Civic Accountability -- Honesty in Local Government I

[Dan OMalley]

Regarding this evenings finance meeting, I have a few concerns that may or may not be coincidental.

First of all the meeting is listed from 5pm to 8pm in one place and 6pm to 8pm in another. Unless there is a closed door portion, anyone attending should be there by 5pm.

Secondly, the wording for ORDINANCE 41-16 is extremely vague. Is there another fund besides LHF they could be referring to to cover the budget shortfalls? They refer to it as "CERTAIN" funds. http://www.onelakewood.com/event/financ ... eeting-17/

Hi Tara -

Sorry for the confusion - tonight's Finance Committee meeting begins at 6. There is no "closed-door" portion (I am a member of the Finance Committee, and won't be arriving much earlier than 6 p.m.).

Regarding Ordinance 41-16, the full text including referenced funds can be found on page 26 of the most recent council docket: http://www.onelakewood.com/wp-content/u ... 2-5-16.pdf

[Mark Kindt]

In my next series of posts I am going to review common civic accountability tools that we can easily understand and discuss. I'm sure that many of you are fully familiar with what I am going to describe. I have always worked under these kinds of standards (or comparable ones) in relationships with my previous employers, both governmental and private sector. Nothing strange about any of this.

They include:

1. Written codes of conduct, that may include:

2. Governmental ethical standards

3. Relationship with vendors, etc.

Additionally, because of local civic participation with other institutions:

4. Conflict-of-interest guidelines for the City and for the institutions that the City has a relationship with.

Finally,

5. A review of training needs with respect the the above categories.

I am also going to argue, with specific examples, that the implementation of such civic accountability tools will reduce legal risks to the City and its public officials/employees. --That these kinds of processes are efficient and reduce risks of unexpected costs.

[Stan Austin]

Mark-- Looking forward to it. Stan

[T Peppard]

Thank you Mark & Dan, for both of your replies.

Dan, The docket is 124 pages and the date is December 5th. I could only find the word "certain" regarding those funds.

If "certain" refers only to Lakewood Hospital Funds - this would indicate we are in fact using funds from the sale of our former public asset to cover budget shortfalls. This is extremely concerning.

[Brian Essi]

Regarding this evenings finance meeting, I have a few concerns that may or may not be coincidental.

First of all the meeting is listed from 5pm to 8pm in one place and 6pm to 8pm in another. Unless there is a closed door portion, anyone attending should be there by 5pm.

Secondly, the wording for ORDINANCE 41-16 is extremely vague. Is there another fund besides LHF they could be referring to to cover the budget shortfalls? They refer to it as "CERTAIN" funds. http://www.onelakewood.com/event/financ ... eeting-17/

Hi Tara -

Sorry for the confusion - tonight's Finance Committee meeting begins at 6. There is no "closed-door" portion (I am a member of the Finance Committee, and won't be arriving much earlier than 6 p.m.).

Regarding Ordinance 41-16, the full text including referenced funds can be found on page 26 of the most recent council docket: http://www.onelakewood.com/wp-content/u ... 2-5-16.pdf

Mr. Kindt,

Bravo on your excellent posts. Very informative.

Mr. O'Malley,

Thank you for the clarification--it saved an hour of my time.

Ms. Peppard,

41-16 was an "emergency" ordinance that allocated $2.1 million from the Lakewood Hospital Fund to the General Fund. The full ordinance at page 26 of Mr. O'Malley's link and the CAFR make it clear that money from the sale of Lakewood Hospital was needed in an emergency that threatened the peace, health and finances of the City. The use of this money runs contrary to prior representations by public officials some of which mentioned by Mr. Kindt above.

[Mark Kindt]

I am asking you to take The Transparency Challenge. You can personally verify for yourself whether the city administration has a transparency or ethics problem. This is quite easy. You can then report back your findings in this thread or your own thread. Here it is!

The Transparency Challenge (Updated)

Monitor Whether or Not the False Affidavit is Corrected

1. You can track whether or not legal counsel for the city council files a corrected affidavit or corrected motion in Skindell v. Madigan. Legal counsel had an absolute professional ethical duty to correct this filing made before the Court of Appeals.

Here is the case number: CA 15 103976.

It's easy. You can track the filings here: https://cpdocket.cp.cuyahogacounty.us/Search.aspx

You Are Entitled To Request Public Records

All you have to do is send an email or a letter to the City of Lakewood Law Department as a public records request under Ohio law and ask for:

1. Any documents in the possession of the City of Lakewood related to any agreement to retain the Huron Consulting firm limited to 2015.

2. Any emails or documents in the possession of the City of Lakewood between any city council member and any public employee in the city administration related to the Master Agreement in 2015.

3. Any topic of interest related to the City of Lakewood that you would like see a document on.

You may judge transparency on timeliness, completeness and the difficulty in receiving what you have reasonably requested. That's The Transparency Challenge!

Good luck!

And thank you for following this series!

[David Anderson]

I received a text and a call last night and this morning asking “why Council was passing spending ordinances without anyone knowing it.” I replied that Council has not passed any of the more than a dozen 2017 budget related ordinances and that all of these are due for third reading on December 19. I was told “You’ve been caught and you’re a liar because you passed 41-16 and Brian Essi reported this on the Observation Deck.”

So, I visit the LO site and read that Brian Essi indeed reported that “41-16 was an ‘emergency’ ordinance that allocated $2.1 from the Lakewood Hospital Fund to the General Fund.” Anyone reading this would come to the conclusion that Council already passed this ordinance. Apparently, Brian Essi posted this “report” around 7:00 p.m. last night while attending one of the Finance Committee’s many hearings focused on the 2017 budget.

First off, there is no “was” or “allocated” about it. Despites Brian Essi’s claims, 41-16, the quarterly transfer ordinance, has not been passed and is due for a third reading on 12/19.

Secondly, all end of year budget related ordinances are emergency ordinances. Lakewood’s fiscal year coincides with the calendar year and we need a working budget in place day one of 2017. Emergency ordinances are effective after passage and signing and do not have to wait 40 days to become effective as regular ordinances do. We can’t go 40 days without an approved budget in place.

Lastly, many of the line items of all quarterly transfer ordinances change by the time of final consideration. Many accounts, revenues and pay outs need to be reconciled with numbers that are clearer than what was available weeks prior when the quarterly transfer ordinances are first introduced (so that it can be read three times before passage). Transfers to and from the Lakewood Hospital Fund have taken place for years as the City had and still receives “rent” and some emergency responder salaries, health insurance claims and other city items have been supported by LHF allocations. Regardless, it is completely consistent that some of revenues received as a result of the new master agreement could be used to cover actual reductions in municipal income tax due to the loss of jobs until the Family Health Center is operational and/or when the hospital site (which the city still owns) is returned to a revenue producing entity.

Overall, the City of Lakewood’s financial reserves – money set aside for potential future needs – are in good shape and have grown over the last number of years. Municipal tax income for 2017 is projected to increase by 1% over 2016 and 5% more than 2015. Property tax revenues for 2017 are projected to be the same as for 2016 (and 2016 was 4.6% higher than estimates). As has been standard practice over the past many years, the proposed 2017 budget is very conservative and is built so that expenses do not exceed revenues.

Via the Finance Committee’s upcoming Monday hearing, the last in a series of 2017 budget hearings, Council and the community will receive a complete report of all items in the 41-16 transfer ordinance and will be replaced with a substitute, because, again, many of the numbers will change.

Yours in service,

David W. Anderson
Member of Council, Ward 1
216-789-6463

[Bridget Conant]

some of revenues received as a result of the new master agreement could be used to cover actual reductions in municipal income tax due to the loss of jobs until the Family Health Center is operational and/or when the hospital site (which the city still owns) is returned to a revenue producing entity.

But Jenn Pae said we could easily weather the loss of income tax revenue!

Who is misleading us?

[Mark Kindt]

For clarity, we can each see exactly what the City told us in February 2015. I attach the relevant documents.

[Mark Kindt]

Council Member Anderson:

Thank you for taking the time to write your thoughtful response. I found it to be a very helpful and clear explanation.

It was shared in the best spirit of openness.

Thank you!

[Mark Kindt]

It is clear from the attached city administration document that the statements made at Paragraph 9, Paragraph 11 and Paragraph 12 of the Exhibit A Affidavit in Skindell v. Madigan are false. Please compare the two documents. The falsity of the affidavit cannot be rebutted. Wild!

[Mark Kindt]

Given the post above and the two documents, here's a test:

Is the City of Lakewood being paid $32,000,000 by CCF? True or False

One document says "Yes"

One document says "No"

Does the City of Lakewood have a transparency problem?

Do these City of Lakewood documents increase the potential legal risks to the city or reduce them?

Are these representations about the financial condition of the City of Lakewood? Yes.

Is one of these statements a misrepresentation? Definitely.

Does the City of Lakewood have an honesty problem?

The Master Agreement is clear that the City of Lakewood is not being paid these funds.

Fellow citizen, you be the judge!

[Brian Essi]

I received a text and a call last night and this morning asking “why Council was passing spending ordinances without anyone knowing it.” I replied that Council has not passed any of the more than a dozen 2017 budget related ordinances and that all of these are due for third reading on December 19. I was told “You’ve been caught and you’re a liar because you passed 41-16 and Brian Essi reported this on the Observation Deck.”

So, I visit the LO site and read that Brian Essi indeed reported that “41-16 was an ‘emergency’ ordinance that allocated $2.1 from the Lakewood Hospital Fund to the General Fund.” Anyone reading this would come to the conclusion that Council already passed this ordinance. Apparently, Brian Essi posted this “report” around 7:00 p.m. last night while attending one of the Finance Committee’s many hearings focused on the 2017 budget.

First off, there is no “was” or “allocated” about it. Despites Brian Essi’s claims, 41-16, the quarterly transfer ordinance, has not been passed and is due for a third reading on 12/19.

Secondly, all end of year budget related ordinances are emergency ordinances. Lakewood’s fiscal year coincides with the calendar year and we need a working budget in place day one of 2017. Emergency ordinances are effective after passage and signing and do not have to wait 40 days to become effective as regular ordinances do. We can’t go 40 days without an approved budget in place.

Lastly, many of the line items of all quarterly transfer ordinances change by the time of final consideration. Many accounts, revenues and pay outs need to be reconciled with numbers that are clearer than what was available weeks prior when the quarterly transfer ordinances are first introduced (so that it can be read three times before passage). Transfers to and from the Lakewood Hospital Fund have taken place for years as the City had and still receives “rent” and some emergency responder salaries, health insurance claims and other city items have been supported by LHF allocations. Regardless, it is completely consistent that some of revenues received as a result of the new master agreement could be used to cover actual reductions in municipal income tax due to the loss of jobs until the Family Health Center is operational and/or when the hospital site (which the city still owns) is returned to a revenue producing entity.

Overall, the City of Lakewood’s financial reserves – money set aside for potential future needs – are in good shape and have grown over the last number of years. Municipal tax income for 2017 is projected to increase by 1% over 2016 and 5% more than 2015. Property tax revenues for 2017 are projected to be the same as for 2016 (and 2016 was 4.6% higher than estimates). As has been standard practice over the past many years, the proposed 2017 budget is very conservative and is built so that expenses do not exceed revenues.

Via the Finance Committee’s upcoming Monday hearing, the last in a series of 2017 budget hearings, Council and the community will receive a complete report of all items in the 41-16 transfer ordinance and will be replaced with a substitute, because, again, many of the numbers will change.

Yours in service,

David W. Anderson
Member of Council, Ward 1
216-789-6463

Mr. Anderson,

Thank you for the clarification---I had assumed that when Mr. O'Malley's referenced Ordinance 41-16 above, it meant that it was passed--I did not look to see that it had not been passed so it was my error. However, it is simply not my doing that one of your constituents jumped to the conclusion that you were passing laws "without anyone knowing about it."

Nevertheless, I assume Council leadership (you and Mr. O'Leary) had a hand in the drafting 41-16 knowing that $2.1M of the Lakewood Hospital Fund would be needed for the General Fund. If that comes to pass, it would be at variance with the documents that Mr. Kindt has published above prepared by public officials in the Administration (a different branch of our local government).

So it seems to me clear from the plain language of 41-16 that Council leadership believed that $2.1M of hospital sale proceeds might be "necessary for the immediate preservation of the public peace, health, safety and welfare of the City."

In this regard, it should be noted that most of the funds currently in the Lakewood Hospital Fund came from the "sale of Lakewood Hospital to the Cleveland Clinic" (see the 2015 CAFR).

So the "sale" of otherwise "capital" assets were converted into "revenue" and are now being proposed to be used foe "operating costs."

Financing operating costs by liquidation of capital assets is not usually conduct associated with an entity in top financial condition.

Finally Mr. Anderson, I find it most interesting that you were so quick to respond to my post within this thread were I (a lowly citizen) simply used the wrong tense, but you remain silent as to the many issues raised by Mr. Kindt above that point to serious misrepresentations by public officials concerning far more grave matters.

Could you kindly take the time address what Mr. Kindt has presented or even just tell us whether or not any of this gives you as much concern as my lone errant comment?

[Mark Kindt]

To continue my review of issues related to the Exhibit A affidavit and the City forecast spreadsheet. In my opinion the conflict between these two very public documents illustrates one of the major governance problems that I discussed earlier.

On the spreadsheet, we can see how real estate assets are being monetized as they return to the City via the Master Agreement. These assets are part of what we would call a contractual reversionary interest (that results from the interplay of three separate contracts.)

Even the city administration knows that Exhibit A is false. Therefore, we know that $32,200,000 is headed to the New Foundation. We thus see that the bulk part of the cash reversionary interest is not returning to the City. That cash remains with a private party (CCF) for future distribution to another private party (New Foundation). This cash never hits the City's books. And the private donor actually has control rights over the funds once they reach the New Foundation.

This $32,000,000 could actually have reverted to the City, just like the real estate assets did. I make this point to highlight the significance of what has occurred.

If the City has future revenue shortages, they can be attributed to four decisions made by the city administration:

1.) The failure to actually appraise or realistically understand the value of the City's contractual reversionary interests;

2.) The transfer of part of the cash value of that interest to private parties,

3.) The rejection of the Metro Health System proposal, and, obviously,

4.) The closure of the hospital.

In other words, did we forego actual current revenues (that were contractually available) for future tax increases?

Frankly, in my opinion, we just gave away a pile of money to a "new foundation" that was a mere gleam in the eye a year ago. I also believe that the taxpayers of Lakewood will be paying back that give-away with a burden of new taxation or reduced services. I argue that the citizens were misled about the fact that they would be, in effect, funding a private third party. Conceptually, this is a transfer of future tax revenue to a private party due to the decision by the city administration to abandon most of its cash reversionary rights.

We need to stop pretending that CCF is "donating" funds. They are merely "donating" our reversionary assets to a different private party. Once those funds arrive, the donor retains control rights over their charitable use.

I know this is a difficult one to think through. To the extent that we face future tax increases or reductions is services, we need to understand the streams of revenue that the city administration decided to abandon by rejecting the Metro proposal and closing the hospital.

[Mark Kindt]

Public assets that have previously been privatized need to be repatriated to the public when the privatization concludes so that any subsequent use is carefully reviewed by public officials in an open and transparent process. --Even, if they were privatized in 1983. Especially, like here, where the City had express residual or reversionary rights under the contracts that it has now fully surrendered under the Master Agreement.