EAST CLEVELAND, Ohio — Ohio Auditor of State Keith Faber is requesting that a state court appoint a receiver to oversee the finances of the struggling City of East Cleveland.
The request, which will be formally made to the Ohio Attorney General's Office to launch proceedings, is allowed under a new state law taking effect Tuesday aimed at helping cities that have been dealing with fiscal emergencies for an extended period.
“East Cleveland has operated in a state of fiscal emergency for most of the last 40 years, and there has been no meaningful progress to deal with the ongoing problems,” Faber said in a news release on Monday. “This is the only viable option left to protect public resources that have been mismanaged for way too long.”
But stabilizing the city's finances won't be easy.
At a news conference on Monday morning, Faber stated that East Cleveland generates approximately $11 million in revenue annually, but incurs $12 million in expenses.
That doesn't include an estimated $65 million in judgments the city owes, including tens of millions of dollars connected to police misconduct lawsuits.
"Even at a nominal interest rate, just the interest on that is almost half of the budget," said Faber.
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If the attorney general's office appoints a receiver, that person will "have authority to implement cost reductions, enforce a financial recovery plan, and take any other necessary action to restore financial stability to the City of East Cleveland," said Faber.
"It is time for the residents of East Cleveland to have a path forward out of fiscal emergency and to financial stability,” said Faber. “As Detroit proved, there are ways to deal with financial distress and move toward a prosperous, stable financial future.”
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State Representative Juanita Brent, whose district includes East Cleveland, called the appointment of a receiver a sign of hope for the city.
"It's going to take a long time," said Brent. "It's not going to be an overnight situation. Something like what's happening today, we're going to see happen for the next five to 10 years."
But others were more skeptical, pointing out the state has already been involved in financial oversight of the city's budget for years under its fiscal emergency designation.
"Hell no, I don't believe anything they say," said Councilman Twon Billings. "We shouldn't have ever gotten to this point."
"I do think this level of aggression is good," said Eric Brewer, chief of staff to East Cleveland Mayor Lateek Shabazz. "But it's something that should have happened years ago, instead of today."
Faber said if the city can't stabilize its finances, bankruptcy would be a possibility.
However, Faber said that would require a vote by local leaders and then approval from the state's tax department as well as the governor.
