MVSD's $5M rebate plan under scrutiny from state

The judges of the Mahoning Valley Sanitary District Court of Jurisdiction have acquired an important ally in their clash with the district’s board of directors over a proposed $5 million rebate to the cities of Youngstown and Niles and the village of McDonald.

Judges Lou D’Apolito of Mahoning County and Ronald Rice of Trumbull County refused to rubber stamp the plan to send $3.7 million to Youngstown, $1.2 million to Niles and $100,000 to McDonald. They voiced concerns about the decision in a letter to MVSD lawyer Tom Wilson.

Ohio Chief Deputy Auditor Robert Hinkle shares those concerns.

In a recent letter to the judges, Hinkle made note of the fact the water treatment facility in Mineral Ridge owes $38.7 in loans from the Ohio Water Development Authority. In addition, the district has issued more than $9 million in bonds.

It is noteworthy Hinkle’s letter was prompted by a report last year from the district’s Secretary/Treasurer Alan Tatalovich to the state auditor that said, in part, the “rehabilitation or replacement of obsolete infrastructure vital to the purification of water is a major challenge to management to ensure infrastructure can be preserved without affecting … [the] finished product.”

MVSD purifies water from the Meander Reservoir and sells in bulk to the two member cities, Youngstown and Niles, and McDonald.

The court of jurisdiction must approve the rates the district proposes to charge the three communities, which is why the rebate issue is now before the judges.

Hearing postponed

Youngstown, Niles and McDonald, which supply drinking water to customers within their boundaries and to those in the suburbs, have the exclusive right to set retail rates.

As a result of Hinkle’s letter to judges D’Apolito and Rice, the MVSD sought – and received – a postponement of Tuesday’s court of jurisdiction hearing.

The district said it needed more time to consider the comments made by the auditor’s office.

Here’s a key paragraph in Hinkle’s letter that undoubtedly will strike a responsive chord with the judges:

“We at the Auditor of State’s Office share the expressed concerns of the District [Tatalovich’s 2016 report] and the interest of the court in preserving the fiscal integrity of the MVSD for the benefit and protection of the many communities and citizens it serves.”

The judges of the court of jurisdiction voiced similar sentiments when they refused to summarily approve the $5 million rebate.

One of the key questions they posed to MVSD board President Matt Blair and his colleagues was this:

“Other than for political reasons, why does it make financial sense to the MVSD to return the funds rather than be prepared for future MVSD needs, like dam repairs, etc.?”

There also was this cogent question from D’Apolito and Rice that places the issue in its proper perspective:

“Do current board members have fiduciary obligations to the MVSD to preserve its financial well-being?”

In a recent editorial we responded thusly: “The simple answer is yes, they do.”

It should be clear by now the decision by the board to return $5 million to Youngstown, Niles and McDonald does not have the support of the state auditor’s office. That is significant because there is an ongoing investigation by the office into the use of water and wastewater funds in Youngstown for downtown development projects.

A prominent developer, Dominic Marchionda, Youngstown Finance Director David Bozanich and Atty. Stephen Garea have had documents, computers and other material confiscated.

In Niles, state-mandated fiscal emergency has been a millstone around city government’s neck. There has been enormous pressure from the state on the mayor and city council to submit a balanced budget for each of the next five years.

When judges D’Apolito and Rice asked the question, “Are there any conflicts of interest of any board members in voting for this transfer of funds?” the door was opened for the state auditor’s office to delve into the operation of the Mahoning Valley Sanitary District.