Tuesday, December 09, 2008

North Canton Leaders Ignore Signs Leading To Financial Calamity

Prepared Comments Made to
December 8, 2008

On Monday, December 9, 2002, eight years ago, almost to the day of tonight’s meeting, I sat on this council. One of the items on the agenda was the 2003 budget which was titled as Ordinance No. 124-02. Prior to passage of the budget that night, I presented information to council pointing out that the city’s General Fund was going to be down twenty-five percent from the previous year in that 2003 budget while proposed expenditures for 2003 had spiked over the previous year. I also remarked on the practice of passing the city’s annual budget on an emergency as many other pieces of legislation get passed. The Repository reported my comments the next day in an article titled “N. Canton Council OKs $44 million budget.”

The observations I provided that night were quickly rebuffed by Finance Chairman Jon Snyder. Mr. Snyder countered that the city had $18.0 million in the bank and that citizens “…pay taxes for purposes of services. And that it is incumbent on the administration and the elected officials of council to provide services whether it be a fine EMS service, whether it be repair of your streets, or police department.”

Well, council did indeed spend down the reserves. The $18.0 million in reserve funds that Finance Chairman Snyder referred to that night have been spent in just five years. But not all of the millions were spent on providing services for city residents. Before the remaining weeks of 2002, were finished, I received a phone call from Council President Snyder who advised me that Arrowhead Golf Course was for sale. We all know how that story played out and continues to this day. A single expenditure for $4.2 million totally unbudgeted. I might add that the 2003 budget approved only weeks earlier did not include a line item for acquisition of property for $4.2 million, nor did it include all the other costs associated with the acquisition of Arrowhead Golf Course.

In late 2001, North Canton City Council agreed to repay the Maytag Corporation an overpayment of taxes that amounted to over $3.1 million dollars. The city made payments back to Maytag in 2001, 2002 and 2003 that amounted to nearly $1.1 million. Over the course of a year in 2005 and stretching into early 2006, the city made further payments of nearly $2.1 million dollars to Maytag, again refunding overpayment of taxes.

I suspect that the $1.5 million removed from the General Fund in 2005, for the funding of the CIC was totally unbudgeted as well.

Did the leaders of North Canton ignore all the signs that have brought the city to the precipice of financial distress that you face in your budget for 2009 and beyond?

Adding up the expenditures noted above accounts for nearly $9.0 million of the $18.0 million Finance Chairman Snyder talked about six years ago. It is obvious that one half of the $18.0 million in reserves was not spent for services as Finance Chairman stated those funds should be spent.

Have city leaders been prudent over the course of the last six years while reserves were being drained and revenues continued to decline? Where is the remaining $9.0 million of the $18.0 million that the city had in reserves?

According to information from Mayor Held’s state of the city PowerPoint presentation titled Income Tax Collections vs. General Fund Expenditures 1990-2007, North Canton General Fund Expenditures have outspent Income Tax Collections every year since 2001. How does one outspend revenue for seven straight years and not know there is a reckoning some day in the future?

Why would a community continue to outspend its income tax collections while there were repeated signals and warnings that it was about to lose its largest employer? One only had to have read the newspaper to have seen the handwriting on the wall on the fate of the Hoover Company.

A March 30, 2000, news story titled “Hoover workers ponder future” reported some Hoover Company salaried workers were worried that they might lose their jobs. The fear became reality less than three years later when Maytag moved the headquarters of The Hoover Company to Iowa and 500 salaried jobs were lost. The stories are numerous of the slow death of The Hoover Company in North Canton and yet expenditures increased.

The City of North Canton has had ample opportunity through the years to prepare for the financial calamity it is now facing and yet for some unknown reason its leaders have chosen to ignore all the warnings.

It does not take long time to blow through $18.0 million in reserves when you outspend your revenues year after year.

In an October 25, 2001, news report in the Repository, incumbent Council Member Greg Sarbach running for re-election remarked “…the most important issue in the next two years is the decreasing tax revenue because of Maytag Corp.’s restructuring of how its subsidiary, Hoover Co., pays its taxes.” On the same date in 2001, incumbent Council Member Marcia Kiesling as well as myself and another candidate for council were quoted as saying the most important issue facing North Canton “…is how council will deal with reduced tax revenue.” Council has dealt with the reduced tax revenue by accelerating expenditures and exhausting $18.0 million in reserves in the span of six years.

As this council prepares to vote tonight on the 2009 budget, I believe one could say that city leaders have come up short in taking meaningful steps to reduce expenditures and have actually compounded the financial crisis facing the city tonight.

I do have some recommendations at this late stage in the financial crisis facing the city and they are recommendations I have made to Mayor Held, but unfortunately he has failed to take action.

Mayor Held, I must dispute your rebuttal to my comments of October 27, 2008, regarding the residency status of your city administrator. You and I have only discussed the residency of your administrator on one occasion. That discussion took place about six-months into your first term as mayor, over two years ago. We have not had at least a dozen conversations regarding the residency status of your city administrator as you stated in your rebuttal remarks that evening to council.

There is one topic that I have discussed with you on many occasions, probably a dozen times, over the last three years and that is a recommendation that you look around the state of Ohio for communities that participate in a combined Fire/EMS District and then implement a plan such as that for North Canton.

After more than two years of inaction by the administration on this topic, I encourage this council to pursue this course of action. Due to the city’s deteriorating financial condition, this is a course of action that the city will be forced to pursue and implement.

Furthermore, I would investigate, as the City of Akron is doing at this time, the creation of regional policing for the City of North Canton. This is not a course of action I would suggest at this time but the city must do its homework and be prepared to act if the city’s financial condition continues to deteriorate.

Thank you,
Chuck Osborne
City of North Canton