The City Of Lorain, over the past four years, has been faced with a most difficult challenge in managing its budget process. Revenues have seen minimal growth over that time and are projected to remain flat for this year. The loss of more than 1,500 jobs over the past four years has been the main source of the revenue decline. The job loss coupled with the continued downturn in the economy has been a double-edged sword for the city. The city has maintained hiring controls, experienced layoffs and instituted a wage freeze in 2003 to offset the lost revenue. In spite of the measures taken, the city has shown a deficit for 2001, 2002 and 2003 and will also end 2004 with a deficit. The City is now faced with the impending loss of the Lorain Ford plant, over 1,700 employees and income tax of approximately $2.4milllion.

On October 17, 2002 The Auditor of State’s office declared the City of Lorain to be in a state of “Fiscal Watch” in accordance with Section 118.022 of the Ohio Revised Code. This declaration was a result of a forecasted deficit in excess of 1/12 of the preceding year’s general fund revenue. In response to this declaration, the City of Lorain has contracted the Auditor of State’s office to perform a performance audit to identify improvements that can be made in the City’s operations. The performance audit was released January 15, 2004. The performance audit suggested a number of revenue enhancements and expense reductions which the city is pursuing in 2004. If the City’s adjusted aggregate deficit fund balance reaches 1/6 of the General Fund budget and the receipts of those deficit funds, the Auditor of State has the authority to declare the City in a state of fiscal emergency, at which time a Financial Planning and Supervision Commission would be required to be established.