Sharon Mayor David O. Ryan said refinancing the city's bond debt is crucial to reducing a $865,000 deficit and other financial problems plaguing the city.

Ryan said Monday he's counting on city council's approval of the bond refinancing to help reduce the deficit. If council approves a refinancing plan floated last week, Ryan said the proceeds from the deal can cut the deficit by $255,000 this year.

Ryan stressed that he had nothing to do with creating the deficit. He said he wants people to know that he inherited the city's dire financial condition when he took office in January.

The year 2001 ended with an $865,000 budget shortfall. The shortfall was caused by $486,000 in bills that weren't paid last year, an end-of-year deficit of $239,000 and $140,000 in additional health insurance costs that were not anticipated.

Ryan said he's planning to pay down the deficit over a period of about five years.

Ryan said he's hoping to have the shortfall cut to $610,000 by the end of this year, but the bond refinancing is crucial because it will save the city $327,000. Ryan said he and city Finance Director Michael Gasparich have managed to save $28,000 so far this year through "nickel and diming" the budget.

"We put the kibosh on almost all spending," Gasparich said. Ryan said there will be no more "discretionary spending" by city employees, and the only purchases made will be those that are necessary to keep the city running.

Ryan said he is also trying to pay back the wage tax department, and plans to start by repaying $100,000 this year. At one point the city's general fund budget owed the wage tax department about $1.3 million, Gasparich said. He said that amount will be down to about $900,000 at the end of this year.

"This deficit condition did not happen overnight, or just in the 2001 calendar year, but it an accumulation of less than adequate funding over probably a five to 10 year period," Ryan said in a letter to Council President Fred Hoffman. "Funding sources have not kept current with the rise of inflation built into the budget by expenditures, wages, insurance, etc. Along with a decline in the collection of taxes and the sewer fund negative balance with the general fund, this has left the city in a precarious position."

Over a 10 year period from 1987 to 1997 taxes only increased in the city 2.5 mills. Ryan said the city is really operating now with the budget it should have had in 1994.

"How do you do that," he asked. "If we had just raised taxes everybody would have been mad but I guarantee you we wouldn't have a nickel of debt."

Ryan said his projections to reduce the debt for 2003 are just that and what happens during the rest of the year will impact the numbers.

Ryan said he's hoping the city will collect more revenues than anticipated.

It's too early to say if he's going to ask council for a tax increase for 2003 spending, Ryan said. Gasparich said department heads are in the process of compiling data for the upcoming budget process.

"I'm going to turn in a responsible budget to council, and I don't know what they're going to do with it," Ryan said.

The proposed 2002 budget first submitted to council included a 5 mill tax increase but council approved a 3.5 mill increase. Council cut several job positions in order to save money in the budget but then reinstated those positions over the past eight months. Council learned that Gasparich actually left the money for the positions in the budget in case council decided to reinstate them.

Councilman Lou Rotunno has already said he doesn't want to see another tax increase in 2003.

Council will vote on the bond refinancing at 4 p.m. Wednesday. At that time council is also expected to vote on borrowing an additional $2 million for capital projects in the city.

Rotunno said Thursday he's concerned if council borrows the money for capital projects, it will end up being absorbed into the general fund. William Madden, city solicitor, said council can set up a separate fund for the borrowed money that will be earmarked only for capital projects.

You can e-mail Herald Staff Writer Kristen Garrett at kgarrett@sharonherald.com