Cleveland City Council is objecting to how long City Hall takes to spend money on neighborhood projects.
Whether that’s casino tax revenue council slated for small projects or bond proceeds meant to upgrade city buildings, council wants the administration to get money out the door more quickly. At a caucus meeting Monday, Council President Blaine Griffin and others pushed Mayor Justin Bibb’s finance staff to explain why the pace of spending was so slow.
The heart of the issue at Monday’s meeting was the city’s income from bond sales. This is money that the city borrows from investors in order to pay for big-ticket projects like buying vehicles or fixing up roads. As with any loan, the city pays back the bonds over time with interest.
According to figures prepared by City Council, Cleveland is sitting on $200.6 million in proceeds from several bond sales going back to 2019. Of that, about $63 million was for the new police headquarters, a project that is now underway.
Jim Gentile, a longtime top staffer in Cleveland’s finance department, conceded council’s broader point. He said the city needs to pick up the pace in turning around contracts and projects.
“The city has got to do a better job spending down bond proceeds,” Gentile said. “I think it’s gotten better, but it’s still a ways to go.”
Griffin said he wanted to see a “sense of urgency” in project spending.
“We get calls all the time about people who are saying, ‘My project is not getting out the door,’” he said.
Griffin’s council is trying to flex its oversight muscle as it returns from its reduced summer meeting schedule and prepares for next year’s budget process. In October, council will hold hearings to get updates on city operations. Council advertised Monday’s caucus meeting in a news release on Friday, drawing several reporters and TV crews.
There was some confusion at the meeting over the finer points of tax-exempt bonds. A document prepared by council suggested that the Internal Revenue Service levied a $404,421 penalty against the city for failing to spend the lion’s share of its 2019 bond proceeds within three years.
While the city has been slow to spend that money, Gentile said the three-year requirement wasn’t the specific reason for the IRS payment. Instead, high interest rates played a role, he said.
Cleveland owed the IRS because its bond proceeds generated more bank interest for the city than the city owed in interest payments to bondholders, Gentile said. The city has to pay the federal government the difference. Although the IRS could penalize the city for spending slowly, it hasn’t done so, he said.
The city’s pace of spending hasn’t just vexed council members. Local nonprofits have also voiced frustration over how long they’ve had to wait for reimbursements on city contracts funded with casino tax dollars, Signal Cleveland reported last year. Bond spending is different from Cleveland’s American Rescue Plan Act expenses, although both have funded similar types of projects.
Cleveland City Hall is taking steps to speed up a contracting process that has long relied on paper and ink. Just last week, the city completed what’s believed to be its first contract signed entirely through the online service Docusign.
