East Cleveland finances could be placed under a state receivership at the recommendation of Ohio Auditor of State Keith Faber.
The Ohio legislature included the receivership option, for governments unable to overcome fiscal emergency, in its most recent biennial budget.
“For too long, people simply just kicked the can down the road," Faber said. "It's time for that to end. It's time for a long-term solution."
Under the new law, the state auditor or legislative body of a municipality or county can, under certain conditions, make a referral to the state attorney general for a receivership. The attorney general then files with the state’s Court of Claims, which will then appoint a receiver.
“They're now going to have some limitations on their ability to manage their finances and the money side is going to be controlled in some degree by the receiver,” Faber said. “The receiver's going to have the ability to put things in place to make sure the books and records and the administration side for the financial picture is better managed.”
The referral for a receivership in East Cleveland will go to Attorney General Dave Yost’s office Tuesday, when the new law goes into effect.
"One of the reasons we're doing this now, is that if we waited another month, we think the problem will continue to get worse,” Faber said, when asked about why he made the referral one month before East Cleveland’s mayoral election. “But ultimately the problem isn't just the mayor. We've had issues with council, we've had issues with staff, we've had issues getting financial documents."
Faber laid out a list of the city’s longstanding troubles; 30 years under fiscal emergency since 1988, the inability to perform audits from 2021 and 2022 because of a lack of paperwork, tens of millions of dollars in outstanding debt from lawsuits, and a budget with $1 million more in spending than projected revenues.
No city officials were asked to speak during Monday’s press conference. The mayor’s chief of staff, Eric Brewer, and Councilmember Twon Billings were in attendance and criticized the state for failing to take action after years of mismanagement by previous mayors.
“You should have done something a long time ago,” Billings said. “Come on up in East Cleveland today. He’ll open up the books. Come on up in there today, if you’re serious, and take those damn computers and find out where that money is at. And then start issuing indictments and that’s when I’ll start seeing that they’re serious.”
Former Mayor Brandon King left office following a corruption conviction and his predecessor, Gary Norton, was recalled by voters and later pleaded guilty to federal obstruction charges for his interference in a corruption investigation.
The one local elected official who spoke during a press conference Monday, Democratic State Representative Juanita Brent, said the receivership was a long time coming.
“All of this goes back to how can we make sure the quality of life for those who live in East Cleveland is our number one priority?” Brent said. “This is going to take time. This is not going to be something that's going to happen overnight.”
Under the state law, the receiver will have authority over the city’s spending. It can force officials to reduce spending or increase revenues and follow a fiscal emergency plan. The receiver will have to present reports to city council, and to the public, and will remain in place until East Cleveland is no longer in fiscal emergency.
Bankruptcy is still a possibility, according to Faber.
“Look, long term, if the receiver and the elected officials determine that there is no viable pathway, that their revenues will never be sufficient to satisfy all the debt and obligations, then they have other options,” Faber said. “There is a bankruptcy provision in the federal code and a bankruptcy provision of the state code, but the process would still require the elected representatives to vote and ask the Department of Taxation and the governor for the permission to file a structured bankruptcy.”
