Saturday, January 05, 2008

Erie Street Market - questions that deserve answers

Here's what I don't understand. Citifest had a contract with the City of Toledo to manage the Erie Street Market. I've read the contract and it says that Citifest has no liability for any losses ESM may incur.

So why is it that Mayor Carty Finkbeiner continues to say that they are liable for outstanding bills?

A press release issued Friday afternoon announcing that ESM vendors will get the payments due to them, states that "The money in question is owed by CitiFest - not the City of Toledo." Carty is quoted saying, “We’ll make good on Citifest’s debt and pursue all avenues to ensure CitiFest eventually pays their debts.”

There is a huge contradiction here and no one is asking about it - or, if they are, they aren't sharing the explanation. You can't have Citifest liable for debts when their contract says they incur no liability for losses. From their contract:

WHEREAS, it is the intention of the City to appropriate monies for the Market Project sufficient to meet its management and operation needs until such time as it becomes self-supporting, provided that future availability of City funding and appropriation is subject to the standard procedures of the City's yearly budget allocation processes;
WHEREAS, CITIFEST shall have no responsibility or liability to provide financial support for the Market Project and shall not be denied either its current allocation from the city or any similar future allocations for entering into this Management Agreement;
b. Deposits and Disbursements: ... CITIFEST is hereby authorized and empowered to draw on the Account for the payment of (i) first, all compensation to which it is entitled to pursuant to this Agreement and (ii) second, any and all liabilities, expenses and obligations incurred by CITIFEST in carrying out the terms pursuant and performing it obligations under this Agreement. After deposit of all gross revenues from the Market Project, CITIFEST shall disburse such revenues with the Payment of the Operating Expenses section below.
9. PAYMENT OF OPERATING EXPENSES. CITIFEST shall pay...all fees, costs and expenses ... except for expenses which the City has agreed in this Agreement or otherwise to pay directly, and always subject to the availability of funds in the Account. ... and CITIFEST shall have no liability for such Market Project fees, costs and expenses except as set forth in this Agreement.
15. BUDGET AND PLANS. ... Further, CITIFEST shall have no responsibility or liability to provide financial support for the Market Project.

Numerous times the contract specifically absolves Citifest of ESM liabilities and says that they're supposed to pay bills "subject to the availability of funds." And the contract says Citifest gets to subtract their payment for their services first.

Some may say this wasn't a good contract for the city to sign, but that is a moot point now. The contract was signed, Citifest followed the contract and now Carty is saying they need to pay the debt on the operations of the Market, directly contradicting the contract.

Why am I the only person pointing this out and asking this question?

But that's not the only issue. Citifest says that they ran out of money as an organization because they did cover losses at ESM that they weren't required to pay, expecting funds from the City, as per the first 'whereas' in their contract.

Carty hired an auditor (at an estimated expense of $7,000) to review the books because he implied that the ESM couldn't have lost money and that ESM profits must have gone to cover Citifest bills. But when the audit was released, there was nothing in it that indicated the profit and losses of either operation, just a review of the accounting processes which, incidentally, found that ESM had not been charged enough in several line items. That would indicate, however, an even greater operating loss for the Market.

ESM has never made a profit and has traditionally required financial support from the city. Such monetary support was not provided in 2007, and, as a result, Citifest expended money to run the facility and is now closed. But ESM is still open - and the Mayor continues to say that a new business plan is in the works. From the press release:

"The City’s Department of Development has prepared a business plan to make the market profitable. This plan has been submitted to a committee of local business people for their review and input. When this review is complete, it will be presented to Toledo City Council for action."

(Wonder what would happen if I asked for a copy of this public record, even if it is in draft form???)

Fortunately, City Council wants a public hearing on this and the proposal from the Mayor to establish an account for receipts and expenditures so the Market can continue to operate. Seems to me that Council would want to see the business plan first.

And if I were on Council, I'd ask for a P&L statement on each operation - Citifest and the ESM, so I'd be able to see whether or not ESM was operating at a loss. And if Citifest was owed reimbursement for any costs they covered, I'd probably want to reimburse them per the terms of the contract, even if I thought the terms of the contract were not favorable to the city or to the taxpayer. But then, if I were on Council, I would have raised those points prior to voting on the contract in the first place.

The ESM is - and always has been - Carty's baby. We all know he wants to continue to have the city run it, especially in light of his comment that anyone who disagrees with him that it can be profitable - well, 'the facts are on my side' he says. Of course, if you never actually get the facts in terms of a P&L statement, you can stand by that comment.

And don't forget that the ESM is heavily subsidized by the City for heating and electricity. The 2008 budget predicts ESM will have a profit of $306,148, but it also allocates City funds of $287,370 for electricity and $14,191 for heating.

NOTE TO Carty: ESM doesn't have a "profit" of over $300,000 if taxpayers are paying roughly the same amount to cover utility costs! Perhaps you should include that in your 'facts.'

The future of ESM is now up to City Council. I hope they ask these questions and demand answers to them PRIOR to making any decisions. In the end, it's important to remember that the City of Toledo has no record of success with any such ventures. As former District 5 Councilwoman Ellen Grachek has said, "The time has come to gracefully exit, if there is such a thing, from the Erie Street Market."


roman said...

I've lived here for about eight years and I have found myself visiting the ESM from time to time. Lisa and I enjoy shopping Libbey Glass Factory on certain occasions. I agree with you on ESM - the city needs to release it and sell it. Carty has had this site in his grasp for far too long. He needs to come to the realization that it's not moving forward under the city's guidance.

That piece of property is a gem and Carty knows this the only thing he doesn't know is how to use it properly in order to make it shine. If he rids himself of this site be prepared for his meat hooks to grab the COSI building and keep that one in a tight strong hold.

The A-Hole Lawyer said...

I think Carty is so wrapped up in his own self importance that the words of any contract or other regulating document (The Constitution for example) have no meaning to him, or he feels they do not apply to him.

"Thats how I want it, thats how its going to be!" is Carty's mission statement.

ESM should be a private venture, then market forces, efficiency, suppy and demand, and the principles of capitalism would drive its operation and develpment.

Carty - "If you cant' lead, get out of the way."

The A-Hole.

Tim Higgins said...


I put my two cents in this morning, based on the Toledo Blade editorial
and I can't agree with you more.

The bottom line here is that markets need to be run in a flexible business environment by people with a true entrepreneurial spirit. Governments tend to be run by bureaucrats who rigidly follow the rules of the status quo (even when they are failing).

Erie St Market can succeed if sold to someone with the former, cannot and will not succeed if run by the latter.

Brian Schwartz said...

The money in question is not really for "debts". It is money that was collected by CitiFest on behalf of vendors for merchandise sold, then not paid to those vendors.

CitiFest collected those funds via a cash register that served as a common point of purchase for most of the ESM vendors. The cashier tracked from which vendor each sale came. That is how we know how much each vendor is owed.

To pay the vendors the money they are owed was a business decision. For the market to be successful, we need those vendors. A small investment to make them whole and happy will pay dividends later.

Hope that explains some things.

Brian Schwartz

Hooda Thunkit said...


The A-Hole Lawyer came very close to the truth in his remarks, but I'd like to state it (for "His Dishonor") in very simplistic terms, ARROGANCE.

I believe somebody has a book out on the subject ;-)

Robin said...

If Carty loves the ESM so much, maybe he should consider buying it himself, and get it off the taxpayers' backs.

Maggie Thurber said...

That's priceless, Robin!!!


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