Monday, September 14, 2009

Financial Losses From Failures of City Officials Must Be Investigated

Prepared Comments Made to
September 14, 2009

On tonight’s agenda is legislation on an emergency asking for city council’s approval of a settlement agreement between the City of North Canton and Larizza Management Group, Ltd. It is Ordinance No. 93-09. Larizza Management, Ltd. is the previous lessee of The Fairways of North Canton.

The settlement agreement calls for the City of North Canton to accept $35,000 as payment in full for delinquent lease payments and property taxes totaling $104, 311.74. In financial terms, this is a good deal for Kevin Larizza, the President of Larizza Management Group, Ltd. In ethical terms, a clear conscience for Mr. Larizza might not come as easily.

The seeds for the economic loss now facing the city arise out of the passage of emergency legislation in 2003, Ordinance No. 98-03, which gave blanket approval for the Rice Administration to negotiate the lease contract without subsequent review of the terms negotiated by then City Administrator David Held.

The bottom line for North Canton taxpayers is that the city is unable to collect nearly $70,000 in revenue for which it is rightfully owed. There is a need for a public accounting of the failings of the lease contract.

These failings are numerous. 1) Lack of a performance bond as urged by former North Canton Law Director Roy Batista; 2) No personal guarantee by the lessee; 3) No review of the contract by the city law director as required by state law; and 4) Failure to collect the $50,000 security deposit as specified in the lease.

Three weeks ago Mayor Held attempted to answer in this chamber why the above protections for the city were not incorporated into the lease when he negotiated the contract with the lessee. In all honesty, Mayor Held’s answer as to why the $50,000 security deposit was never collected by him and former Finance Director Julie Herr raises more questions than it answers. It also raises other issues foremost is the failure of a city official to enforce a city contract resulting in great financial loss to the City of North Canton.

Mayor Held, you stated in your answer that a performance bond “just priced Kevin Larizza right out. He [Larizza] said I simply can’t do it.” You continue “So we decided at that time that we were going to forego the security deposit because he [Larizza] said I don’t have that kind of money or was unwilling to invest the security deposit….”

Mayor Held, your answer brings up a number of questions. I would like to ask who is the “we” you are referring to in your statement. It appears it is you and Mr. Larizza.

Who decided to “forego” as you put it, the security deposit? It appears to me from your response that this was a mutual decision between you and Mr. Larizza. If this was a mutual decision between you and Mr. Larizza, when was this decision arrived at?

Was that decision arrived at before or after the lease was signed?

If this were agreed upon before the lease was signed, why wasn’t ARTICLE IX of the lease requiring the $50,000 security deposit deleted before signatures were affixed to the contract? Why would Mr. Larizza sign a contract that had terms he opposed?

Who else had knowledge that the security deposit would not be collected?

If there were a mutual agreement with Mr. Larizza that no security deposit would be collected after the lease was signed as appears to be the case, why was the lease not amended to reflect that?

Why would you agree to not collect a security deposit? Surely, you understand that doing so would leave the city completely exposed to financial risk. And, in fact, this is what has happened.

Mayor Held, your explanations do not hold water and I can only conclude one of two things happened. One, you as well as former Finance Director Julie Herr forgot to collect the security deposit outright; or two, without authority you, Mr. Held, had a private understanding with Mr. Larizza that you would not enforce the signed contract and no one in the city, including former Finance Director Herr, questioned your actions.

Your decision to remove the last vestige of any financial security that the city had in the lease contract has resulted in great financial harm to the taxpayers of North Canton.

For City Council, I understand that accepting $35,000 is better than walking away with nothing at all. The loss of nearly $70,000 at a time when the city is struggling to maintain city services while remaining fiscally solvent is heartbreaking to say the least.

What I find more wrenching is the fact that as a former City Administrator and now Mayor that you have misled city officials, the citizens of North Canton, and the general public with a lease that offered absolutely no protections for the city.

This is a lease for which you expended $4,200 in public funds to a law firm a thousand miles away for legal services and stated, “From my perspective it was the best $4,200 that I spent while I was working as City Administrator.”

Mayor Held, the contract to lease The Fairways of North Canton is not worth the paper it is printed on and you have either known this fact or been oblivious to that fact from the beginning. One can only conclude that your performance in this matter as North Canton City Administrator and now as Mayor has resulted in great financial loss to the city.

I ask again tonight that this council and that Law Director Randy McFarren commence an investigation into how one individual could single-handily inflict financial loss of this magnitude on the city and have it go unnoticed for five years.

Mr. Revoldt, as President of City Council, I am aware you are a member of the Host Committee in support of Mayor Held’s reelection. I hope you will place politics aside and support an investigation of how and why the city has suffered a loss of nearly $70,000.

If funds were embezzled from the city of this magnitude, there is no doubt that an investigation would be conducted. The financial loss to the taxpayers of North Canton highlights failures that cannot be swept aside.

The process of government in North Canton has failed its citizens and it has resulted in a substantial loss to the city. Last year this council expended in excess of $64,000 for a state audit looking for increased efficiencies in government. Surely, there is an equally compelling interest to determine how, why, and who is responsible for the loss of nearly $70,000 of public funds.

The citizens of North Canton deserve answers.

Thank you,
Chuck Osborne
City of North Canton