Have County Commissioners Tim Hagan and Jimmy Dimora jeopardized the Cuyahoga County’s future financial viability?
Two Commissioners – Tim Hagan and Jimmy Dimora - in July raised the sales tax a quarter percent to 7.75 from 7.50 percent. It is the highest sales tax assessed in Ohio. Peter Lawson Jones, the third Commissioner, voted against the measure.
The increase – estimated to raise $42 million annually for 20 years – would be used to attract a Medical Mart by insuring public funds for a new convention center.
The County legally could raise the sales tax another quarter percent without going to a citizen vote. Moreover, it might have to do this. The County has other major building projects on its agenda.
The County’s mid-2007 budget report notes, “Currently the County has a total of $449.6 million of active capital projects and capital improvement needs. This total estimate includes ongoing various improvements as well as major projects such as the Youth Intervention Center, Juvenile Court Complex and the County Administration Building. The planned outlay for the Exhibition (Convention) Center project is not included in these numbers. The majority of the projects will be financed with future general obligation bonds.”
On major construction projects as the County Administration building and the juvenile court and jail complex original estimates of cost are usually unreliable. Often the estimates are way below the eventual cost. The Justice Center, if memory serves me correctly, came in at double or more the estimated cost. Of course, the same was true at Gateway.
The Convention Center, of course, is supposed to be covered by the increased sales tax. It’s expected to raise $42 million a year for 20 years. That’s $840 million total for its cost. That suggests a figure double the expected construction cost of the center.
There apparently is concern that the County cannot meet these obligations.
The County would use its inside millage of 1.45 mills of the property tax for funding. Presently, .74 of the 1.45 is used to pay debt. The rest, .71 mills, goes for general fund purposes. Using more for debt would leave less for general operations. The inside millage of 1.45 mills is set and does not increase.
Though the County has reduced employment with its 2001 buyouts, the full time employment has been creeping back up yearly since 2004. By 2008, the County will have jumped by 782 full-time employees over the number of full-time employees in 2003.
I picked up chatter this week that “the fourth floor,” - meaning the County Commissioners and their staff – now considers it possible that it will not be able to pursue construction of the new County Administration building at E. 9th and Euclid.
Added to all this is the foreclosure problem and what it might mean to County revenues. The New York Times Business page on Sunday zeroed in on Maple Heights and Cuyahoga County in a foreclosure article. The article, “Can the Mortgage Crisis Swallow a Town,” reports, “In terms of the subprime mortgage meltdown, Ohio has been among the hardest-hit states, according to the Mortgage Bankers Association.”
It goes on: “In Cuyahoga County, which includes Cleveland and its surrounding suburbs, roughly 30 percent of subprime mortgages are either delinquent or in foreclosure,” says Jim Rokakis, the county treasurer.”
This situation merely adds to a money-crunch with $800 million in the new tax over the next 20 years dedicated for the convention center.
The question does arise: How does the County expect to pay off bonds indebtedness beyond the convention center for the normal capital improvements and juvenile facilities and a new administration building.
Budget managers for the County will seek a budget reduction, asking departments to cut their budgets, for 2008. The general fund for this year is expected to have a cash deficit of $5.5 million and a $12.6 deficit last year. Although a spokesperson said Comprehensive Annual Fiscal Report – more a business reflection of the County cash budget accounting – notes a $12.2 million surplus.
In either case, the County’s finances are tottering toward the red.
Commissioners Hagan and Dimora threw caution to the wind in voting quickly for the tax and its use for a convention center.
The collection of the quarter percent tax increase will go into the general fund of the County. The Commissioners have said it will be dedicated to pay off bonds for the convention center. However, by allocating it to its general fund, a guarantee is absent.
They did this, according to a budget official of the County, for two reasons. One, it allowed for quick action. This suggests why there are so few answers for the public about the Medical Mart and a Convention Center site, its cost and needs. The cart is before the horse, or in this case, maybe before the donkey.
Two, and most important, it dodged a vote by the public. A vote would have been necessary if the money were specifically allocated for the convention center.
The commissioners and staff, aided by the consultation of two law firms – Squire, Sanders & Dempsey and Climaco, Leftkowitz & Peca, made the decision, according to the County official. The two law firms have conflicts of interest. Squire-Sanders’ regional managing partner Fred Nance will head the all-important site selection committee. The Greater Cleveland Partnership (GCP) named him to the task last week.
The Climaco firm has a long-time political association with Hagan. It raises questions of self-interest, particularly with Nance taking a role in deciding the site of the project.
However, another official has disputed the County’s hiring of the two firms. County Administrator Dennis Madden says that the County didn’t pay either law firm. He said that GCP must have paid. However, GCP’s representative says she has no knowledge that GCP paid. More likely, the two firms gave advice with the expectation that they would be chosen as bond counsels when the bonds were let. That’s lucrative business for the law firms.
A County budget official said that the bond rating firms, which help determine the rate of interest the County would pay on bonded indebtedness, were not consulted on the raised tax for a convention center. Presently, the County’s bond rating is fine.
This raises the question, however, whether this quick action might not elevate questions in the minds of bond raters as to the County’s future ability to pay off debt. A rise in the interest rate would cost the County millions or tens of millions of extra dollars for such heavy borrowing.
The evidence of the GCP’s heavy involvement is troublesome.
The GCP and County have totally ignored the long-standing Cleveland-Cuyahoga Convention Facilities Authority (CFA), created by state legislation in 2004 that allowed the County to establish the CFA to determine the need and financing of a new convention center here.
“The CFA will work to retain and create jobs, generate tax revenue and enhance the image of Cleveland and Northeast Ohio by building and operating a competitive convention center in downtown Cleveland,” says the CFA web site.
What’s the status of the CFA today? Good question.
Only one of five members returned my phone calls. The one who did reported he has been replaced on the board. Chairman Bill Reidy didn’t return a call. It is so cozy.
The CFA was given some $400,000 a year by the County before suspending its activity.
The CFA’s lack of success in spurring any public interest in paying for a convention center apparently panicked the city’s elite. It has been the corporate desire for years for a publicly financed new convention center.
Another direction was needed with the CFA’s failures.
The plan was then developed to invent the need for a Medical Mart as a reason for building a costly new Convention Center, which will more than likely become a big loser and a drain on the County’s budget.
On this pretext, Commissioners Hagan and Dimora voted for the tax increase.
I’ve mentioned before that the sales tax represents the most regressive of taxes. The County budget reports that in 2005 the property tax raised $313.9 million, compared to $168.9 in sales tax revenue.
In the 2008 projected budget – the first year reflecting the new sales tax revenue – County taxpayers will pay property taxes of $347.9 million and the sales tax will jump to $270.4 million. Thus, a greater proportion of the County’s revenue will come from its most regressive sales tax. With income inequality growing the sales tax represents even more of a burden on lower income people.
The County (more correctly, you and I) is providing the funding, but the business community, fronted by GCP, apparently will be calling the shots.
It’s called the Cleveland way of doing business. You see what kind of economic shape it has produced for Cleveland and the County. The city and county decline has been devastating but the agenda of the city’s corporate community remains, tossing hundreds of millions of dollars into downtown ventures. The rest of the city and now county can rot.
And believe me, the GCP and its sponsors don’t give a cents worth of concern whether the County is jeopardizing its financial status as long as it is doing GCP’s corporate bidding.
And it is, big time.
What should be troubling taxpayers is where the funds are going to come from in constructing the three major projects – convention center, juvenile court facilities and administration building on Euclid Ave. – and if there will be any funding left over to operate the county.
The County’s 1.45 millage presently provides $47.7 million in revenue. Some $24 million goes to reduce debt and $22.8 million goes into the general fund.
As the debt goes up funds will have to be taken from operating revenue.
I’d be the last to say that the County doesn’t have excess revenue slopping around in its pockets. Last week the County gave $100,000 for two events to the Greater Cleveland Sports Commission. The County Commission’s spending this year is more than $134,000 over budget, primarily for student and summer employment. Wonder how many where related to some official?
Someone had better start reigning in our free spending County Commissioners Hagan and Dimora. Of that, I am sure.
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CORPORATE JOURNALISM THRIVES AT PD
The Plain Dealer continues its brand of corporatized journalism in failing to examine any critical aspect of the Medical Mart/Convention Center issue.
The team of PD publisher Terry Egger and editor Susan Goldberg continue to operate a disgustingly corporate newspaper, failing to fairly report about the community.
Typically, the PD reporting and editorializing vigorously slanted in favor of what the two Commissioners did. Little was said about the effort by citizens to collect signatures to force a vote on the tax increase. When it failed, it was top of the front-page news. At that point, obviously, it reflected the Pee Dee’s wishes.
Thwarting public citizenry seems an odd position for a newspaper.
Theodore Dreiser reflected a long-standing low opinion of the press, saying, “The American press, with a very few exceptions is a kept press. Kept by the big corporations the way a whore is kept by a rich man.”
To those who ride over the public in order to serve powerful interests, John Kenneth Galbraith said, “The deepest instinct of the affluent, whether in America, Germany or Argentina, is to believe that what’s good for them is what’s good for the country.”
What people yearn for, I believe, is a countervailing power against this influence by the rich to help provide balance.
Redressing these inequalities should be one of the functions of a free press.
You could never give passing marks to the PD on that score.
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REDUCING CITY COUNCIL
If the Council President wants to reduce Council himself then you know there’s somebody out there that should be doing it the right way. A Council reduction by Council represents a defensive move, not reform.
I’ve gone back and forth on the number of Council members there should be. You can argue either way: that more members means less ability for corporate or other interests to buy off the Council OR fewer Council members means less cost and a lot less arguing.
I guess today as I write I think Council should be reduced to 11. That’s a good number. Not too small for a sharply shrinking city and not too many so that you cannot remember names.
It might lift the stature of the members, too.
One thing I’d like to see, however, is downtown cut into about three or four wards. This would reduce the power of the downtown representative.
Right now, downtown Councilman Joe Cimperman, a bright but flawed individual, is a mouthpiece for the GCP and its members, the city’s top corporate and legal leaders. Joe’s for them, right or wrong.
Fewer members also might attract a better class of people since it will offer a more prominent position and allow some young people with smarts to see a future in higher office by making a name for him or herself in that position.
I’ve always thought if you had more Council members, there might likely be two or three more activist types who would want to make a name for them. What has happened, however, is that too many Council members have been able to hide in the pack.
Time to thin the crop.