300,000 a year for collections from estate tax revenues, but has received $3,982,380 over the last three years ($703,832 in 2008, $2,208,362 in 2009 and $1,070,186 in 2010). All of these revenues go directly into the General Fund.

Reduction in the Assessed Valuation of Property

With the recent reappraisal completed by Hamilton County, it is estimated that the total assessed valuation of the City’s homes and businesses will drop approximately 7-9%, according to a recent news article.  This will impact the amount of real estate taxes paid by property owners and the amount collected by the City. The City is awaiting data from the County Auditor’s Office on the exact amount of the City assessed valuation.

What is the bottom line?

In 2011, the City had anticipated a reduction in the Local Government Fund and that loss of revenue had been programmed into the 2011 budget. The unexpected financial loss for 2011 will be in the form of the accelerated elimination of the Tangible Personal Property Tax, which took effect July 1, 2011.  The combined loss from the Tangible Personal Property tax for the General and Fire/EMS Funds is approximately $170,000.

The real impact of these revenue reductions will be felt beginning in 2012 and continuing into 2013 and beyond. In 2012, the loss of revenues from 2011 levels will be approximately $650,000 of the total operating budget.  When the estate tax is repealed effective January 1, 2013, the losses beyond 2013 could exceed $1.3 million annually. If the City does not take action to reduce expenses or increase revenues, the target reserve balance in the General Fund of six to twelve months of operating expenditures could be completely depleted by the year 2015.

Fortunately, the City has already implemented many sound budgetary practices, including:

• Establishment of targeted fund balances to provide a“rainy day fund” to guard against a downturn in the economy or the loss of a major employer
• Cooperative efforts working with employees to negotiate fair and appropriate wage and benefit adjustments, including the use of health savings accounts and high deductible health plans.
• Regular review of all spending areas to identify and realize potential savings
• Audit of staffing levels for possible reductions through retirements, resignations, and reductions in force
• Implementation of energy conservation measures for City facilities and vehicles
• Regular use of studies to carefully evaluate how services are provided and implement cost savings measures to eliminate waste in our systems
• Maximization of partnerships with other government entities to share in the delivery and cost of services
• Use of strategic planning and visioning efforts that focus on the creation of key goal areas for the City in the future including a renewed economic development program, efforts to work toward financial self sustainability, and organizational development and workforce strategies to develop alternative methods of service delivery with fewer resources.

Unfortunately, these measures may not be enough in the long-term as the City responds to these unanticipated budget cuts. However, it is imperative that the City balance its commitment to quality community services, continued customer value and doing this with fiscal responsibility and accountability. It is critical that residents are knowledgeable of the state budget cuts and their impact on the City.