Cuyahoga County discovers $36 million in unspent bond funds

CLEVELAND, Ohio — Last year, Cuyahoga County discovered $36 million from a 2014 bond sale that officials had somehow overlooked for years and that needed to be spent by the end of the year.

The discovery resulted in officials allocating the money to proposed and completed capital projects that were to be paid for with money from the county's general fund, said Maggie Keenan, director of the Office of Budget and Management.

The county wouldn't have lost the money if it had not been allocated, Kennan said. But not spending the money the within the three-year window could have nullified the tax exempt status of the bonds and could have resulted in a fine by the IRS.

The oversight occurred at a time when County Executive Armond Budish insisted the county had no money to commit to big capital projects such as the Quicken Loans Arena upgrade and the rebuilding of the MetroHealth System's main campus.

Quicken-loans-arena-transformation

The problem arose because two major projects that were to be funded from the proceeds of the bonds went forward in a different direction and another was delayed — and officials did not realize the money had not been reallocated.

Keenan and her staff discovered the extra bond funds last year while reviewing all capital projects.

Keenan sent a detailed memo to County Council in December outlining what was done, essentially spending bond money for capital projects that had been funded by general funds.

What were the bond supposed to fund?
The county issued $137.9 million in sales tax revenue bonds in December 2014 for capital projects.

After using some of the money to refund prior bonds and pay underwriting costs, $102.4 million remained for 11 projects, including $27.6 million for the county headquarters building and $25 million for the Enterprise Resource Planning system, which will tie together all county government computers and information technology systems.

But only $42.3 million was spent for the projects, according to Keenan. Several projects came in under budget.

The Enterprise Resource Planning system was delayed, and only $3.8 million was spent on that project.

Two other projects went in different directions.

  • Just $1 million was spent from $18.7 million allocated for a new data center because the county in 2015 decided to build its data center in an existing state building in Columbus.
  • And instead of spending $14.7 million toward a state-of-the-art emergency operations center, the county in 2015 opted not to build the center and spent $2.8 million of the bond funds to enhance its current emergency operations and dispatch.

What happened to the unspent $60.1 million bond funds?
In 2015, the county transferred $10 million from the emergency operations center fund and $14 million from the data center project to a demolition fund.

That left $36.1 million that had not been allocated. Here's what Keenan did:

  • $10.1 million was transferred to capital projects to cover expenses by the Public Works Department for projects between 2015 and 2017. Some had negative cash balances because the bills had been paid, but the money was not transferred from the general fund, she said. Among the projects funded by that transfer were $4.7 million for the county headquarters project and $3.8 million for the data center project, which for some reason was not covered by bond funds.
  • $24.1 million was transferred to 19 current capital projects. including $8 million toward the underground pedestrian walkway from the Hilton hotel to the Huntington Park Garage and $5 million to move county archives and other operations into the Halle Brothers Warehouse.
  • $1.9 million is being retained for information technology and resource planning system projects. The bond balance is permissible, according to the bond counsel, Kennan wrote.

The transfers freed up $26 million in general funds. That money was put in reserves. About $23 million is set aside to complete the resource-planning system and information technology projects.

Keenan said new policies are in place that ensure public works projects are properly funded and paid so there are no more negative cash balances.

Who is responsible for losing track of the bond funds?
"This goes back a couple of years and I think there was just a disconnect between the Fiscal Office and public works," Keenan said. "It really does take both of us to make sure we are doing everything right. I can't point a finger at a staff person or department. This will never, never happen again. We are typing up new policies and procedures."

Her staff meets with public works monthly to stay on top of projects.

"I don't know what happened before," she said.

Here's who was in charge since the bonds were issued in December 2014.

Office of Budget and Management: Chris Murray: January 2014 to March 2015. Colleen Brown: March to October 2015. Maggie Keenan, October 2015 to present.

Fiscal Officer: Mark Parks: September 2013 to February 2015. Dennis Kennedy: April 2015 to present.

Public Works Director: Bonnie Teeuwen: January 2011 to February 2015. Michael Dever: March 2015 to present.

Tribune Content Agency
Ohio
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