Audit finds Youngstown misused water and sewer funds; mayor still disagrees

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State Auditor Keith Faber says funds were wrongfully spent on business development

YOUNGSTOWN, Ohio (WKBN) – A big question tonight, will the City of Youngstown have to pay back more than $3 million spent on economic development? A state audit released Thursday morning said again, it will.

But, the city still maintains it did nothing illegal and that paying back the money will cause job cuts.

State Auditor Keith Faber is calling for the city to replace funds back into its water, sewer and environmental sanitation fund, funds he says were wrongfully spent on business development.

He says water customers expect to be paid back.

“Those monies, statutorily, we do not believe should have been utilized for those purposes and it is appropriate for them to do the adjustment,” Faber said.

City of Youngstown may have inappropriately used funds, could be on way to fiscal emergency

The audit found that the City of Youngstown incurred $4,462,662 in inappropriate expenses.

During 2017, the city granted various businesses a total of $3,170,620 — $1,696,003 from the water fund, $1,324,617 from the sewer fund and $150,000 from the environmental sanitation fund.

The following businesses received grants or loans from the city:
-Fireline, Inc.
-M.J. Joseph
-Youngstown Business Incubator
-Noble Creature Cask House
-Youngstown Stambaugh Hotel
-Youngstown Stambaugh Bridge

One of the loans the city made is scheduled to be repaid, with an outstanding balance of $2,042,042. If payments are on time, the city has agreed to forgive $750,000 of this loan.

Assuming the loan balance is paid on time, the audit still shows that the water, sewer and environmental sanitation fund is still owed $3.1 million.

“They recognize they have a problem. It is something that needs to be addressed. We only looked back to our active audits. Candidly, they probably should have repaid and recaptured amounts that go beyond that. We are only looking back to ’17 and ’18 cycle. We think there is upwards of $1 million out there in ’18 that also needs to be readjusted,” Faber said.

The state auditor’s office interprets the law to say that money was supposed to come from the general fund or a specific business development fund.

“Ratepayers expect that the fees they pay for services will be used for their intended and legal purpose. In this case, the City has violated that expectation,” Faber said. “My office has tried to balance our concerns regarding this misuse of money with the City’s financial condition and were met with a lack of willingness to address these findings. At the end of the day, it is my job to be a watchdog for our taxpayers and ensure that Ohioans can trust their local governments.”

Youngstown Mayor Tito Brown argues the use of the money wasn’t improper. He claims the city will have to cut expenses, probably with jobs.

He released this statement on Thursday, “The city cannot and will not agree to place such a burden on its citizens.”

Brown points out it happened before he took office and that he has stopped using the money.

But, Faber doesn’t agree with the mayor.

“We are confident that the payment plans we offered do not move the city into fiscal emergency,” Faber said.

The auditor’s office alerted the City of Youngstown more than a year ago that the funds had been inappropriately allocated. Since that time, the office has, to no avail, attempted to reach a reasonable resolution with the city, according to Faber.

Faber and Brown both say they’re willing to negotiate, but if they don’t reach an agreement, the auditor could turn the case over to the Ohio Attorney General to determine if the state takes legal action.

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