Court makes the right call on the MVSD’s rebate plan

Judges Lou D’Apolito and Ronald Rice have sent an unequivocal message to the Mahoning Valley Sanitary District: Get your financial house in order.

It’s a message prompted by this reality: The MVSD, which provides bulk drinking water to Youngstown, Niles and McDonald, owes $38.7 million in loans from the Ohio Water Development Authority, and is making payments on more than $9 million in bonds it has issued.

And yet, members of the water district’s board of directors approved a $5 million rebate proposal last June, with $3.7 million earmarked for Youngstown, $1.2 million for Niles and $100,000 for McDonald. The three are the MVSD’s member communities.

But the proposal ran into a legal buzzsaw in the court of jurisdiction made up of Judge D’Apolito of the Mahoning County Common Pleas Court and Judge Rice of the Trumbull County Common Pleas Court.

The veteran jurists were skeptical from the outset and refused to rubber stamp the decision by the board of directors. Instead, they expressed deep concerns about the timing of and the reasoning behind the rebates.

The judges refused to schedule a hearing on the matter until the district secured written opinions from the state attorney general and/or the state auditor, or the Mahoning and Trumbull prosecutors that the transfer of funds is permissible.

D’Apolito and Rice told the district that a special master would have to be appointed if the written opinions weren’t forthcoming. The district would have had to pay for the master.

As we noted in an editorial last year, there was an overarching question Chairman Matt Blair and others needed to answer: Other than for political reasons, why did it make financial sense to return the funds rather than set them aside for future capital improvement needs, such as dam repairs?

Fiscal emergency

With the city of Niles in state-mandated fiscal emergency and under orders to develop a balanced budget for each of the next five years, the rebate would have been a godsend.

But as D’Apolito and Rice pointed out in their judgment entry last week, the rebate proposal was “ill-advised.”

They made it clear the court of jurisdiction was unwilling to “simply provide a rubber stamp to this solicitation.”

The judges also made note of the fact that the Ohio Auditor’s Office declined to endorse the MVSD’s proposal.

Chief Deputy Auditor Robert Hinkle conducted the review and echoed the same concerns as those voiced by the court of jurisdiction.

In a letter to D’Apolito and Rice, Hinkle referred to a report issued in 2016 by the district’s Secretary/Treasurer Alan Tatalovich to the state auditor. The report 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.”

Hinkle added: “We at the Auditor of State’s Office share the expressed concerns of the District 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.”

State law gives the court of jurisdiction the authority to approve the rates for bulk drinking water the district supplies to Youngstown. Niles and McDonald. The three jurisdictions have the exclusive right to set retail prices for water supplied to their customers within their boundaries and to those in the suburbs.

It was telling that during their review of the $5 million rebate proposed by the MVSD’s board, the judges posed this question: “Are there any conflicts of interest of any board members in voting for this transfer of funds?”

Underlying the question about possible conflicts was the concern of the judges that the city of Niles’ fiscal problems had driven the decision about the rebates.

Indeed, in the wake of last Friday’s journal entry that blocked the payments, Niles Mayor Thomas Scarnecchia expressed “disappointment.” That’s because city government had included the $1.2 million in the five-year recovery plan that’s required by the state. The city has been under state-mandated fiscal emergency since 2014.

Scarnecchia said he’s not sure how to make up the $1.2 million.