Ohio auditor David Yost

CHICAGO — Ohio Auditor David Yost has declared the city of Maple Heights to be in a state of financial emergency after the Cleveland suburb missed payments on sewer loans in January and showed deficits in its general and debt service funds.

Yost declared the emergency on Feb. 13 after the city tripped two of the state's six triggers. Maple Heights had been under fiscal watch since April 2014. The declaration means a commission, led by the auditor, will take over the city and develop a recovery plan within 120 days.

Maple Heights is in Cuyahoga County, about 10 miles south of Cleveland, with a population of 23,000. It has roughly $14.4 million of outstanding general obligation bonds.

Moody's Investors Service rates the city Baa3 with a negative outlook after downgrading it last summer from A3. High unemployment, weak economic development, and falling property tax values have all pressured the city's position. Moody's said other challenges include a minimal positive cash position in all funds, a high debt and pension burden, growing deficit fund balances, and a declining tax base.

Yost's declared the fiscal emergency after the city missed three payments on sewer loans from the Ohio Water Development Authority. The loans were due on Jan. 2, 2015, and they made them about 45 days late, according to Scott Campbell, the authority's chief financial officer and assistant executive director.

The authority issues bonds that are backed by payments from local governments who take out loans from the sewer fund. The bond payments are not linked directly to any particular loan payments, according to Campbell. The loan payments are backed by a pledge from Maple Heights' sewer system.

The authority collects the vast majority of its payments on the semi-annual collection dates, said Campbell, calling Maple Heights' 45-day delinquency "pretty unusual."

"Typically a payment is due on January 1 and July 1 and we collect almost all the revenue on those dates. A handful of communities may be 10 to 15 days late, but it's pretty unusual for there to be much of a balance outstanding 30 to 45 days late," he said.

"I think being placed in fiscal emergency was much broader than just the lateness of this payment and I would add that they are current now," said Campbell.

The auditor's 12-page fiscal analysis noted that the city has a $531,000 deficit in its general fund as well as an $80,000 shortfall in its debt service fund. Along with the loan defaults, the deficits acted as triggers on two of the state's six conditions for a fiscal emergency.

"This is a call to action for Maple Heights — their fiscal crisis demands it," Yost said in a statement. "Tough decisions will need to be made, and my office stands ready to provide assistance where it can."

Maple Heights has roughly $3.5 million of outstanding sewer loans from the development authority in addition to the $14.4 million of outstanding GO bonds issued in 2004 and 2010 and roughly $4.3 million of loans from the Ohio Public Works Commission.

The city's mayor and finance director did not immediately return phone calls.

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