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State auditor reviewing Youngstown’s use of water, wastewater funds
YOUNGSTOWN
As part of its regular review of Youngstown’s financial records as well as an examination of the city’s practice of using water and wastewater funds for economic development projects, the state auditor wants documents from developer Dominic J. Marchionda about city grants given for three of his company’s projects.
Marchionda, one of the downtown’s major landlords, filed in court an objection to the auditor’s subpoenaing records related to money given by the city for his development of the Flats at Wick near the Youngstown State University campus, and Erie Terminal Place and Wick Tower downtown.
Marchionda went to Mahoning County Common Pleas Court seeking to quash the subpoenas and obtain preliminary and permanent restraining orders because the auditor’s office isn’t being forthcoming about why they want the information, said Michael J. McGee, his attorney.
“I need more information, but they are refusing to give it to us,” McGee said. “They’re giving us the stonewall. If they want to have a dialogue with us about what this is about, we’ll give them the documents. If not, they’ll need to have a judge compel us to turn them over.”
“Dominic is a regular businessman, honest in every way, and has nothing to hide,” McGee said.
McGee said he’s asked officials with the auditor’s office if they’re doing more than its annual audit of Youngstown and they refuse to answer.
He points out that it’s unusual for the state auditor to subpoena records from private companies for routine audits.
“An indication this is not a regular audit is the records [requested] go back to 2009,” McGee added.
The subpoenas state they are part of the auditor’s “investigation of city of Youngstown.”
The city’s use of water and wastewater funds for economic development projects was the subject of an Oct. 11, 2015, article in The Vindicator. That investigation showed $2.73 million of those funds were given since 2010 to businesses, primarily downtown, with $520,000 pending the completion of the Wells Building restoration project.
Though some question how Youngstown can provide the money from those funds, the city has legal opinions from 2011 from Calfee, Halter & Griswold, a Cleveland law firm, and its then-law director, Iris Torres Guglucello, that the policy complies with state law.
In that article, Marchionda said without the water and wastewater money, his projects “wouldn’t have happened,” and “the city providing that money is vital to any project.”
Brittany Halpin, a state auditor spokeswoman, said: “There is an audit of the city of Youngstown. It’s a regular audit.” She declined to discuss the subpoenas and an investigation.
But in a Dec. 31 court motion seeking to dismiss Marchionda’s requests, Renata Y. Staff, an assistant Ohio attorney general representing the auditor, wrote: “The auditor is seeking ‘invoices from all contractors supporting the expenditures of all the grant monies awarded by the city of Youngstown,” and “the auditor’s subpoenas seek to ascertain whether public funds provided to the subpoenaed entities were lawfully spent.”
The subpoenas were issued by Robert F. Smith, deputy chief legal counsel of the auditor’s public integrity assurance team, and would have had Marchionda speak to Chris Rudy, fraud investigator for that same auditor unit.
Staff wrote in her motion that the subpoenas were issued “during an official audit of the city of Youngstown. The auditor’s office issued the subpoenas in the course of carrying out its statutorily mandated audit of the city of Youngstown. These subpoenas make clear that the subpoenaed information relates to an ongoing audit [of 2014] and seeks documentation of expenditures of public money received by the plaintiff corporations from city of Youngstown grants.”
It also states that “the auditor carefully limited its subpoenas to records demonstrating whether plaintiffs complied with grant agreements. The city of Youngstown did not give plaintiff corporations spending money to do with as they pleased; grants come with conditions and the auditor subpoenaed documents showing plaintiffs complied with those conditions.”
Judge Lou A. D’Apolito of Mahoning County Common Pleas Court has been assigned the case.
T. Sharon Woodberry, the city’s director of the department of community planning and economic development, said she wasn’t aware of Marchionda’s subpoenas, and that her office has routinely provided information to the auditor’s office about giving water and wastewater money for those purposes related to economic development projects for the past few years.
The city gave $1.2 million in water and wastewater funds to Marchionda in 2009 for the Flats at Wick student housing project, Woodberry said. But, she added, Marchionda’s company paid $1 million to the city for the property, so the company netted $200,000.
The city gave Marchionda’s company $350,000 in water and wastewater funds in 2011 for its Erie Terminal Place apartment project, and then $220,000 two years later for improvement work at that downtown property.
Also, $500,000 in those funds went to Marchionda’s company last year for the apartment/extended-stay Wick Tower that opened in November.
“We asked for documentation for that scope of work,” Woodberry said. “There were no problems with Marchionda’s projects.”