When the FirstEnergy Corporation announced last week that, due to new mercury and air toxin standards, the company would be closing six of its coal energy plants, the city of Eastlake, Ohio, couldn’t help but panic a little.
The town of 20,000, just outside of Cleveland on the shore of Lake Erie, is home to one of the six plants slated for closure. The plant is one of the largest employers in town, and when it shuts down operations in September, it will also stop generating tax revenue for the city.
"It’s a huge hit," says Mayor Ted Andrzejewski.
FirstEnergy said newly enacted rules by the U.S. Environmental Protection Agency would make it prohibitively expensive to keep them operational. The six plants were all relatively small, accounting for about 10 percent of the company’s energy production. Retrofitting these smaller, older plants would be too expensive.
The side benefit for Eastlake is that the coal-burning energy plant will no longer be spewing toxins like arsenic and lead into the air. The result will be cleaner air - the main intent of the new EPA rules.
With the elimination of the plant and its roughly 100 employees, the city will be losing about $400,000 in local income tax revenue, and another $190,000 in real estate tax revenue. This nearly $600,000 shortfall is the equivalent of 5 percent of the city’s annual budget. Andrzejewski says the city’s already in a bind because of the downturn in the economy, and more cuts to the budget will only make existing problems worse.
“We only have two choices: get additional tax revenue, probably through tax levies, or layoffs,” says Andrzejewski.
FirstEnergy plans to keep the plant open until September 1, so the city will at least have most of this fiscal year's revenue, money it has long depended on. But after that, budget cuts will almost definitely be a reality. Andrzejewski says those cuts will likely come in the following fiscal year, and will probably target public safety. He estimates that it would take eight layoffs to offset the losses.
And while the plant’s closure will hurt the city, it will create an even deeper budgetary hole for the Willoughby-Eastlake City Schools District. The district gets regular property tax revenue from the plant, but also an additional property tax on public utilities. This makes up the bulk of the revenue the district receives from the plant, which is estimated at $1.8 million.
"Our guess is that that entire $1.8 million will disappear," says Cliff Reinhardt, the school district’s treasurer.
The district has about 8,600 students and operates 13 buildings. The $1.8 million it’s expecting to lose will create about a 2 percent hole in its budget. "It’s not an insignificant number," says Reinhardt.
And it’s being taken away at an awkward time. The school district is already facing economic hardship. It’s trying to fill a $13 million deficit for the next fiscal year by asking voters this March to approve a new operating levy. Reinhardt says that levy will likely pass, but the added blow from the FirstEnergy closure will still make things difficult into the future.
But both Reinhardt and Andrzejewski see a potential silver lining. After the plant shuts down, it could create some real estate potential.
"I’m hoping we can get it torn down and cleaned up so that we can start looking at redevelopment," says Andrzejewski. "The one positive I see is that the plant is located right on the lake."
He says the site would be ideal for a mixed-use residential project, or at least some open space. Redevelopment will fill in some of the gaps left by the property tax revenue that will soon stop flowing into the coffers of the city and the school district. But any project is years away, and after what’s likely to be a lengthy site cleanup process. In the meantime, the city and its schools will have to figure out how to scrape by with less.