OCC communication to Banks regarding Foreclosed Residential Properties

The following information was received from Kermit J. Lind and draws attention to an important communication released yesterday from the Federal Office of the Comptroller of the Currency.  

Here is the link to the full OCC communications released on 12/14/2011:

OCC 2011-49

Below Kermit's message is an excerpted version of the communications drawing specific attention to issues important to the way banks and financial institutions comply with local and state government laws as well as consideration for releasing mortgage liens as opposed to pursuing foreclosures in cases where the "costs to foreclose, rehabilitate, and sell a property exceed its current fair-market value."

Dear Public Officials and Code Enforcement Advocates,

The attached statement just released by the OCC to Chief Executive Officers of All National Banks and Federal Savings Associations, Department and Division Heads, and All Examining Personnel should be of special interest to those agencies who are spending millions in public funds to deal with the harmful condition of residential properties in foreclosure. 

In the case of Cuyahoga County and Cleveland, published reports have illuminated the loss of tax-base value measured in billions of dollars and demolition costs for dwellings no longer safe for any lawful use measured in the hundreds of thousands of dollars. 

If those to whom this guidance is directed would follow it, the public effort and costs to protect payers of taxes and mortgages next to or near foreclosed properties would be significantly mitigated. 

 If those who exercise public authority would consider the standards outlined by one of the primary regulators of financial institutions to be expected of the institutions who come before them in the course of business, it would encourage those financial institutions to voluntarily adhere to those standards.

Kermit J. Lind
Clinical Professor Emeritus 
Cleveland-Marshall College of Law
Cleveland State University

OCC 2011-49

Subject: Foreclosed Properties
Date: December 14, 2011

To: Chief Executive Officers of All National Banks and Federal Savings Associations, Department and Division Heads, and All Examining Personnel

Description: Guidance on Potential Issues With Foreclosed Residential Properties

Background

"...The Office of the Comptroller of the Currency (OCC) is providing guidance to banks on obligations and risks related to foreclosed property. This guidance highlights legal, safety and soundness, and community impact considerations.¹

...Bank as Owner of Foreclosed PropertyObligations and Actions

• In acquiring title to foreclosed properties, banks assume the primary responsibilities of an owner, including providing maintenance and security, paying taxes and insurance, and serving as landlord for rental properties...
• Following foreclosure, the bank must record its ownership interest in local land records.
• Banks must comply with the other real estate owned (OREO) appraisal and accounting requirements.
• Banks should maintain appropriate insurance on the property...
• The Protecting Tenants at Foreclosure Act of 2009 provides tenants with protections from eviction as a result of foreclosure on the properties they are renting.
  • When a bank takes title to a house after foreclosure, it must honor any existing rental agreement with a bona fide tenant and must provide 90 days’ notice to the tenant prior to eviction whether or not the tenant has a rental agreement...

Additional Issues as Owner

• Banks should have sufficient staffing to manage their foreclosed properties portfolios and policies, procedures, and risk management systems in place to properly oversee and manage third-party relationships.
  • Use of third parties does not diminish the responsibility of the bank board of directors and management to ensure that foreclosed properties are administered in a safe and sound manner and in compliance with applicable law...
• When disposing of foreclosed residential properties, banks should consider:
  • ...opportunities to participate and coordinate with state and local land bank programs, neighborhood stabilization programs, redevelopment programs, and other anti-blight programs, or opportunities to enhance owner occupancy.

Bank as Servicer of Foreclosed Property

Additional Issues as Servicer

• Banks acting as servicers should have sufficient staffing and appropriate third-party vendor oversight to manage the foreclosed properties portfolios.
• Rehabilitation or improvement of foreclosed properties should comply with local building codes, licensing requirements, and any requirements in servicing agreements...
  

Releasing a Lien Rather Than Foreclosing

At times, lenders may release a lien securing a defaulted loan rather than foreclose on the residential property. This decision is often based on financial considerations when the bank or servicer/investor determines that the costs to foreclose, rehabilitate, and sell a property exceed its current fair-market value. When this decision is made after a bank or servicer has initiated foreclosure, the borrower may have already abandoned the property or discontinued the care and maintenance of the property, increasing the chance of a blighted property in the community. Because the decision to release a lien is typically a financial decision, banks and servicers should ensure that their valuation of the property provides the best information practicable, while complying with investor requirements, before initiating foreclosure and subsequently deciding to release the lien. While the financial risk must be considered, banks and servicers should also consider the potential for reputation and litigation risk arising from their position as a prior mortgagee or servicer of a now-abandoned property. [emphasis added]

If the decision is made to forego foreclosure and release the lien, the bank or servicer should notify, or attempt to notify, the borrower of the decision. Borrowers should be notified that (1) the mortgage holder is not pursuing foreclosure and has released the mortgage lien, (2) the borrower may continue to occupy the property, and (3) the borrower is obligated to maintain the property consistent with all local codes and ordinances and to pay property taxes and the debt owed. The bank or servicer should also make appropriate notifications to the local jurisdiction when it makes the decision to release a lien in lieu of foreclosure.

Additional Information

For additional information, please contact Steven V. Key, Assistant Director, Bank Activities and Structure Division, (202) 874–5300; or Kevin R. Russell, Director, Retail Credit Risk Division, (202) 874–5170.

Darrin Benhart
Deputy Comptroller for Credit and Market Risk

 ¹ Office of Thrift Supervision CEO Letter 319, “Tenant Protection During Foreclosure: ‘Helping Families Save Their Homes Act of 2009,’” dated September 2, 2009, is hereby rescinded, as this bulletin also references these protections.

 ² For regulations and guidance applicable to banks’ authority to make additional expenditures on OREO properties, see www.occ.gov.

 ³ For regulations and guidance addressing the OREO holding period, see www.occ.gov.http://www.occ.treas.gov/news-issuances/bulletins/2011/bulletin-2011-49.html#ftn1

Cleveland City Council passes Resolution supporting principals of Occupy Movement

Resolution No. 1720-11

Council Members Cummins, Westbrook, Zone, Cimperman, Cleveland, Mitchell, J. Johnson, Brancatelli, Brady, Polensek, Pruitt, Conwell, K. Johnson, Dow.

FOR ADOPTION
December 5, 2011

Recognizing and supporting the principles of the Occupy Movement and the peaceful and lawful exercise of the First Amendment as a cherished and fundamental right in the effort to seek solutions for economically distressed Americans at the federal, state and local levels; committing to work with the Jackson administration to take steps to minimize economic insecurity and destructive disparities in the City of Cleveland; and requesting our County, State and U.S. elected leaders generate solutions for economically distressed Americans.  [See full text using link below].

Copy of Resolution (PDF)

(Word version available by email)

Adopted 18 to 1, 12.5.2011

REF:
Cleveland City Council
Occupy Cleveland
B. Cummins - Facebook

Salvatore Calandra to be honored with Street Dedication on Fulton Road by St. Roccos Church

Former Judge Salvatore R. Calandra will be honored with a Street Dedication on Fulton Road at St. Roccos Church, 3205 Fulton Road, this coming Sunday at 1:00 pm.  Fulton Road will carry the Judge's name - Calandra Way - from Trent to Hyde Avenue, a portion of the road that stretches the campus of St. Rocco's Church.

Fr. Michael Contardi, O. de M., Pastor of St. Rocco’s will be joined by Mayor Jackson, Councilman Zone and Cummins along with members of the family and church leaders.

Judge Calandra served for a quarter-century on Cleveland's Municipal Court.  He passed away on the first of this month and is survived by his wife Marie his sister, Mary Eberle and nieces and nephews. 

Salvatore was a pillar of the community and was inducted into the Northern Ohio Italian-American Hall of Fame, and recognized along with Marie for their long service in the Cleveland Italian American Society.  His connections to St. Rocco’s Church were deep with his family helping build the Italian Catholic church on Fulton Road (completed construction in 1926). 

A Plain Dealer’s article about the judge at his death quoted several church leaders commenting on his passing:

"He was a pillar of our neighborhood, our parish and the city, and yet he was such a humble man -- he didn't care about being out front or being seen," former Councilman Michael Climaco said. "He loved being one of the guys, but he was actually the guy you wanted to be. He was a role model for everyone."

"He was always giving," his godson Anthony Ripepi said. "He would be sentencing people in court, and they would thank him because of how he did it, because he cared. He was an amazing man."

All are welcomed to attend the dedication and it’s fitting that it is taking place in the midst of St. Rocco’s 97th Annual Church Festival.  The annual festival begins tomorrow at 6:00 pm, Thursday, Sept. 1st and runs through Labor Day.

The Street dedication will follow the annual festival’s Procession that begins at 1:00 pm on Sunday following the 12:00 noon .  The festival will also feature the famous grease pole climb, which takes place on Monday, Labor Day at 1:00 pm.

REF:

Salvatore Calandra was a Cleveland judge and a pillar of St. Rocco's
News obituary,  By Thomas Feran, The Plain Dealer, Wednesday, August 03, 2011
http://www.cleveland.com/obituaries/index.ssf/2011/08/salvatore_calandra_was_a_cleve.html

Council reviews proposal for new $32 million city-wide 800 MHz radio system

UPDATE -- 9:00 pm July 20th, 2011
Council voted 15 to 3 approving the new radio system.  The system is anticipated to be initiated and operational within 18-months.


UPDATE -- 6:40 pm July 20th, 2011
Council's Joint Safety and Finance Committee concluded testimony regarding the Administration's proposed new county-wide radio system.  A major issue discussed was why the Administration has not considered utilizing the Ohio MARCS P25 system being planned for implementation in Cuyahoga County on September 1, 2011.

Initially the Administration claimed there were technical issues pertaining to 1) interference on the MARCS system's 700 MHz syestem coming from Canada as well as 2) system capacity issues, i.e., the MARCS system for Cuyahoga County was described as being limited to only 15-channels.

After several conversations with Ohio MARCS staff, Council confirmed that in fact the interference issue is set to be eliminated as of August 1st and that the MARCS Cuyahoga system is designed to initially run with 15-channels but can also be upgraded to 30 channels when needed.

The comparison of potential systems therefore breaks down to approximately:

1. Administration's proposed system - $32 million; 30-channel county-wide system, plus utilization of an 11-channel P25 system run by the Southwest Regional Communications Network.
2. Potential City of Cleveland/Ohio MARCS Cuyahoga system - $26 million; 30-channel city-wide system, plus utilization of an 15-channel (expandable to 30[channels) P25 system run by Ohio MARCS Cuyahoga.

The end result could be as much as a $6 million savings.  But, Council is expected to vote on the Administration's proposal this evening by 9:30 pm under an emergency ordinance and suspension of the rules requiring three-readings.  The vote would come after only two committee hearings (Safety on 7/12; and Safety and Finance today).  Motorola submitted proposals first in September 2010 and then revisions in March 2011.

The City has $11 million in bonding accrued to-date for the $32-million dollar system.  With continuing lower revenues and increasing costs of utilities and services, a potential $6 million in savings should warrant more time and deliberations. 
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Cleveland City Council's Public Safety Committee met yesterday to review proposed legislation for a $32 million city-wide 800 MHz radio system.  The system would replace one purchased in 1993 that serves over 5,000 radio users across departments and divisions that include Public Safety, Public Works, Public Utilities, City Courts, Building & Housing, Port Control and more.

See the presentation given to Council today here.  

The new system would utilize up-to-date standards and comply with The Association of Public-Safety Communications Officials (APCO) Project 25, which is an open source system developed to address emergency communications systems in the United States.  Motorola is being proposed to be awarded the contract.

According to the administration, the new system would enable the City to communicate with the County and State of Ohio Multi-Agency Radio Communications System (MARCS); would drastically improve reliability, redundant coverage and operation; and would integrate with the Southwest Regional Communications Network that is composed of 8 of the County's 59 municipalities - Brookpark, Berea, Middleburg Heights, North Royalton, Parma Heights, Olmsted Falls, Olmsted Township, and Strongsville.

Presently there are 47 different types of radio systems currently being used in Cuyahoga County, due to the different set of frequency bands used by the various public safety agencies.  The new system would include the use of 14 radio towers up from the current 8 the City of Cleveland uses today, which would expand the city's radio coverage area.

The current system was purchased by Motorola, 18-years ago and has had multiple failures reported in 2008, 2009 and 2011.  Annual maintenance costs for systems such as Cleveland's range from $1 to $3 million.  The Jackson Administration began the process to replace the current system in January 2009.

In addition to Motorola being proposed as the vendor, The Administration is also seeking approval for a $552,000 contract with RCC Consultants.  RCC was utilized to assist in the pre-bid analysis of the project through a grant from the US Department of Justice.  The legislation is expected to be heard for a second time next Wednesday in City Council's Committee of the Whole and a vote is expected the same day.

REF:  City of Cleveland Request For Proposal - 800 MHz APCO P25 Radio System

Council authorizes participation in proposed AMP Ohio natural gas fired power plant and settlement of expenses for cancelled AMPGS coal fired plant in Meigs County

Contract represents $52 to $62 million, 35-year take-or-pay power purchase contract for 60 MW share of a 675 MW natural gas combined cycle generation plant.

 

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UPDATE -- June 20th, 2011 -- Council voted and approved the 60 MW share participation in the AMP Fremont Energy Center project.  The vote was 15 to 2 with Councilmen Michael Polensek and Jeffery Johnson voting against.  Council met for two additional hours this morning to discuss the project for the third time in hearings, and then a vote was held at 12:00 noon.

A major part of the deal also handles $12 million in stranded costs assigned to Cleveland Public Power (CPP) that is attributed to the failed AMP Generating Station (coal) project.  Of the total $12 million, $4 million is being eliminated or pick-ed-up by  non-AMP participants share in the AFEC project; $4 million will be paid as part of the power contract over a 15-year period, and $4 million will be paid out of CPP's operating expenses and will have an impact of increasing rates to CPP customers by $4.00 per year.  But, the 60 MW, 35-year power purchase contract will eventually replace existing short-term (1-2 year) contracts which are typically far higher in price that what the estimated price is for power under this new contract, and the net effect is anticipated to save rate payers money.
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UPDATE -- June 16th, 2011 -- Cleveland City Council will be holding a Special Finance Committee & Public Utilities Committee meeting on Monday, June 20th, 9:00 am, 601 Lakeside Avenue, Room 217, immediately followed by a special City Council Meeting where a vote is expected on Ord. 680-11.

CPP & AMP have provided additional information that was requested by Council and more information will be reviewed tomorrow as well.  I'll try updating this post again over the weekend leading up to Monday's meeting and vote.  Overall, it's been disappointing to have received the legislation just a week prior to going into our legislative break.  The opportunity to participate in a natural gas power plant appears to have some great benefits, but the 60MW participation amount represents approximately 16-20% of CPP's total power purchases and I'm uncertain of the risks that come with entering into a 35 year contract for this one source of power.

Here is some of the additional information we received:

• Primary purchase agreement for the new combined cycle natural gas plant
  Asset Purchase Agreement between AMP and First Energy
  
• Participants Contract with AMP for shares in the AMP Fremont Energy Center project
  AMP Fremont Energy Center Power Sales Contract, dtd 6/30/2011. One of Four; Sections 1 - 4
  AMP Fremont Energy Center Power Sales Contract, dtd 6/30/2011. Two of Four; Sections 5-20
  AMP Fremont Energy Center Power Sales Contract, dtd 6/30/2011. Three of Four; Sections 21 - Appendix B
  AMP Fremont Energy Center Power Sales Contract, dtd 6/30/2011. Four of Four; Appendix B - M

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UPDATE -- June 6th, 2011 -- Cleveland City Council has decided not to hear or vote on the legislation today and American Public Power has confirmed their actions to seek an extension of the AMP Participants deadline to confirm inclusion in the AFEC (from June 15th to June 30th), as well as seek an extension for the closing of the Purchase Agreement with First Energy (from July 1st to July 15th).

PUBLIC NOTICE:  Cleveland City Council will hold a public hearing to discuss Ord. No. 680-11 on Monday, June 13th at 1:00 pm, Mercedes Cotner Committee Room 217, 601 Lakeside Avenue.
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On Wednesday, June 1st Cleveland City Council’s Public Utilities Committee heard legislation that would authorize participation in the proposed AMP Ohio Fremont Energy Center (AFEC) natural gas combined cycle generation plant and settlement of expenses for the cancelled AMPGS coal fired plant in Meigs County.

The authorization would allow Cleveland Public Power (CPP) to enter into a 35 year contract to purchase power from the plant as well as allow CPP to pay and settle its’ share of development costs for the unsuccessful AMPGS coal fired plant.

The authorization represents a contract for a 60 Megawatt (MW) share of the total 675 MW project, or a relative percentage (8.75%) value of the cost of the purchase of the AFEC, which equals:  $675.1 million total project costs, for an amount of $150 million for the City of Cleveland’s share taking into account the 35-year power contract.  An additional 25% "step-up" provision could increase The City’s subscription (from 60 to 75 MW) and the cost exposure to $200 million.

The power purchase contract would also provide a discount to AMP participants that agree to a share in the new proposed gas fire plant.  The total stranded costs of the AMPGS coal fired plant have been reported as $119 million.  Cleveland’s share, according to AMP is $12.4 million. 

AMP’s Board approved applying $34 million of the total cost of development of the AMPGS project to the AFEC project.  The application of these fund balances has been stated to reflect development costs that can be applied to the new project based on work performed and related to the identified need and development of an intermediate and base load supply of power that was initially identified as a goal by AMP participants in 2002.

If Cleveland participates in the new project at a level of 60 MW, the $12.4 million stranded cost would be reduced to $7.5 million.  Of the $7.5 million balance, CPP would be able to apply half the amount. $3.75 million to a 15-year payment term for power purchased from the AFEC project and the remaining $3.75 million would be paid out of CPP’s operating fund.

Resources:

• Ord. No. 680-11
• Executive Summary ORD 680-11
• AMPGS/AFEC PowerPoint Presentation 6/1/2011

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Cleveland Public Power is an Enterprise Fund and a Division of the City of Cleveland that was created in 1906.  CPP serves approximately 77,000 customers in an area bounded by the Cleveland City limits and is the largest municipal electric system in Ohio and 37^th largest in the U.S.

The City of Cleveland, through Cleveland Public Power is a member of American Municipal Power, Inc. (AMP).  AMP is a non-profit wholesale power supplier and services provider for 128 member municipal electric systems in six states (OH, PA, MI, VI, KY, WV) with a combined base of more than 570,000 customers.  AMP was formed in 1971 and is headquartered in Columbus, Ohio.  There are more than 240 employees at AMP headquarters and their generating facilities. A 19-member Board of Trustees, comprised of member communities, governs the organization.

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STATUS --  At the conclusion of the Public Utilities Committee on Wednesday, June 1^st, the legislation was held and will be heard in a Committee of the Whole of Council on Monday June 6^th.  A vote is expected at the 7:00 pm Council meeting the same day.

Council's Public Utilities Committee developed a list of follow-up questions that are being responded to currently.  The list is provided below.

Major concerns regarding the legislation is first and foremost the short period of time Council has been provided to review and vote on the contract.  AMP entered into a purchase agreement with First Energy for the AFEC on March 11^th.  The subscription period began on March 15^th and is scheduled to end June 15^th.  The current closing date for the agreement with First Energy is July 1^st. 

There are discussions to request that AMP exercise an option within the agreement to extend the closing date to July 15^th in which case Cleveland City Council would be able to deliberate for an additional three or more weeks and potentially engage an energy consultant to assist in a review of the proposed project. 

The agreement calls for an option of extending the closing date to September 30^th, but there are provisions for $125,000 per-day penalty payments if the agreement is not reached and is terminated after the July 15^th date.  AMP’s Board of Trustees must approve any closing date extension requests.

Other major issues that are being considered are the amount of the requested subscription (60 MW) and the 20% share this would represent of CPP’s energy portfolio.  Clearly a combined cycle natural gas power generating plant is generally recognized as preferable to coal technology, but there are concerns such as gas availability, price stability and the calculations to cost estimate the power over a 35-year contract. 

In addition, although the participation in the plant could assist CPP in gaining ground on its relative competitive pricing with First Energy, there are concerns for locking-in 20% of our power needs to natural gas when significant changes could occur over the length of the 35-year commitment.

Cleveland City Council’s Public Utilities Committee Questions and Concerns raised after the
June 1^st 2011 Committee hearing –

1.        Provide the complete listing of all long-term contracts CPP has for the purchase of power.

2.        Provide information on other comparable natural gas power generation facilities to compare construction costs and cost of power, which CPP will be purchasing.

3.        Provide copy of or sufficient data of CPP consultants report assessing proposed contract with AMP (per Ordinance 680-11) as best choice for CPP purchase of long-term power.

4.        Provide copy of AMP Board approval or Resolution authorizing fee arrangement of “stranded” costs.

5.        Provide ordinance in which consultant contract was authorized for the review and assessment of the proposed AMP contract per Ordinance 680-11

6.        Provide copy of the Asset Purchase Agreement (see slide #26 from PowerPoint), as well as any other documentation pertaining to CPP/City of Cleveland's power purchase contract.

AMPGS - Stranded Costs

7.        Provide an accounting of the total $119 million stranded costs for AMPGS

8.        Did all participants take a percentage share of the costs based on shares of power?

9.        Provide a chart of accounts showing the participants and their shares of the stranded costs

10.    Provide the resolution and any documentation for the rational and decision by the AMPGS participants for the vote to add $34 million of the costs to the AFEC.

11.     What is the current interest rate on the APM line of credit for the $119 million?

12.     What will be the payment terms to the City of Cleveland for the $12,396,426 stranded costs if we do not participate in the AFEC.

13.     What are the legal position, or guarantees regarding the $119 million and the outcome of the litigation with Bechtel Power?  i.e., if there is a settlement, or a judgment what can the City of Cleveland/CPP expect to receive or possibly pay in addition to the $12,396,426 costs that have been identified?

14.     What other assets remain of the $119 million stranded costs?  Does the $119 million include land acquisition costs in Meigs County?  Any other significant assets?  What happens when the assets are disposed of, sold?  What is the estimated value of any such assets?

AMP Fremont Energy Center (AFEC)

15.     Provide a copy of the AMP/FirstEnergy Asset Purchase Agreement

16.     Provide a copy of the AMP Participant’s Subscription Package

17.     Request more time for due diligence on this project and seek the extension to July 15^th.

18.     What would be required to seek additional time beyond July 15th?

19.     What contingencies, if any, are allowed if CPP would want to exit our participation from the AFEC at time during the 35-year take-or-pay contract?  Can we sell our share to another AMP Ohio participant?  To a non-AMP participant?

20.     Who would be operating the plant?  What are the anticipated O&M annual costs?

21.     It was stated by CPP that the power from this one source would make up approximately 20% of our share of power needs.  How does this percentage compare to our current ratio of fuel sources in our Integrated Resource Plan?

22.     What analysis has been done to confirm the value and negotiated purchase price of the AFEC?  What documentation and analysis does AMP have to justify the purchase price of $485 million, which represents an amount of $231 million above what FirstEnergy paid for the plant ($253.6 million) out Calpine Corp’s bankruptcy proceedings in January 2008.

City Council approves 5-year water rate increase plan

Cleveland City Council voted this evening 10 Yes; 8 No; 1 absent approving a Division of Water rate increase plan for the next 5-years. I voted NO, not because I don't agree on the need for an increase, but rather on a vote of no confidence in the existing executive/admin management of the Division.

Vote Summary -- YES (10): Sweeney, Pruitt, K. Johnson, Cleveland, Mitchell, Miller, Brancatelli, Kelley, Zone, Westbrook. NO (8): Dow, J. Johnson, Conwell, Polensek, Cummins, Brady, Keane. ABSENT (1): Cimperman.

For a detailed report on the Division of Water that includes the Rate Study information see:
City of Cleveland – Division of Water Comprehensive Financial Plan Report, March 2011

Reasons opposed to the water rate increase legislation --

1. Poor Executive & Administrative Management
• Lack of confidence in the current leadership and management of the Division of Water.  There’s been no one held accountable for the poor Administrative and Fiscal management of the Division.  The poor management of the division has overshadowed the strong and successful management of the Division’s capital improvement projects, water operations and quality of our water.   The lack of accountability jeopardizes credibility of the entire system.
• The Division of Water’s accounts receivable balances have seen double digit increases since 2007.  The 2010 accounts receivable position was not presented to Council until just this month and equals some $75 million.  Of this balance more than 50% of it is past due 6-months or longer, and the Division has not made any major write-offs for un-collectable accounts.
• Due to the (management) problems in billing and customer service, Council’s Leadership made a decision in 2010 to not entertain a discussion about the Division’s need for a water rate increase.  There was a draft water rate study completed last year that provided much of the same information we’ve been informed of since March 2011.
• The full City Council should have been notified sooner of the Division’s financing position and need for a rate increase.  The increase was budgeted in the 2011 Mayor’s estimate in February 2011, and assumed a passage of the increase by July 1, 2011.
• Disappointed that no permanent Commissioner has been hired since departure of Commissioner Nielson in December, 2010 (5-months!).
2. No Public Process
• There have been no public meetings sponsored by the Division of Water in Cleveland to explain need and rational for the proposed 5-year increases or the steps being taken to improve the management of the division.
3. In-sufficient planning to buffer impact of increases on most vulnerable customer.
• No immediate plans to introduce budget billing/payments for people who have been asking for monthly billing because their quarterly bills are getting too high.

Other observations

1. Satisfied that Council negotiated 50% reductions in rate increase for our most vulnerable customers who are eligible for Homestead rate.
2. Calls for a one or two year authorization for increases with additional pending performance review were not considered. 

Posted meetings regarding the proposed rate increases -- Meeting dates:
http://www.clevelandwater.com/Newsroom/documents/rateIncreaseInfoMtg%20eFlier-WEB.pdf

• Wednesday, May 25, 6:00-8:00 p.m.   Independence Civic Center, 6363 Selig Drive, Independence 44131
• Thursday, May 26, 7:00-8:00 p.m.  Harvard Community Services Center, 18240 Harvard Avenue, Cleveland44128

REF:

• Cleveland Division of Water, Rate Proposal Information:
  http://www.clevelandwater.com/Resident/general.aspx
• See more posts and comments at: facebook.com/brianjcummins
• The Request for Proposal for the consultant services can be found here: http://www.scribd.com/doc/56163995/RFPUtilitiesManagementServicesPhaseI
  We've not yet received the actual proposal submitted by Black & Veatch.
  
  Media:
• http://blog.cleveland.com/metro/2011/05/cleveland_councils_water-rate.html
• http://blog.cleveland.com/metro/2011/05/cleveland_council_approves_wat.html

Cleveland Schools expected to propose layoffs and school closings

The Cleveland Metropolitan School District is expected to act quickly to propose and approve a plan to deal with a $47.5 million projected budget shortfall for the 2011/2012 school year. 

Some school closings and layoffs are to be expected.  Additional measures will likely include wage and benefit reductions, operational efficiencies and revenue enhancements.

In a meeting with City Council yesterday, Interim CEO Peter Raskind explained the timeline he anticipates for developing, announcing recommendations, publicly discussing and approving a budget and management plan.

• March 22^nd - Raskind expects an announcement to be made about recommendations at the Districts’ next Board meeting on.
  
  See details on announcement at:
  
  650 Cleveland teachers could be laid off,
  seven more schools may close as district struggles to trim costs
  By Thomas Ott, The Plain Dealer, March 22, 2011.
  
  CMSD Interim CEO proposes nearly $74 million in budget cuts
  CMSD news release, March 22, 2011.
  
  
• March 29^th and 30^th  - Then on public meetings will be held to review the recommendations and to take public comment.
  
  
• April 5^th - A vote is then expected by the District Board at their regularly scheduled meeting on

In the meeting with council yesterday, Raskind explained the criteria he’ll be using to develop recommendations:

•  Academic performance
• School buildings capacity vs. utilization
• School Buildings age and conditions
•  Location and geographic coverage of school buildings

CMSD Interim CEO, Peter Raskind

Some of the issues raised in the meeting included: * the need for clarity and communications regarding developing recommendations and making decisions;  * flexibility and cooperation between the District and Cleveland Teachers Union ; * concerns for not closing excellent schools or cutting proven outstanding teachers; * taking into consideration school cultures and strengths of the community and neighborhoods where they are located, i.e. SPO’s neighborhood support etc..; * not losing ground on gains made in school reform, i.e., smaller specialty high schools; neighborhood schools model; development of Charter alternatives under the District’s management; * priority of keeping class sizes at appropriate levels; and, * at least a 2-year plan on facilities so people can better plan and make decisions for their children and families.

In terms of potential school closings, the District will be utilizing the recent census data for their analysis on future projected enrollments.  Raskind also confirmed that the District does not expect to close any of the current 23 high schools.

Community Information Meetings:

WHAT

 Interim CEO Peter Raskind and Chief Academic Officer Eric Gordon will

update the community on the fiscal and academic challenges the Cleveland

Metropolitan School District faces.

WHEN

Time:  6:00 – 8:00 pm

Dates and Locations:  

WHERE

Tuesday, March 29^th

East Technical Campus Auditorium

2439 E. 55^th Street

Wednesday, March 30^th

Lincoln-West Campus Auditorium

3202 W. 30^th Street

Cleveland Metropolitan School District Information

Next scheduled Board Meetings:

• Tuesday, March 22, 2011 (New Location) Board Business Meeting 6:30pm
  Board of Education Administration Building, Auditorium
  1380 East Sixth Street, Cleveland
  NOTE:  Announcement expected regarding details of budget and operation plans for 2011/12
   
• Tuesday, April 5, 2011  Board Work Session 6:30pm
  Board of Education Administration Building, Board Room
  1380 East Sixth Street, Cleveland
  NOTE:  Vote expected regarding details of budget and operation plans for 2011/12

CMSD Facts

Number of Schools: 112

Pre-Kindergarten–Grade 8: 89

High Schools (9-12): 23

Students - Total Served: 44,362 (2009-10, latest official figures available)

Attendance Rate, 2009-2010:  91.7 %

Graduation Rate , 2008-09:  54.3%

Employees:  6,331;  3,463, Educational staff;  teachers 2,808

Financial Information

$1.4 Billion total annual budget

$ 663.5 M         General Funds

$ 346.7 M         Special revenue funds (primarily state & federal grants)

$ 283.9 M         Capital Projects

$   56.5 M         Internal service funds

$   15.7 M         Debt service

[Projected budget shortfall = $47 M, or approx. 8% of current operating budget]

2009-2010 cost per pupil:  $14,573  

REF:   

Interim Cleveland schools CEO Peter Raskind likely to propose layoffs, school closings

By Thomas Ott, The Plain Dealer, Tuesday, March 15, 2011

http://blog.cleveland.com/metro/2011/03/raskind_likely_to_proposes_lay.html

Excerpts from http://www.cmsdnet.net/AboutCMSD/Facts.aspx

Cleveland Teachers Union Local 279, http://www.ctu-279.org

School Year Report Cards from Ohio Department of Education:

http://ilrc.ode.state.oh.us/districts/District_Questions.asp?sel=043786,Cleveland%20Municipal,Cuyahoga%20County

Graffiti Busters - Community Action

 Graffiti Removal Action & Training

When:  12:00 Noon - 2:00 pm, Tomorrow, Sunday 2/13/2011

Where: Meet-up at "Gas USA" 3101 Scranton

What you need: 

1. Energetic attitude (we'll provide the coffee!); 
2. Comfortable layered work clothes;
3. Supplies - we'll have what we need but you can also bring the following if you have it; safety glasses, work gloves, rags/cotton cloth, fine steel wool; acitone; paint scraper. 

Due to the high volume of graffiti tags over the last six-weeks and the difficulty of the weather (below freezing temps) we'll be taking a few hours tomorrow to try to remove as much graffiti in the neighborhoods of Tremont, Clark Fulton, Stockyards and Brooklyn Centre as we can.  The temperature is predicted to reach the high 30's tomorrow. 

Although locations have been reported to the City's Public Works Department, there is a long list for removal throughout the city and the below freezing temperatures have limited the City's ability to get the work done.   Over the last few weeks some of our block club leaders and members have expressed an interest in rolling up there sleeves and helping out, therefore the action planned for tomorrow.

We'll be fortunate to have our very own graffiti removal expert - Anthony Petti from the old Brooklyn neighborhood assisting us.  Anthony has been volunteering his services to several of our neighborhoods over the last few years and he'll help us out tomorrow by providing some hand-on training and of course removal and paint-overs.

Please RSVP by email or phone and feel free to join-in at anytime during the two hours planned (call me on my cell and we can direct you).  If we get enough folks to participate we'll plan on breaking up into groups and covering s much as we can during the two hours.  If you cannot make it tomorrow but are interested in receiving training and would like to participate in the future, please let us know and we'll add you to the "Graffiti Removal Team".

* UPDATE - 2/13/2011

Below are examples of the work done today as well as how it was done.  Even the worst case, as in the first storefront, only took about 15 minutes to complete.  The paint-over examples are temporary until the temperatures are higher and the owners of the buildings can re-paint properly.  Tags removed from metal surfaces can be done so with acetone or a few other types of products most of the time.

Thanks! to Anthony Petti for sharing his experience and lending a hand along with Eric Lutzo.  Thanks also to Jack and Ron Amburgey and their Name Brand Paint and Hardware Closeouts store for donating paint and supplies.  Their store is located at 4199 Pearl Road and features 5-gallon and 1-gallon name brand paints for as low as $39 and $2.  If you have a chance to purchase any product, please be sure to thank them.

Storefront, Scranton Road.  Paint-over, 1) spray paint partial cover over tags, 2) finished off with latex and roller.  Time, 15 min.

          

Utility box, Pearl Road.  Removal, using acetone and a scrunge/cotton cloth.  Time 10-min.

Storefront, Scranton Road.  Paint-over, 1) spray paint partial cover over tags, 2) finished off with latex and roller.  Time, 10 min.

     

Gas pump, Scranton Road.  Removal, using acetone and a scrunge/cotton cloth.  Time less than 5-min.

 

 

We'll continue to work with the City's Public Works Department's Graffiti Removal program as well as  assisting business and commercial property owners and ensuring they are more responsive in removing graffiti.

But, the work done today clearly shows that removing and painting over tags is an easy process that can be done quickly.  There are discussions to plan additional clean-ups like today.  Volunteers are welcome to contact the local development corporations or my office to sign-up to be notified of the next scheduled date.  A date in April is also being planned and more information for that will be forthcoming.  

There is no one easy solution to this problem and the multiple efforts and enforcements will all be needed to be able to more quickly eliminate graffiti, which is proved in discouraging taggers.

A word about the taggers -- In reviewing the over 70 tags we've inventoried over the past 6-weeks, it is clear that only three or four individuals are responsible for the majority of graffiti.  And, in working with the 2nd District Police, there is no evidence that the majority of the graffiti was the work of any gangs.  We are also aware that the graffiti being reported in Ward 17 in and around Lorain Ave. and W. 117th Street was done by several of the same taggers that have vandalized Ward 14.

We have photographed and are inventorying the images of the tags.  We'll be sharing that information and ask that residents and business persons help in being vigilant in reporting graffiti as well as taking measures to quickly eliminate it.  The information needed to report graffiti is listed below.  We would also ask to please call our office at this time as well so we can assist with tracking until we can collectively catch-up once the weather is nicer.

• On City-owned buildings: 216.420.8200 - Weekdays 7:00 am to 3:30 pm.
• On other structures: 216.664.2510 - Weekdays 8:00 am to 5:00 pm.
• Cleveland City Council, Ward 14, 216.664.4238.

Also see:

Scranton Road neighbors are soldiers in war against graffiti

By, Rachel Dissell, The Plain Dealer, Sunday, February 13, 2011

2011 Mayor's Estimated Budget

2011 Mayors Estimate Bdgt CLE OH

Council receives 2011 Mayor's Estimate Budget

Cleveland City Council received today, Mayor Frank G. Jackson’s Estimated Budget for 2011.

The submittal represents a general fund budget of $512 million and a total citywide budget of $1.29 billion.

2011 Revenue is projected at $505.9 million for the General Fund with projected expenses of $512.3 million.  A $6.4 million funding gap is proposed to be filled by a carry-over of the same amount from 2010.

See the complete file embedded above or download the complete file (22.2 MB pdf) here.

The budget takes into consideration the State of Ohio’s projected $8 billion or more budget deficit and measures that are expected to occur including a likely cut in the local government funding that the State provides and the loss of $5 million or more in Estate Taxes.  The Mayor estimates a potential shortfall of revenue in the amount of  $28 million.

The following measures are being recommended by Mayor Jackson to deal with the anticipated deficit: no cost of living increases for  2011; continuation of the current hiring freeze (began in 2006) of non-essential positions; elimination of most currently vacant positions; use of one-time revenue of $12 million from the sale of the convention center for the Medical Mart project; and a $3.7 million bed tax the City anticipates receiving annually as a result of the Medical Mart agreement.

Some of the measures taken in 2010 to deal with a budget of $498.5 million included: a 3.85% net pay reduction for non-union employees – this included Council; pay reductions or concessions from 23 out of 34 bargaining units; and, elimination for the year of longevity pay increases.

In addition to the continuing poor economy and shortfalls in State related funding there is also a serious risk of the Community Development Block Grant (CDBG) and other federal funds being cut and lower anticipated revenues to the City from Property Taxes, Waste Collections and other grants.

The Mayor’s estimated budget relies on the following initiatives to help close the anticipated budget gap:  one-time revenues from the sale of property; costs savings due to restructuring Operations Clusters that merged the Departments of Public Service and Parks, Recreation & Properties; savings through employee attrition; continued energy reduction attributed to operation efficiency efforts; and, increased revenue that is anticipated from the results of a new fee study.

Total staffing for the City is estimated at 5,132.  This is compared to a high over the past 7-years of 5,317 in 2004 and a low of 4,854 for 2010 (un-audited), or a 5.7% increase over last year.

The General Fund budget of $512.3 million is being estimated at a 2.8% increase over last year’s amount of $498.4 million.

A quick look at the largest budget line item category – Public Safety at 59% of the estimated expenditures - shows a staffing amount of 3,267, or a 5.6% increase over last year’s number of 3,093 (aun-audited).  There are proposed increases in the number of staff in uniform and civilian police, uniform fire, EMS and Correction staff.

The City’s Rainy Day Reserve Fund was tapped for $7.5 million for the 2010 budget.  The City waits until as late in the year as possible to transfer these funds and the authorized allocation was not utilized for 2010.  The 2011 proposed budget again utilizes $7.5 million to assist with the gap in revenues to expenditures, which will bring the fund balance down to $1 million.

Council will begin hearing on the budget beginning February 22^nd through March 4^th.  Hearings regarding the budget for CDBG funding are being held from February 15^th through the 17^th.

I’ll be posting more regarding the 2011 budgets including links to more of the budget details.  Prior year budget information can be found at the Finance Department’s website here.

Related news:

• Cleveland Mayor Frank Jackson balances 2011 budget without cuts in jobs, services, by Mark Gillispie, The Plain Dealer, 02.02.11 
• Cleveland Mayor Frank Jackson proposes '11 budget with no layoffs or tax hikes, by Jay Miller, Crain’s Cleveland Business, 02.01.11
• Mayors Join US Representatives in Defending CDBG Funding Against Possible Cuts, Press Release, Congressman Barney Frank, Fourth Congressional District of Massachusetts, 01.19.11
• Mayors Fight to Save Block Grant Funding, by Ryan Holeywell, Governing, 01.04.11
• Cities brace for impact as budget cuts loom
• Local governments fear state may whack key cash streams, by Jay Miller, Crain’s Cleveland Business, 01.03.11

Council authorizes $2.5 million for turn-around of Division of Water

As reported in the Plain Dealer this morning, Council approved authorization for the Jackson Administration to enter into contract, for 2-years with a renewable 3^rd-year option at $1.25/year, with a consultant/professional firm to “develop management strategies, and implement accepted recommendations” for the management of the Division of Water and the Public Utilities Department (oversees Water, Water Pollution Control and Cleveland Public Power).

See Ordinance No. 138-11 here.

See the Full Plain Dealer article here.

Cleveland hires outside consultants for $2.5 million to fix water department

By Mark Gillispie, The Plain Dealer, Tuesday, February 01, 2011

http://blog.cleveland.com/metro/2011/02/cleveland_hires_outside_consul.html

 

The following was posted as a comment to the article -- 

A few additional facts from yesterday's Finance Committee hearing -- The ordinance approving the consultancy (2-year plus one renewable year, with a not-to-exceed amount of $1.25 million per year, represents an acknowledgement that the Administration does not have, in-house, the management capacity sufficient to run the Division of Water’s operations.  The consultancy is expected to go further to address management issues that intersect the Division of Water Pollution Control as well as Cleveland Public Power. 

The  ordinance was brought to the Finance Committee and was passed as an emergency.  It did not go through the normal Committee process, i.e., read and discussed at a weekly scheduled Utilities Committee meeting.  The ordinance was introduced without any detailed scope of service or detailed narrative of what the consultancy would address and there was initially no funding amount specified.

There was a good amount of debate that included Councilwoman Brady commenting on the fact that in the private sector, the equivalent to the Director and Commissioner positions would be replaced with individuals that could get the job done.  Councilman Polensek and others expressed concerns about the lack of defined scope of service or process and the absence of a not-to-exceed amount in the contract.

There was some discussion that the Chief and Director will be developing a working group to manage and oversee the consultancy.  There is also currently an Acting Commissioner of the Division of Water and they reported that the permanent position will be filled within 90-days.

Council will need to be vigilant in overseeing the process.

To place the issue in some perspective, I mentioned the following issues prior to the vote in Chambers last night –

For over 150 years the City of Cleveland has supplied quality water service to the community.  The Division of Water supplies water to over 1.5 million people throughout 3 counties and 70 communities

The ordinance represents -- $1.25 million per year; 2 years w/ 1 yr renewable

Represents less than 1% of the annual combined budgets of the Dept and Divisions (Water, Water Pollution Control, CPP).

Half a billion dollars ($455) in operations w/ over 1,500 employees (Water, Water Pollution Control, CPP).

• Department of Public Utilities, $2.5 million budget w/ some 25 employees
• Division of Water, $260 million budget w/ over 1,000 employees
• Division of Water Pollution Control, $23 million budget w/ over 150 employees
• Cleveland Public Power. $170 million budget w/ over 350 employees

• Division of Water has utilized the following funds for third-party consultancies, for studies, technical services and engineering and design:
• Professional Services, averaged $5 million last three years.
• Other Contractual Services, averaged $3 million

• City of Cleveland should consider the development of a Water/Pollution Control Board to provide oversight to the Departments.  The Board could include participation from the private sector as well as regional/local governments outside of Cleveland.
• Louisville Water Company (850,000); 7–member Board of Water Works, appointed by the Louisville Metro Mayor
• The Water and Sewer Advisory Board (2.1 million), 9-member Water and Sewer Advisory Board.
• Denver, 1.3 million customers; 5-member board

Although there has been substantial progress made, the Mayor's Administration has so far been unable to resolve chronic problems in the operations of the Division of Water. Those of us on City Council should be critical of ourselves as well for not demanding more, sooner.

Even in yesterday's actions, The Administration came to the table with too little information to ensure a successful process to engage a professional outside firm. There is a high degree of trust between the current Council and Mayor and when chronic problems such as this persist, Council needs to be stronger in our oversight role.

---------------------------------------

As to prove the point of needing to act more quickly the following was also reported this morning by the Plain Dealer -- 

13,000 Cleveland water customers didn't get their November bills

By Dave Davis, The Plain Dealer ,Tuesday, February 01, 2011

http://blog.cleveland.com/metro/2011/02/13000_cleveland_water_customer.html