Mayor Cervenik: No new City Tax Levy likely this year

 In the March issue of the Observer, the first of a two-part series reported on Euclid Mayor Bill Cervenik’s assessment of the “state of the city,” including progress on major initiatives to enhance the city’s future prospects.  In this installment of our question-and-answer dialog, the mayor offers insight into some of the troublesome issues that the city has to contend with.

      Mayor Cervenik, a licensed C.P.A. who has announced that he will seek a third four-year term this fall, addresses the city’s financial situation in light of anticipated cutbacks in state and federal aid. And, importantly, he stresses that he does not expect the city to place a new tax levy before the voters this year.

 Q.  What are the major concerns that you have regarding the future of the city?

 A. As we are slowly stabilizing our financial position to the level of 2008, my fear is that the reductions in revenue that are being discussed in Columbus, such as the elimination of the Estate Tax and the reduction of Local Government Funds, could drastically affect our ability to accomplish many of the goals discussed earlier and really cloud the vision I have for this community.  The cuts could reduce the revenue we receive from the state--which is money our residents sent down there in the first place in the form of sales, income, and other taxes—by more than $2 million dollars.  I am also worried that the impending cuts proposed for school systems in Ohio will devastate the ability to operate our schools and educate our children. 

 Q.  For the first time in memory, Euclid voters last fall defeated a sewer maintenance levy. What impact might that have on the city’s ability to finance necessary sewer services and improvements?  Also, there has been talk that the EPA’s insistence on major expenditures by Euclid and other communities to control storm water runoff will cause residents’ sewer charges to triple in the near future.  Will the sewer charges that residents now pay with their water bills really rise that dramatically?

 A. The defeat of the two-mil levy was unexpected and reduced annual revenue by about $650,000 for sewer maintenance and other items that are required by EPA mandates.  As you mention, we are in a U.S. EPA Consent Decree situation that will require us to make significant capital improvements to our sewer system and wastewater treatment plant, in order to bring them into compliance with the U.S. Clean Water Act. Virtually every community in the region that operates its own system is experiencing the same circumstance.  Spokespeople for the Northeast Ohio Regional Sewer District, which serves close to 70 communities, have been quoted as expecting rates to increase by as much as 13% per year for 5 years and then some lesser amount on a continuing basis.  However, I do not expect our rates to increase that much, since we have for years been undertaking capital projects that we knew the EPA would require under the agreement. 

 Going back to the levy defeat, we expect the U.S. EPA to at least double our requirements for maintenance of our sewer system, storm water management, and other items the levy paid for. And we will be required--as we are with the capital costs--to fund that through our sewer charges.  We are, as best we can, working with consultants to prepare rate-setting projections. But, until the U.S. EPA agrees to a specific program, we cannot be certain.  We believe the cost of the improvements will be in the range of $55 million to $90 million dollars over 15-plus years.  Having said that, we do not expect our future rate increases to be as dramatic as those for other communities in the Northeast Ohio Regional Sewer District.

Q. Can you discuss the likelihood of Euclid taking over responsibility for collecting those sewer charges, rather than allowing the City of Cleveland Water Dept. to include them on residents’ water bills? 

  A. The City is considering taking over the billing and, more importantly, the collection of our local sewer charges rather than having them included on the Cleveland water bills.  The Cleveland Water Department’s new billing system has caused even greater problems than the previous system.  In addition, handling this in house will allow us to provide better service to our residents, as well as streamline the collection of delinquent accounts. This is important, since if we decrease the delinquencies of the past and greatly reduce non-payment of bills in the future, it could help minimize our rate increases. I will be meeting soon with the Cleveland Water Dept. to discuss how they may assist in rectifying the problems we are experiencing.

 Q.  Several years ago, the city did take control of its income tax collections—rather than rely on a regional agency.  How has that worked out?  And doesn’t such a move fly in the face of all the current clamoring for “regionalization”?

 A. We did bring income tax collection in-house and, subsequently, have achieved tremendous results in collection. Also, interaction has become much more convenient for our residents since the function is now located at City Hall.  Delinquent taxpayers are put on payment plans and required to stay current on present and future tax liabilities. This may seem to fly in the face regionalization and collaboration, but to collaborate for the sake of collaboration, and allowing inefficient operations to cause revenue to decrease, flies in the face of good financial management. The budget of the City’s tax department today—six years later--is less than what we paid Cleveland’s Central Collection Agency to administer our tax collections.

 Q. What is the status of current city income tax collections?  Are revenues down significantly due to the recessionary economy?

 A. Although income tax revenues, due to the economy, are about $2.5 million less than in 2008, for 2010 we were within $60,000 of the 2009 income tax collections, which we hope translates into the stabilization of our tax base.  We are projecting a 3.2 percent increase in 2011, amounting to $700,000. At the same time, we have reduced expenditures in the General Fund to below 2008 levels..  

Q. Do you foresee the need for a new tax levy of some kind in the next few years?

A. If the state follows through with the cuts being discussed, it will translate into reductions in all areas of service we provide, including the safety forces.  It would be painful to have to take that action. 

      I believe that the residents would not accept any tax increases at this time--nor in the near future.  So, no, I do not see putting a tax levy in front of the voters nor increasing any other fees, other than what was discussed concerning the EPA mandates.  We mentioned collaboration concerning revenue collections and it should be noted that I have already called Ed Jerse, who was appointed by County Executive Ed Fitzgerald to the position of director of regional collaboration.  I believe there are services that can be shared and partnerships that can be formed to increase efficiency and reduce the costs of operations.  My administration will be actively working on those initiatives.

Q.  Other than the issues that we’ve covered, what are your major goals for 2011?

     I hope to complete the Downtown redevelopment work, continue searching for funds for the Lakefront project, and continue following the economic development program--attracting the first of many new businesses to Bluestone Business Park. I also want to continue our neighborhood reinvestment programs, including housing rehabilitation and demolition when needed, and to keep our community and neighborhoods safe and sound.

      In addition, we were just notified that we are in line to receive an additional TLCI grant from NOACA to conduct a Master Plan for the Euclid Ave. Corridor, similar to what we did for Downtown. We expect this planning process to produce similar results.

NOTE: To read a copy of Mayor Cervenik’s February “State of the City” message, you can visit the city website at www.cityofeuclid.com. Then, click on “city departments” and then “mayor’s office.”

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