COLUMBUS — Auditor of State Keith Faber will formally request the Ohio Attorney General’s Office launch the required legal proceedings to appoint a receiver to resolve longstanding financial issues in the City of East Cleveland.

The move is allowed under a new state law that takes effect Tuesday for communities that have been unsuccessful in addressing fiscal emergency declarations for long periods of time.

“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,” Auditor Faber said. “This is the only viable option left to protect public resources that have been mismanaged for way too long.”

The Auditor of State’s Office declares fiscal emergencies when communities default on debt obligations, have substantial deficit balances, or meet other negative financial conditions. Communities with fiscal emergency declarations come under the oversight of a financial planning and supervision commission to develop a plan to eliminate the fiscal emergency conditions.

As of Tuesday, there were 13 Ohio communities operating under fiscal emergency declarations. The City of East Cleveland’s current declaration has been in place for nearly 13 years, the longest of any community on the list. Prior, the city operated under a fiscal emergency declaration for more than 17 years, from September 1988 through February 2006.

As of July, East Cleveland was operating with deficits in 10 of its budgeted funds. The city also was holding bills and not making payments that were due, not making payments on lawsuit settlements, and continuing to operate without a fiscal recovery plan, among numerous other ongoing issues.

The new state law enables the Auditor of State’s Office, as financial supervisor of the City of East Cleveland, to make a referral to the Ohio Attorney General’s Office requesting the appointment of a receiver. The Attorney General must file the receivership petition with the Ohio Court of Claims to formalize the appointment.

The receiver 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.

“It is time for the residents of East Cleveland to have a path forward out of fiscal emergency and to financial stability,” Auditor Faber said. “As Detroit proved, there are ways to deal with financial distress and move toward a prosperous, stable financial future.”

Auditor Faber informed East Cleveland Mayor Lateek Shabaaz, members of East Cleveland City Council, and others of the receivership filing Monday and will formally request the Attorney General initiate legal proceedings on Tuesday.

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The Auditor of State’s Office, one of five independently elected statewide offices in Ohio, is responsible for auditing more than 5,900 state and local government agencies. Under the direction of Auditor Keith Faber, the office also provides financial services to local governments, investigates and prevents fraud in public agencies, and promotes transparency in government.

Public Affairs
Contact: Marc Kovac
press@ohioauditor.gov