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Published: 3/18/2007

No need for Toledo to consider bankruptcy, officials say

BY JOE VARDON
BLADE STAFF WRITER

Toledo is facing tough times financially, but city and state officials said bankruptcy is not an option.

"It's not even worth talking about," said Jerry Dendinger, Toledo's clerk of City Council. "We're not even close to bankruptcy."

Mayor Carty Finkbeiner has proposed a general fund budget of $241.7 million for 2007 that includes an $11.9 million deficit. That deficit is projected to grow to $17 million next year.

All Ohio cities are required by state law to pass a balanced budget, and Toledo is considering many actions to make its revenues match its expenditures. Some action has been taken, including 23 layoffs and cuts in 124 city jobs, as part of the mayor's plan to cut the deficit.

Toledo Director of Finance John Sherburne said bankruptcy is not a worry because the city traditionally doesn't finish the year in deficit spending.

Mr. Sherburne said if Toledo's finances were in a dire situation, the city has $5.4 million in a reserve fund as well as assets it could sell to raise money.

"There are lots of choices you can make, but many of them are not favorable items," Mr. Sherburne said.

John Mahoney, a spokesman for the Ohio Municipal League, said making tough choices in the face of a budget deficit is a city's only choice.

"Our cities don't just say, 'Let's go into bankruptcy.' It's not an option," Mr. Mahoney said. "If someone has a budget problem, they deal with the budget problem.

"In the grand scheme of things, an $11 million deficit with a $250 million budget is not that big of a deal. Toledo will have to make some tough decisions, but I don't see them being anywhere near bankruptcy," Mr. Mahoney said.

Steve Faulkner, press secretary for Ohio Auditor Mary Taylor, said the state auditor's office was not aware of any Ohio municipality that has engaged in a federal bankruptcy action because state law requires all cities to pass a balanced budget.

Mr. Faulkner said the state has set up further protections to guard against bankruptcy by placing qualifying cities on fiscal watch or emergency.

Cities in danger of being unable to pay the bills or fulfill payroll requirements can receive state help in balancing their budgets and implementing policies to avoid further woes.

According to a report from the state auditor's office, Cleveland was placed on fiscal emergency - in which a commission of state and city officials monitors finances - in 1980 after defaulting on a $15 million debt.

The auditor removed Cleveland from fiscal emergency in 1987.

While bankruptcy appears to be unlikely for cities in Ohio, some municipalities in the nation have filed for bankruptcy.

According to FindLaw.com, an online resource for legal information, fewer than 500 municipalities have filed for bankruptcy protection since Congress first enacted municipal bankruptcy legislation in 1934.

Both the Web site and research conducted by The Blade showed that most cities that file for bankruptcy are smaller than Toledo.

However, financial experts and various newspaper reports have speculated that big cities such as Pittsburgh and San Diego are among the current candidates for a bankruptcy filing.



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