Thursday, March 27, 2008

Short Sighted Thinking Thwarts North Canton City Council's Progress

Prepared Comments Made to
March 24, 2008

Given that this new city council has completed its first one-hundred days in office, today being day one-hundred fifteen, and in keeping to this council’s interests in performance audits, I thought I would provide an audit of what I have observed of this body. My audit of council’s performance comes free of charge.

My first observation of this council is that despite efforts to ensure that there is a free flow of public discussion on the issues, in recent council meetings this has not occurred. On March 10, 2008, North Canton Mayor David Held was abruptly cut off when the council meeting was gaveled closed by the council president. The rules of parliamentary procedure were not even followed as there was not a motion and a second to close the meeting. Failure to allow the mayor to speak two weeks ago was followed by a denial to allow public comments at last week’s council meeting.

I hope the two occasions cited above are an oversight and are not a predictor of future actions by this council to limit discussion on public business before this body.

Although my first comments were less than glowing, I would like to offer some positive comments for Mr. Revoldt’s actions as a leader of this body. President Revoldt, I believe your efforts to lead this council to passage of legislation on a number of issues was sound in judgment, well thought out and certainly in the best interest of the city. I would like to commend you on the following legislative efforts:

Your first proposal was that the city extend the deadline for compliance with nonconforming signs by businesses. Unfortunately, your recommendation came after Community and Economic Development Chairman Kiesling had already embraced discussions to simply remove the entire section of the zoning code regarding compliance with nonconforming signs.

Extending the deadline should have been every politician’s knee-jerk reaction. The issue is resolved and the politician is off the hot seat. This city paid a Cleveland firm over fifty thousand dollars to draft the zoning regulations and many of the members on this council voted to codify that zoning in 2003. The issue of nonconforming signs needs to be addressed. Most communities that are current in their zoning regulations deal with this issue in a more responsible manner than simply sticking their heads in the sand and stripping the language from their zoning code.

I would like to add that having the Community Economic Development Committee handling zoning issues is inherently a conflict of interest. Issues with regard to zoning and issues of economic development have diametrically opposing goals.

This council can offer relief to business owners at this time by simply leaving the legislation on the books as it is and extending the deadline for compliance. I urge you to embrace President Revoldt’s recommendation and do just that.

President Revoldt, I commend you and support your recommendation that council implement legislation dealing with nepotism. It is inconceivable how anyone on this council can argue in support of maintaining a practice that is so detrimental to good government. There is no way to hide or contain the problems that arise from hiring practices that permit nepotism.

Nepotism instantaneously creates problems of perception for the public and the city. President Revoldt framed this issue very eloquently and succinctly. It is a problem of management.

Hiring relatives creates a minefield of problems. Whenever any decision is made by a manager responsible for a relative in an organization, the first thought that comes to mind, consciously or unconsciously, is that the employee is related to the mayor, a city council person, the city administrator, or a department head. It is human nature. And due to the nature of that kinship there will be a natural tendency to treat that employee as family. And even if there is no bias, there is no way to convince someone that there is no preferential treatment. It will exist if someone feels slighted or if one’s relative is not hired or simply if it is believed by citizens. Nepotism undermines good government and good management practices.

Why should anyone apply for a position in North Canton when it is common knowledge that relatives are favored over non-relatives?

On a Web site from Santa Clara University’s Markkula Center for Applied Ethics, there is the following: “…because favoritism is often covert (few elected officials are foolish enough to show open partiality to friends, and family), this practice undercuts the transparency that should be part of governmental hiring and contracting processes.” The Web site is titled Favoritism, Cronyism, and Nepotism.

Clearly, the council members who spoke last week in opposition to legislation regarding nepotism are not acting on behalf of their constituents or in the best interests of the city. And the most vocal critic of the nepotism legislation was Council member Foltz who argued that the ownership of the Hoover Company, a private corporation, by multiple family members was a good example in support of nepotism.

I do not think that argument has any connection to the issue at hand. Ownership of a private corporation by related family members has no relation to hiring and management practices of city government that is responsible to the public.

Lastly, I would like to commend Council member DeOrio for his research in disproving the existence of a council policy for construction of sidewalks. Council member Foltz has argued against the construction of city sidewalks for many years citing the existence of council policy to support his position. Even if such policy did exist, that does not mean successive city councils are bound by it for eternity.

There is nothing more important for bringing citizens together than sidewalks. Sidewalks provide a path to your neighbor’s house. Sidewalks take children to school. Sidewalks allow citizens to exercise and explore their city. Sidewalks can also allow citizens a path to their city parks.

Last week, Mr. Foltz argued against the construction of a sidewalk that would allow citizens’ access to Price Park without having to walk down Glenwood Street and across a narrow bridge that carries traffic in to the city from Belden Village and The Strip. What is the rationale for supporting the spending of thousands of city funds for construction of park trails and upwards of $150,000 for a bridge on park trails in the middle of the woods and not supporting spending of city funds for sidewalks? There really is no logic just as there is no council policy against enhancing the quality of life in this city with funding for city sidewalks.

In spite of the position taken by Mr. Foltz against the construction of sidewalks, I do hope this council realizes that it only takes four votes to move legislation through council. Legislation before this council does not require a unanimous vote. Your membership on this council requires putting the citizens first and not your fellow council members.

I realize that this council seldom listens to my comments but I do hope you follow the recommendations of your council president for dealing with the deadline for nonconforming signs, the need for nepotism legislation, and the construction of sidewalks on the south entrance to Price Park.

Thank you,
Chuck Osborne
City of North Canton

North Canton CIC In Violation Of Its Plan And The Ohio Constitution

Prepared Comments Made to
July 9, 2007 & February 25, 2008

In the spring of 2005, this council body authorized the removal of $1,500,000 from the city’s income tax fund and deposited the funds into an escrow fund from which annual payments of $100,000 are being paid to the North Canton Community Improvement Corporation (CIC). As of June 15, 2007, the account balance controlled by the North Canton CIC totaled $300,000. Payments by the city to the North Canton CIC will continue annually with the last payment being paid out on June 15, 2019.

Week after week I, as well as others, sit in the audience and hear council discuss how to deal with declining revenues and funding shortfalls for needed infrastructure improvements and yet the funds set aside for the CIC are left untouched.

I have addressed this issue on several occasions before this body and yet each of you on council chooses to allow these taxpayer funds to be used for purposes other than for support of city services as intended.

My message to you tonight is to provide notice that; one, the North Canton CIC is operating in violation of its own Agreement and Plan and; two, the financial support that is being provided to the owner of Abbott’s Bridal Shop violates Section 6, Article VIII of the Ohio Constitution.

I have addressed these issues in a letter to the Ohio Attorney General with a request that any and all financial transactions of the North Canton CIC be frozen until such time as these violations are investigated.

The North Canton CIC is in violation of its own Agreement and Plan because it is currently using funding sources never anticipated when the CIC was set up twenty-seven years ago.

The present CIC Agreement and Plan was drawn up in 1980 by the Cleveland Law Firm of Squire, Sanders & Dempsey and was crafted in anticipation of the issuance of Industrial Development Bonds (IDB). St. Luke’s took advantage of this bond financing on two occasions. The use of industrial bonds imposed no expense to North Canton or to the taxpayers and was a valuable economic development tool for the city. Sadly, city leaders have abandoned the use of bond financing as a tool for economic development in favor of using taxpayer funds. This was a costly move for taxpayers and the city.

The use of taxpayer monies to fund a CIC under the present Agreement and Plan is not adequate and actually puts the city in violation of state statute as Chapter 1724.10 (A) requires that a CIC prepare a viable plan that is approved by council.

In an OAG opinion, 67-056, the Ohio Attorney General states: “…that a political subdivision may not appropriate monies derived from tax action to provide for the maintenance or operating expenses of a community improvement corporation.”

The state statute regarding Community Improvement Corporations, (Section 1724.10 (A)) has a similar statement. “Any such debt shall be solely that of the corporation and shall not be secured by the pledge of any moneys received or to be received from any political subdivision.”

Taxpayer monies have been pledged from the City of North Canton and continue to be received by the North Canton CIC. These taxpayer funds were paid to the city to maintain city services and now have been diverted for a purpose other than which they were to be used.

Additionally, the Agreement and Plan of the North Canton CIC is being violated in other ways.

First, there is nothing in the Agreement and Plan of the North Canton CIC that allows for the promotion of retail development. The Preamble of the “Agreement and Plan” states:

“The Corporation and Municipality desire to incorporate the terms and provisions of the Plan into this Agreement so that this Agreement embody and constitute the plan of industrial, commercial, distribution and research development…”(emphasis added).

Providing added parking to benefit a private retail business does not meet any of the requirements delineated in the CIC Agreement and Plan.

Second, the Agreement and Plan clearly states that taxpayer funds are not to be provided to the CIC.

In Article III, paragraph (2), the CIC Agreement and Plan states:

“The municipality shall not be required to make any financial contributions to the Corporation and nothing in this Agreement and Plan shall be construed as permitting the Corporation to obligate the Municipality except as expressly set forth in this Agreement and Plan” (emphasis added).

In Article III, paragraph (3) the CIC Agreement and Plan continues with:

“All costs of the Corporation shall be paid solely from the funds of the Corporation and the Municipality need not contribute any moneys to the Corporation to meets its costs. In no event shall any moneys raised by taxation be obligated or pledged for the payment of any bonds or other obligations issued or guarantees made pursuant to this Agreement and Plan” (emphasis added).

In Article II, paragraph 5(b), the CIC Agreement and Plan has similar language:

“[The Corporation may] …acquire sites…for lease or sale by the Corporation, provided that any such debt shall be solely that of the Corporation and shall not be secured by the pledge of any moneys received or to be received from the Municipality, State of Ohio, or any political subdivision thereof” (emphasis added).

The requirements of Article II, paragraph 5(c) were ignored by the trustees of the North Canton CIC when approving the application for financial assistance from the owner of Abbott’s Bridal Shop. This section of the North Canton CIC says:

“[The Corporation may] make loans to any person, firm partnership, corporation …and may establish and regulate the terms and conditions with respect to any such loans; provided the Corporation shall not approve any application for loan unless and until the person applying for said loan shows that he has applied for the loan through ordinary banking or commercial channels and that the loan has been refused by at least one bank or other financial institution” (emphasis added).

The trustees of the North Canton CIC never required the owner of Abbot’s Bridal Shop to pursue financial assistance through ordinary banking or commercial channels before seeking financial assistance from the North Canton CIC.

The specifics with regard to violation of the Ohio Constitution arise as well from the North Canton CIC’s decision to provide financial assistance to the owner of Abbott’s Bridal Shop. In the court case of C.I.V.I.C. v. City of Warren, the Ohio Supreme Court ruled that municipalities taking action “to raise money for” and “loan its credit to, or in aid of” private corporations violates Section 6, Article VIII of the Ohio Constitution. The North Canton CIC is an agency of the city and by extension this is what is taking place between the North Canton CIC and the owner of Abbott’s Bridal Shop.

In a OAG opinion, 71-044; the Ohio Attorney General states that a “municipality may not make an outright, unrestricted gift of funds to a nongovernmental organization, regardless of whether or not such organization may be generally engaged in performing a beneficial, public purpose.”

There are grave concerns with regard to the present operation and funding of the North Canton CIC. The Corporation must get its house in order before it can serve the City of North Canton. A twenty-seven year old document crafted for industrial bond financing of economic development projects clearly will not work, legally or otherwise if you are using other sources of funding for the North Canton CIC.

Using public monies to benefit private interests in violation of The Ohio Constitution and state law should raise a concern to North Canton elected officials.

This is not a legacy any of you wishes to leave behind given the financial difficulties North Canton is facing today.

Thank you,
Chuck Osborne
City of North Canton