Toledo might have as much as $9M in unspent money

Council president says 2 officials’ answers at odds

6/18/2017

BY IGNAZIO MESSINA
BLADE STAFF WRITER

George Sarantou, Toledo mayor Paula Hicks-Hudson and Steven Steel.

Millions more dollars could be in the city of Toledo’s capital improvement fund — on top of the millions Mayor Paula Hicks-Hudson announced in late May was unexpectedly available for residential street repaving, The Blade has learned.

Or the money — as much as $9 million — might be restricted under a special tax district designated years ago for the Franklin Park Mall area.

George Sarantou, Toledo mayor Paula Hicks-Hudson and Steven Steel.

City Council President Steven Steel, a Democrat like the mayor, who is seeking re-election this year, said it was unclear how many unspent city funds are available for spending.

And he said he is not getting the answers he needs. Instead, he is getting conflicting reports.

“I get 180 degree contradictory statements about what this money is, and where it is, and where it can be used,” Mr. Steel said.

The council president started asking questions about city fund balances after a Blade report earlier this month found the city had more than $8.2 million in unspent funds sitting in a fund for at least five years during the same time Mayor Hicks-Hudson was telling voters the city badly needed an income tax increase.

Records obtained by The Blade showed the city’s “general obligation debt service fund” had $8.2 million beginning in at least 2011 that carried over year-to-year until about December, 2016, when it was wiped out to zero.

Councilman Steel said he’s been getting different stories from Finance Director George Sarantou and from city Auditor Jake Jaksetic.

“Jaksetic has laid out the numbers for me and George Sarantou and his staff never have,” Mr. Steel said. “[The finance department] is telling me our city auditor is 100 percent wrong. Well, I need to have them show me on paper why he is wrong and not just anecdotal statements. ... The auditor has shown me numbers that indicate there is both money reserved for the TIF and available money, but I have never seen an actual number that conflicts with him, so yes, we absolutely need to get to the bottom of this.”

Mr. Steel added: “I have been told, even with backing out that money that was in the general obligation debt service fund, out of the capital improvement budget, that there is somewhere between $8 million and $9 million additional in the CIP and that can be used anywhere in the city.”

Mayor’s explanation

The mayor addressed the situation in an email to all 2,682 city employees on June 9 titled “Toledo Finances Moving in the Right Direction.”

“There appears to be some confusion related to available funds, specifically that there is $8 million in ‘found’ money available for expenditure,” the statement said. “The $8 million is restricted. These funds cannot be shifted to the operating budget. Fund balances are necessary to cover previously committed capital funds that carry-over to subsequent years and certain restricted funds.”

Her statement said “The Franklin Park Mall tax increment financing” is legally restricted for certain capital project uses in that area and cannot be used for residential streets.

At some point before 2011, the $8.2 million was put into the general obligation debt service fund with three different transfers: from the city’s general fund, from the capital improvement fund, and from the worker’s compensation fund.

The account is used to pay debt with money roughly equal to the amount owed that year transferred into it from the city’s capital improvement fund. In December, the city transferred less than the amount needed into the general obligation debt service fund — $9.2 million rather than the $19 million it did in 2015 — which wiped out the debt service fund balance, records show.

Peter Rancatore, the city’s commissioner of accounts, confirmed the fund was emptied in that manner.

City officials have not explained why more than $8 million was in the general obligation debt service fund for years if it was meant for a legally restricted tax increment financing district that has its own fund.

The conflicting statements to councilmen have come from Mr. Sarantou and Mr. Jaksetic, Mr. Steel said.

Mr. Jaksetic declined to comment to The Blade and Mr. Sarantou refused to return several phone calls over the past week.

City spokesman Janet Schroeder said Mr. Sarantou and his team were too busy to answer questions.

She later sent a written statement with Mr. Sarantou’s name attached.

Waiting for audit

“The finance department will answer any questions about the 2016 [comprehensive annual financial report] once work on it is complete and it has been submitted to the GFOA (Government Finance Officers Association) on June 30,” the statement said. “It would be irresponsible and reckless for any accountant to comment on an audit that is not yet completed.”

Ms. Schroeder Friday told The Blade the mayor’s office possessed a letter from an independent auditor hired by the city approving of general obligation debt service fund transfers and activity by the city finance department.

She later said that was not true.

“I spoke in error,” Ms. Schroeder said via email to the newspaper. “The item I was thinking about was not about the debt service fund and not from the auditor.”

Mayor Hicks-Hudson is being challenged in this year’s mayor’s race by Lucas County Treasurer Wade Kapszukiewicz, a Democrat, and West Toledo District Councilman Tom Waniewski, a Republican.

Mr. Waniewski said he trusts Mr. Jaksetic’s assessment.

“He makes a convincing argument and has always had all the numbers right there,” Mr. Waniewski said. “The finance department is always working on projections and where it becomes complicated, or more measurable, is we need to know exactly what is in the TIF funds.”

‘Appalling’

Mr. Kapszukiewicz said it was appalling that neither the Hicks-Hudson administration nor Mr. Waniewski, who is vice chairman of the council’s finance committee, appeared to have a handle on city finances.

“This has become the number one issue facing the city of Toledo’s government — the fact that the mayor’s office and the vice chairman of the finance committee do not know how much money the city of Toledo has is appalling and unacceptable,” he said. “Their inability to keep track of taxpayer money casts doubt on their ability to deliver the basic services that citizens rely on.”

The mayor on May 31 said $4 million was available from a number of sources from the city’s 2016 budget. She wants to allocate $2 million of that toward residential street repaving; $1.5 million for equipment and vehicle replacement, and $500,000 more for sidewalks. Part of the 2016 savings that allowed that extra $4 million — bringing the 2017 total potentially earmarked for residential roads this year to $9 million — was $2.3 million in savings from reductions in 2016 workers’ compensation claims compared with what city financial stewards anticipated the cost would be at the start of that year.

But those savings do not appear accurate. Records obtained subsequently by The Blade after the mayor’s May 31 announcement showed the city actually saved $3.83 million in general fund money, not $2.3 million, from the lower workers’ compensation claims costs. The records showed the city budgeted $5,845,333 in its general fund but had to spend only $2,012,490, leaving a positive variance of $3,833,043.

Melanie Campbell, Toledo’s budget commissioner, said the $2.3 million was a projection made in March, before the final cost was known.

Contact Ignazio Messina at: imessina@theblade.com or 419-724-6171 or on Twitter @IgnazioMessina.