Youngstown on the hook for misuse of water funds

There’s good news and bad news for Youngstown Mayor Jamael Tito Brown, who has been told by the state the city must repay the $5.5 million previous administrations withdrew from restricted water accounts to finance economic development projects.

First the bad: The Ohio Auditor’s Office, which has determined that such use of water, wastewater and sanitation funds violated state law, is not willing to ignore the misappropriation of public dollars.

In other words, Brown, who took over as mayor in January, likely won’t get his Christmas wish that the $5.5 million will be written off.

But there’s some good news: Ohio Auditor Dave Yost, who will become state attorney general in January as a result of winning the November general election, is willing to do whatever he can to ease Youngstown government’s financial pain.

The city could be given 10 years to replenish the restricted accounts, which certainly would be preferable to having the entire $5.5 million taken out of the already anemic general fund.

Such a move would place the city of Youngstown in state-mandated fiscal emergency.

Brown was in Columbus recently for a meeting with the state auditor’s staff to discuss what is undoubtedly the worst financial news he has dealt with since taking office.

“I thought it went well,” the mayor said. “I’m cautiously optimistic. They were open and receptive to me coming down face-to-face and asking what we can do to resolve this.”

Brown is encouraged that the auditor’s office requested additional documentation that may provide a justification for the use of the water money.

Before delving into who should be responsible for justifying the expenditure, it’s important to look at the underlying premise of the state auditor’s conclusions.

Utility funds are required to be segregated from the general fund because more people pay water and sewer rates than pay the city’s income tax.

Suburban customers

In Youngstown, there are suburban water customers who shell out a surcharge for their usage. They, therefore, have a reasonable expectation that surplus money will be used to upgrade the water-delivery system.

Suburbanites have long complained about Youngstown government using water and wastewater funds for economic development projects in the city.

However, past administrations have justified the redirecting of those funds by pointing to a June 2011 legal opinion from the Cleveland law firm of Calfee, Halter & Griswold and a subsequent opinion from former Law Director Iris Torres Guglucello.

Given that the current administration is being asked to show why the city had a right to redirect the $5.5 million, Mayor Brown and Law Director Jeffrey Limbian would be well advised to meet with lawyers from Calfee and anyone else involved in the decision.

Indeed, Limbian, who formerly served as law director and city prosecutor in the 1990s, told The Vindicator that he and the mayor were not swayed by those opinions.

The city hired the law firm of Roetzel & Andress, with offices in Akron, Cleveland and Columbus, to review state law, the Ohio Constitution and Supreme Court rulings relating to the use of segregated money.

According to Limbian, the Roetzel legal opinion “comported with our analysis” that redirecting the money from the water, wastewater and sanitation funds was improper.

If the issue is as clear cut as Brown, Limbian and the Roetzel law firm believe it is, what was the basis of the opinions from Calfee, Halter and the former law director?

Did city officials who sought their advice influence them in any way?

What role did former Finance Director David Bozanich play in the hiring of Calfee?

Bozanich, who was the financial mastermind of most of the major downtown development projects, has pleaded not guilty to state criminal charges of public corruption and bribery.

He, along with former Mayor Charles Sammarone and developer Dominic Marchionda, were indicted in August on 101 counts of public-corruption offenses tied to several downtown development projects.

State Auditor Yost, whose tenure has been marked by his deep commitment to exposing public corruption in the state, has said the indictments of Sammarone, Bozanich and Marchionda aren’t the end.

“Our team is still on the ground,” Yost told The Vindicator four months ago. “An investigation is like a ball of string. You take it to the end, and we’re not at the end.”

But while state investigators continue their work, Mayor Brown and his administration must deal with the $5.5 million threat to city government’s fiscal well-being.