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Tuesday, April 7, 2015

County Council Members Put Distance Between Themselves and Executive's Debt Talk

Posted By on Tue, Apr 7, 2015 at 12:41 PM

At yesterday's Finance and Budgeting Committee meeting in downtown Cleveland, Cuyahoga County Council members aired frustration over how Executive Armond Budish has publicly been portraying the county's debt situation.

A brief reminder:

[T]he county's capacity to borrow money has been severely handicapped. County Executive Armond Budish announced yesterday that thanks to massive projects like the Global Center for Health Innovation ($460 million), the Convention Center Hotel ($260 million) and the County Headquarters on E. 9th Street ($80 million), not to mention an internal accounting problem which failed to segregate earmarked taxes, it's unlikely that the county can take on any new projects for a decade or more.

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On March 26, Budish said the county's financial health faced a "serious situation." Finance and Budgeting Chairman David Greenspan and others on council wanted to know more. Chris Murray, interim director of the county's Office of Budget and Management, fielded most of the questions. 

At issue, for one, was the 2015's 27th pay period (there are usually 26) and whether the administration had been reserving money for that additional $11-million cost. It has, it seems, in a sense. Murray insisted that Budish's "serious situation" announcement had nothing to do with the 27th pay. He said that the resources are there, it's just that the accounting/budgeting still needs to be figured out.

Still, council members were wary. Greenspan said that, since the 27th pay has never actually been reflected in budgeting documents, there's an inherent dissonance between what the administration is budgeting and what the council is overseeing. Murray danced around the question, saying that the cash is there, so what does it really matter?

"Part of the problem here is a disconnect between what was presented in a press conference to the major newspaper of this town and went out over the Internet and is seen by those who are interested as reliable information," Council President Dan Brady said. "It is in fact the case, by any reasonable person's estimation or observation that too much was made of this point. It was one of the major points that the executive made in his press conference. When I read what was said, this was one of the major points that the executive made. He was in error. I find it disconcerting that he could have been in error."

click to enlarge Murray
  • Murray
In more visible terms, the discussion turned toward the major publicly funded projects around town.

Murray said that the financing plan for the Big Three (the Convention Center, the Global Center for Health Innovation, the Hilton hotel) was designed so that revenues (from the .25-percent sales tax, the bed tax, the eventual increase in commercial activity from the hotel, and operating revenue from the hotel) would cover their respective debt services and operating payments. He said that totaled some $52 million in revenue for $36 million in expenditures. The administration stressed that there's no concern with paying down those projects. 

Murray added that there are legal restrictions (like assessed credit valuations) that hurt the county's ability to take on more debt "until multiple years in the future." But there overall sense from yesterday's meeting was that the county's budget was in better shape than was intimated in March and in a private "briefing" with NEOMG reporters and editors. 

In short, as Brady outlined toward the end of the meeting, is that the county's budget projections and inevitable debt payments are more comfortable than the executive had outlined.

Council member Sunny Simon concurred, closing the meeting with something of a resounding statement on the matter: "Based upon what I've heard today, the reasons given originally for the statement that we're in a serious financial situation have been dismantled. I think that statement had a negative impact not only on the county, but regionally. Everything that we've worked for as council to project a stable financial situation with our new county government and all the hard work we've put into this is undermined, I think, when we recklessly make statements like that."

What's probably inevitable is an ongoing conversation about the dissonance between Budish's financial outlook and council's oversight. At times, council members repeatedly said, it comes down to semantics.

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