Thursday, July 24, 2014 at 6:28 PM
East Cleveland's financial woes have drawn a lot of attention in the past several months. It's one of several Northeast Ohio cities to fall into what's known as fiscal emergency since the Great Recession. These cities have to open their books to state auditors, and come under pressure to stop the hemorrhaging. ideastream's Nick Castele reports on different approaches by three troubled northeast Ohio cities.
When you're broke or in deep financial trouble, who are you going to call? Someone who'll give you a loan, right? It's easier said than done, especially if you're in financial distress.
That's the challenge for East Cleveland as it tries to dig itself out of a hole.
The city hopes to borrow just under $7 million by selling promissory notes to pay past-due bills and take care of its deficits. It would pay back the loan out of a pool of state funds that could otherwise have been spent on services. If no investors want to lend, the city may look to the county.
It's an approach that leaves East Cleveland Councilman Nathaniel Martin frustrated.
"We're kind of spinning our wheels, but we have the gun up against our heads, we almost have no choice," Martin says.
Lots of communities have had to make tough choices to make up for revenue losses from the recession, cuts in state funding or overspending that have pushed them into the red.
For cities deemed to be in fiscal emergency, recovery can be very painful.
Garfield Heights climbed out of fiscal emergency last year. Mayor Vic Collova says he was determined not to raise taxes because residents already pay a high price to live there.
"Garfield heights is known to be a city of homes. We had very little business here, we still have very little business," Collova says. "As finances go on and on and things cost more and more money, the only way to get that money if you don't have business is to put that burden on the residents.".
Voters did approve a garbage collection fee. The city renegotiated contracts, didn't replace workers who left and asked some employees to take pay cuts, the mayor says. And according to state audits, it also borrowed money using notes backed by the state -- the same proposition East Cleveland is considering.
Collova says the city lured in an ebook business called Overdrive by offering a property tax abatement.
He says these changes got the city out of serious trouble -- at least for now.
"The residents and the city worked together, the staff and the administration," Collova says. "And we're out of this thing, but like I said, a heavy rainstorm and we'd be right back in. I mean, we don't have that much money."
The recession also left the city of Mansfield in trouble. Mansfield lost tax revenue when a nearby GM plant shut down, then also lost money from cuts in state aid and the end of the estate tax. That's according to former city service and safety director Phil Messer, who says city workers were hit the hardest as Mansfield changed course on spending.
"We had wage freezes, we had voluntary and involuntary furlough days," Messer says. "We got tremendous buy-in from our police and fire unions…for contract concessions, changes in our healthcare plan."
Messer says the city reduced its workforce by about one fifth. And Mansfield voters shared the pain by approving a hike in their income taxes. The city turned off every other streetlight, sold off land and even harvested timber, Messer says.
He says the experience has made Mansfield more cautious with its money, and has city leaders planning more long-term.
"I think in the future we have to do a much better job in trying to do things smarter and more efficient," Messer says. "It's how can we do this better, cheaper, without impacting services to the public."
In East Cleveland, state Auditor Dave Yost warned that in the past couple years the city had spent more than it took in -- and even spent more than council had appropriated. Some council members say the mayor should have cut the city's budget much sooner.
Mayor Gary Norton says the city's long history of economic trouble, and the terrible blow dealt by the housing crisis left him few choices.
"What we have at the end of that is a mayor who refused to gut vital city services, to destroy the few services that we do have for residents and further diminish the city's reputation," Norton says.
Norton says he's still trying to maintain services, and that recently he put in an order for some new police vehicles.
On the other hand, state supervisors say city workers might miss one of their paychecks in August.
Council President Barbara Thomas says the mayor and council now need to follow through on their recovery plan.
"For the first time...we have a recovery plan that has been accepted," Thomas said in a meeting with the mayor and state supervisors. "Now whether we follow the plan and do what's in the plan, that's up to us."