Council supports $4.4M payment
YOUNGSTOWN — City council is expected Wednesday to approve transferring $4,415,332 from the general fund to three other accounts to resolve issues raised in its last two audits that the money was improperly spent.
Council’s finance committee discussed the issue Monday and recommended the payments be made at Wednesday’s full council meeting. Six of the seven council members participated in the finance committee meeting.
Councilman Mike Ray, D-4th Ward, said he agreed the transfers should be made, adding: “I still believe we did things appropriately.”
The 2017 and 2018 audits, both released in 2019, state the city improperly spent $4,415,332 from its water fund ($2,653,169), wastewater fund ($1,612,163) and environmental sanitation fund ($150,000), primarily for economic development purposes. Also, the auditor allowed the city to have the general fund reimburse the three funds over a 15-year period.
The city has refused to transfer the money contending there was nothing improper with the longstanding practice even though it put a stop to it in 2019.
But with $5.3 million in federal COVID-19 relief funds given to Youngstown last year and $88,629,500 in additional federal COVID-19 relief money coming to Youngstown in two equal installments — on May 10 and then May 10, 2022 — the city has the money to address the issue.
The proposal came from city Finance Director Kyle Miasek.
“This is more of a pragmatic decision that Kyle came up with to put all those issues behind us,” Law Director Jeff Limbian said.
He added: “Cynics and critics of the decision that Roetzel (and Andress, a law firm) suggested we take and the acts we took will say this a capitulation and an acknowledgment of wrongdoing. I would strongly resist and argue that this is not a capitulation of our position.”
The decision was done to avoid “a negative relationship with the state auditors” and “maybe it was time since the money was there to take that money from the general fund and put it into the funds they came from,” Limbian said.
A 2019 audit, which will include this same issue, is supposed to be released shortly by the state.
But if this is approved by council, a 2020 audit, which will begin shortly, might not include it, Miasek said.
If the city wants to borrow money in the future, having the audit findings could force it to pay a higher interest rate, he said.
Miasek said he spoke to a state auditor official and the department is “very pleased that we are addressing their concerns and are going to correct this.”
Auditor Keith Faber has said his office could file a lawsuit against the city if the issue wasn’t addressed. Mayor Jamael Tito Brown said on a number of occasions that it would take legal action to get the city to pay the three funds.
But Brown said Monday, “This is an opportunity where we can really clean our books up. We’re not saying we’re at fault. We found a solution that won’t burden taxpayers.”
Councilwoman Lauren McNally, D-5th Ward and chairwoman of the finance committee, said, “It’s frustrating that the state held us in a holding pattern for this long and could have held us here for seemingly forever.”
Miasek pointed out: “It would not go away unless we tackled it.”
The general fund started this year with a $6,907,322 surplus so it can make $4,415,332 in payments to the three other funds, particularly because the $88,629,500 is coming to the city in May and May 2022.
In addition to funding economic development, the water and wastewater funds also went toward other payments questioned by the auditor.
That included $28,758 to buy an SUV for Brown, $45,379 for software support and maintenance, and $524,629 for an irrigation system at the city-owned Henry Stambaugh Golf Course. After questions were raised by auditors about the SUV and the software, the city used general-fund money to pay for the vehicle and all but $19,176 of the software expenses.
The 2018 audit said the irrigation system money should have come from the parks and recreation fund, which gets its money from the general fund.
The legislation in front of council would transfer $524,629 from the park and recreation fund to the water fund as part of the $2.6 million reimbursement to it.
Miasek also pointed out that the transfers would help the water and wastewater funds.
“We had to tippytoe around the water fund this calendar year,” he said. “We’re going to now infuse another $2.7 million into that fund.”
The water fund started this year with a $532,094 surplus and was projected to end with only $119,594.
The wastewater fund started 2021 with a $14,241,550 surplus and is expected to end with a $11,992,495 surplus.
“We had to raise (wastewater) rates,” Miasek said. “So anything that we can do to prop up those two funds because the resources are available and at our disposal” is a positive.
“This is perfect timing and we want to move forward and actually take this opportunity to get this off our books,” he said.
The environmental sanitation budget started the year with a $2,639,656 surplus and was anticipated to finish with a $2,530,156 surplus. But the general fund only owes it $150,000.