Financial crisis grips Girard
A seven-member commission will control the city's finances.
By TIM YOVICH
VINDICATOR TRUMBULL STAFF
GIRARD -- The financially troubled city is in a state of fiscal emergency, effective today.
Mayor James Melfi said state Auditor Jim Petro informed him during a telephone conference Tuesday.
A seven-member commission will be appointed to oversee city finances.
The commission comprises one appointee each chosen by the state treasurer, state Office of Budget and Management, the mayor and city council president, and three chosen by the governor out of five names provided by the mayor and council president.
Meanwhile, the mayor said Tuesday that he will wrap up a financial recovery plan, which he will submit to Petro and city council.
Others in trouble: Twenty-nine Ohio municipalities have been in fiscal emergency; seven are in emergency status.
In April, Melfi asked the state auditor to conduct a fiscal review of the city after it was determined that $175,000 earmarked to buy police cars wasn't in its designated account.
At the same time, it was estimated that the city would end the year about $1 million in debt.
"I sensed we were in grave trouble," said Melfi, who took office in 2000.
Melfi said he couldn't get a clear picture of the problem from Sam Lamancusa, who was auditor then. He did know that the city had a "small general fund deficit."
Budget cuts: The administration has cut $1 million from the budget since January 2000 till now, but Melfi said it isn't enough.
When Melfi asked for the special audit in April, 15 months after taking office, he said he realized Petro could put the city under fiscal watch or emergency.
Although the audit hasn't been completed, Petro imposed fiscal emergency because the city wasn't paying off some of its debt.
The city failed to make its semiannual payments of $117,439 on two Ohio Water Development loans used to buy Girard and Liberty lakes and a payment on a $225,125 loan for improvements at the sewage treatment plant.
Also, city departments have experienced deficits in their operations budgets.
Lakes bought: The city bought Girard and Liberty lakes for $2.4 million, committed to spending $2.1 million on underground utilities when U.S. Route 422 is widened, and $5 million for the justice center that opened last year. The cost of the original center was $3 million.
Melfi called the lakes a white elephant and said that the justice center shouldn't have been built and that someone should have taken a closer look before committing to the underground utilities along Route 422.
The mayor said the city "wildly spent money" and "it all caught up to us."
Melfi said his administration has put "cost savings as its No. 1 priority. We recognized that red ink was going to catch up. It's difficult to get the big heavy wheel to slow."
The cost-savings measures include reducing the cost of labor negotiations by $125,000, eliminating $550,000 from a communications system, renegotiating all vendor contracts and firing two consultants at the sewage treatment plant.
State's results: Melfi had been working on the recovery plan he wanted to submit to city council, but only after Petro released the results of the special audit. The mayor has said it didn't make good sense to prepare a recovery plan until he was able to look at the auditor's recommendations.
Because Petro is not waiting for the special audit report, Melfi said he will go ahead with developing the plan.
The mayor said he asked the auditor if he could submit his cost-cutting recommendations before Petro took any action against the city. Melfi said he wanted to make his recommendations in an attempt to avoid fiscal emergency, which makes it more difficult to borrow money.
He said he's disappointed the city was placed in fiscal emergency without the audit report.
"This may be the purging we need," the mayor speculated. "It will correct the ills that have taken place for a long time."