Is East Cleveland headed for bankruptcy?
Kevin Chill Heard | 12/25/2013, 4:15 p.m. | Updated on 12/27/2013, 10:56 a.m.
By KEVIN D. HEARD
Could the municipality of East Cleveland be headed for the same demise as the bankrupt city of Detroit? If you listen to the words of the Ohio Auditor of State Dave Yost, things are not looking well for Cleveland’s first suburb.
In a release provided by the state auditor, Yost says that after East Cleveland was audited in 2011 and 2012, the financial status the city “Continues on a downward spiral.”
The two audits revealed bad news for East Cleveland’s ability to achieve fiscal solvency.
“To say these audits are deeply troubling is an understatement,” Yost said in his release on the matter of East Cleveland’s status. “The city’s lack of fiscal management is both unsustainable and irresponsible.”
In an interview with the Call and Post, East Cleveland City Council Vice-President Chantelle C. Lewis, whose term ends this month, says that for three years council tried to cut the budget in opposition to the mayor, to avoid the current circumstance.
“I am not surprised that we are now in this position,” stated Lewis.
In the last three years, eight cities and other designated municipalities filed for bankruptcy. Since 1937, there were over 600 Chapter 9 bankruptcies in the U.S. by cities (towns, counties, and districts) with Cleveland’s northern neighbor, Detroit, being the most notable.
Based on the Cleveland suburb having 11 funds with deficit balances, East Cleveland was placed on fiscal emergency a little over a year ago by Yost.
A report sent from the State Capitol sends an alarming message. It states that East Cleveland officials also appropriated more money than what was estimated to be available. In 2011, 11 funds had final appropriations in excess of estimated resources plus carryover balances.
In 2012, five funds had final appropriations in excess of estimated resources plus carryover balances. To make matters worse, in both years, the city spent more than what was appropriated in numerous accounts and Ohio law prohibits such expenditures. In 2011, the officials spent more than $1.3 million than what was appropriated and, in 2012, that number jumped to more than $4.2 million.
In January of last year, the auditor put East Cleveland in a state of fiscal caution when it was discovered a deficit of $5,872,222. The city was then placed on fiscal watch in May of that same year when its leaders failed to provide an “acceptable plan” to fix the deficits.
In October, according to the state auditor’s office, city officials once again could not provide a recovery plan to straighten out its deficits.
The State Auditor’s office provided the Call and Post with the Ohio Revised Code (133.36) for “Refunding of securities under bankruptcy act.” This is the bankruptcy code that would be called upon if East Cleveland should find themselves needing to file.
East Cleveland Mayor Gary Norton has publically stated that he intends to seek to solve the city’s financial dilemma.
In addition to East Cleveland’s impending fiscal crisis, “annexation” still looms as a possibility to cure much of what afflicts the troubled suburb. And in the face of its current misfortune, some see merging with Cleveland as a “magic pill” that would not only provide stability but bring forth a rush of taxable real estate to the fiscally lacking area.
One of East Cleveland’s longest serving leaders, Councilman Nathaniel Martin, suggests that city leaders need to be open to looking at all sides of a merger with Cleveland.
“My only concern is for what’s best for the people of East Cleveland,” said Martin.