Audit: Borough's woes rose from overspending

The borough borrowed money from a recreation bond issue.
GREENVILLE, Pa. -- Carmen Surano could stand on the street corner shouting, "I told you so," and no one could criticize him.
It was Surano, owner of Surano's Hair Styling at 200 Main St., who raised the alarm about borough overspending in 2001, an alarm that at first went largely unheeded.
Surano said he has no desire to gloat. His greatest satisfaction, he said, was getting things out into the open so officials had to acknowledge there was a problem.
The problem was that Greenville was spending money it didn't have, Surano said, explaining he became suspicious when he saw "the way they were throwing money around."
An audit later showed the borough had been using money from a $3.5 million bond issue, borrowed to pay for recreation and other improvements, to meet general operating expenses over a couple of years.
The borough, with an annual budget of just $3 million, ran up a deficit of about $1.6 million before the problem was uncovered and must now pay back those bond funds.
Borough officials at first denied there were financial problems, contending that Surano didn't have accurate information.
Surano said he got details on the borough's financial plight by going to the municipal building and requesting a copy of the latest audit report.
A couple of key pages detailing the red ink were missing, but Surano said he and his supporters were able to get that additional information from Black, Bashor & amp; Porsch, the borough's auditing firm.
Officials said later they had never seen the audit report, contending that then-borough Manager Peter D. Nicoloff Jr. never gave them the financial document.
Nicoloff resigned in October shortly before the financial problems were unveiled and left town without commenting on the financial situation. He is now believed to be living in the Chicago area.
What went wrong
The discovery of the deficit drew accusations of mismanagement and demands for an investigation from residents.
"They're upset, but what can they do?" Surano said of the reaction.
"The public reaction is one of confusion," said Richard H. Miller, head of Keystone Research Inc., which helped examine the borough's financial status. Miller is also chairman of the Greenville Municipal Authority.
Everyone in authority at that time bears some responsibility for the fiscal mess, he said.
Greenville was one of the wealthiest communities in the state 40 years ago, but decades of a deteriorating industrial tax and job base, a decade of mismanagement and failure to take advantage of federal grant programs to foster economic development have taken their toll, Miller said.
"There was a time in the 1970s when you could sweep floors at [Greenville] Steel Car and still make $25,000 a year. Everything was humming," he said.
Today, the only thing growing in Greenville is Thiel College, Miller said.
Borough officials and residents asked the Mercer County district attorney's office to investigate the financial situation, and District Attorney James Epstein asked the Pennsylvania State Police White Collar Crime Task Force to handle the probe.
That investigation isn't done yet, but Epstein said an initial review done by his office indicates that funds may have been mismanaged, but there doesn't appear to be any criminal misconduct.
"I would like for Pete [Nicoloff] to come back and tell us why he let it go as long as he did," said Mayor Clifford H. Harriger, who also thinks it was a matter of mismanagement, not criminal intent, that allowed the deficit to grow.
The mayor and council relied on the borough manager for details on financial matters, he said, adding that he didn't believe there was a problem until just after the November 2001 election in which he defeated Surano, who ran against him for the mayor's seat.
Harriger sand he and council were interviewing a candidate to replace Nicoloff at the time, and the candidate was asked what he would do first.
"Try to get you out of debt," was the reply, Harriger recalled, adding, "We just looked at him."
Nicoloff may have been silent on the borough's situation, but his wife, Linda, wasn't.
She wrote a long letter to the editor of the local newspaper in May 2002 in which she said her husband, who served as manager for seven years, was a scapegoat for the ills of the community.
He did nothing wrong and served at the whim of council, which approved all the budgets, projects, proposals and contracts enacted by the borough, she wrote.
Harriger said he spent the last three weeks in December walking up and down Main Street talking to people about the borough's financial plight.
Most people didn't appear to be concerned, except that they don't like seeing taxes go up, he said.
All council members at the time have since left office, and only Harriger remains from that period.
The borough had to ask the state to declare it a financially distressed municipality in 2002, and Pennsylvania came through with a $660,000 "no interest" loan to bail out Greenville.
The state also required that the borough adopt a formal recovery plan, known as an Act 47 plan, which outlines steps Greenville needs to control spending and raise revenues. If all goes well, the borough will be out of debt in three years.
Recovery plan
"That's a goal we're setting and we hope we can achieve it," said Joseph M. Hohman of Pittsburgh, state-appointed coordinator for the plan.
"If we miss it, we hopefully won't miss it by more than a year," he said, noting that an economic downturn like the borough is now facing could jeopardize the original schedule.
The borough had projected a $660,000 spending deficit for 2002, but the actual red ink was only $400,000, leaving Greenville with $260,000 to carry over into 2003 and perhaps provide money to apply toward the deficit, Hohman said.
Harriger isn't confident in the three-year plan. "It's going to be more like five," he said. Greenville can recover under the plan, but the borough hasn't reached the point where it is gaining ground on the red ink, he said.
"I think we're coasting," he said.
"It looks like they've stopped the bleeding, but that relies on borrowed money and temporary taxes," Miller said, explaining that the state aid is short term and an increase in wage taxes enacted by borough council can stay in place only as long as the borough remains under the state recovery plan.
Surano, the guy who sounded the warning, believes Greenville will come out of its slump eventually.
"It seems like we have some people in there interested in doing something," he said, though he is critical of what he said seems to be an emphasis on figuring out how to get more money from those who are already paying taxes rather than on seeking new business and industry to bolster the tax base.