ESM doors locked for Take Back Toledo kickoff

Last night I stopped by the Take Back Toledo kickoff in the Chowder House at the Erie Street Market.

The main entrance doors were locked and I had to go around to the side door to the Chowder House to enter. As I usually do every day at 5:30, I called in to Brian Wilson's radio show for our roundtable discussion. I stepped into the foyer area of the ESM so I could hear better on the phone.

While in this foyer area, several individuals came in from the larger bay and progressed into the Chowder House. But at about 5:40, a security guard came into the foyer area and told my husband, who was waiting with me, that he was shutting and locking the doors and to 'spread the word' that we needed to use the side entrance.

Around 6 p.m., some people had to leave and tried to exit through the foyer doors, but found them locked and one was chained. WSPD morning show host Fred LeFebvre took some photos which are available here.

The Ohio Fire Code details the state rules and requirements for egress from buildings. Chapter 10 of the code addresses the size, shape and number of exits for building. Section 1019 lists the number of exits based upon occupancy and for 1-500 people, two means of exits are mandated.. While the Chowder House complied with this rule, with their south-side exit and their exit into the foyer of the ESM, the doors in the foyer which would allow access to a 'public way' were locked, essentially leaving the Chowder House with only one legal exit.

Now, the Take Back Toledo group is starting with a recall of the mayor. The ESM is Mayor Carty Finkbeiner's 'baby' - a black hole into which he has poured money for years, always insisting that it will, ultimately, be successful. Toledo owns and leases out space in the ESM.

Were the doors locked to make it more inconvenient for people to come and go from the recall meeting? Was this Carty's way of trying to hamper the efforts? Would a mayor really want to risk lives, in the event of an emergency, by having exit doors to a public building locked? Was this intentional, or just a miscommunication?

Sadly, most of the people at the meeting believed this was an intentional act of the mayor, as a type of retaliation for the people attending and the business hosting the meeting. They easily speculated upon Carty's reaction to hearing that the recall was going to kick off in his precious Erie Street Market: "They're going to start a recall of ME in my Erie Street Market??? I'll show them! Lock all the doors!"

While I have no idea if this was planned or just happenstance, any manager of a facility should have ensured that proper legal access was ensured and that fire codes were followed. But I think it says a lot about what people think of the mayor that many in attendance believed he was capable of putting us all at risk by ordering the exit doors locked.

Maybe that's why so many of them were there in the first place.

FOIA Friday - August 29, 2008

The City of Toledo still can't get it right when it comes to the Erie Street Market. Yesterday, I requested a public record - a copy of the rental agreement for Bay 4 of the ESM for the event scheduled this weekend. Robert Croak is running the event, but the rental agreement is a simple letter, hand delivered and signed by him and Connie Hoffman, the manager of the Market.






















Here is a copy of the agreement for the Chiodos Concert scheduled for 4 p.m. - 1 a.m. But note the text of the letter says the rent is for the date of August 16, 2008, even though the money is due the day of the event, August 29, and the bay has to be cleaned up the following day, August 30.

With all the attention focused on the mismanagement and mishandling of the renovations to Bay 4, you'd think they'd be extra careful to ensure that all things were done correctly. But since they're not using any type of normal contract for the 'rental' of this area, it should come as no surprise that they're just inserting each week's event into a form letter and printing it out. However, they've obviously missed changing one of the dates...and neither Hoffman nor Croak noticed the error. Croak also didn't mind that his company name became 'Enterproses.'

Sometimes, having access to public records tells you more than you want to know.

Suspensions without pay recommend for Erie Street Market spending

According to numerous media reports, three City of Toledo administrators are facing possible discipline over the spending for renovations at the Erie Street Market.

Chief of Staff Robert Reinbolt is recommending five days without pay for Andrew Ferrara, a city economic development specialist; three days without pay for Paul Ringlein, the city's facilities administrator; and one day without pay for Ken Neidert, commissioner of the division of fleet and facility operations.

The charges are 1) failing to communicate (with the mayor, chief of staff, other superiors, and city council about the type of work and the use of multiple subcontractors for less than $10,000 each) and 2) failure to use proper procedures for disbursing city funds, maintaining proper control of the costs, and documenting the scope of work. There will be a hearing for these administrators and I'll be watching to see if they just accept the responsibility or if they offer any defense.

Interestingly, in emails made public during the whole fiasco, there are plenty of references about expediting payments to keep contractor and promoter Robert Croak from complaining to the mayor. So I can only wonder why it is that these employees had the impression they needed to skirt the rules to keep both the promoter and mayor happy? Perhaps the problem isn't that these individuals didn't follow the proper procedures, but that the mayor engenders such behavior among his subordinates?

The atmosphere created by Carty Finkbeiner is not one of responsibility and accountability - or even one of trust and competence. Don't get me wrong, there are excellent people in Toledo's city government who are responsible, accountable, competent and deserving of trust.

Carty's only 'job' was a football coach and he uses the same approach and governance as he used with his players. Unfortunately, he doesn't realize that city employees are professionals, not high school or college students, and should not be treated as children on a playing field. The mayor does not encourage people to disagree with him or present alternative views. Despite saying otherwise, he gives the impression that his opinion is all that matters. Employees walk on pins and needles to avoid experiencing his wrath, deserved or not. As a result, if they think Carty wants something, they make it happen in any way possible. To do otherwise would risk their jobs and that's not something most can afford to do, especially in Toledo's economy.

So in their effort to accommodate the boss's instructions, they didn't do all they should. That is their fault and they deserve part of the blame. But the use of discipline is not supposed to be 'penalty,' rather it should be modification of behavior, especially with individuals who've not had previous problems following the rules and procedures.

If you truly want to change the behavior that led to this error, you need to change the way the mayor manages. It's his management and personality that have caused this environment and it is the only change that will effectively prevent such problems in the future. Sadly, the person who needs the modification in behavior the most thinks he's done no wrong and that offering up the heads of his subordinates (figuratively, though some would say Carty's capable of doing so literally) will be the end of the issue.

Only 490 days until his term is over.

Does ESM's Civic Theater violate the Toledo Charter?

Here's the language of Section 79 of the City Charter:

Section 79. Compulsory referendum of certain measures - franchises.
No ordinance or resolution for a public improvement requiring or authorizing the expenditure of more than fifteen percent (15%) of the average gross annual current operating expenditures by the City for the five (5) fiscal years immediately preceding, or for the granting of a general public utility franchise, shall be effective until the same shall be approved by a majority vote of the electors voting thereon; provided, however, no convention center, exhibit hall, sports arena, or municipal theater, other than a sports arena located in the City's Marina District, being the area bounded by the Maumee River, Interstate Highway 280, Front Street and Main Street, shall be constructed, acquired, or leased unless the ordinance or resolution authorizing construction bidding, acquisition, or leasing shall have been approved by a majority vote of the electors voting thereon, whether or not such ordinance or resolution requires or authorizes the expenditure of more or less than fifteen percent (15%) of the average gross annual current operating expenditures by the City for the five (5) fiscal years immediately preceding. A general public utility is one in which all the people of the City may have an interest.

(Amended by electors 9-11-01)

Note the provision that "no convention center, exhibit hall, sports arena, or municipal theater, ... shall be constructed, acquired, or leased unless the ordinance or resolution authorizing construction bidding, acquisition, or leasing shall have been approved by a majority vote of the electors voting thereon..."

I've requested the details of the city's arrangement with Rob Croak for the new Civic Theater in order to see if the space is being 'leased' or 'rented.' Regardless, there is a question of the construction that has taken place to turn the Erie Street Market's Bay 4 into a 'theater.' It's been the location of the various stalls of individual vendors - food and retail outlets in the past and, more recently, the antique vendors.

Councilman Frank Szollosi has asked for a legal opinion about this issue - and I'm very glad he has. Other council members should join him by supporting his request. And the answer should be made public so we can see if we have a law department that is going to fairly and objectively interpret the law - or protect the mayor.

FOIA Friday - August 1, 2008

Several items for today's FOIA Friday:

This past week I saw a couple of unusual items on the Toledo City Council agenda, so I made a request for the particular ordinance and got the documents the next business day. It's a pleasure making public records requests of the Clerk of Council and I appreciate his prompt responses.

Here's what I found out: the city of Toledo is going to request donations from individuals seeking approval of their work from the Building Inspections Department and permit offices to help fund a 'It Pays To Hire a Licensed Contractor' ad campaign. The ordinance passed by council on Tuesday allows them to create a fund to receive the donations and then expend money from the fund. I spoke to the staff member in charge of the program and he insisted that the only money to be spent will be the donations received - no money from the city will be used for the program.

I've got a problem with a regulatory office asking for donations from individuals/businesses seeking approval of their work from that same office. It seems to me to be the appearance of an impropriety, if not an outright impropriety. Would there be any concern from people seeking inspection approvals that a lack of a donation might put them at risk of not being approved - or of going to the bottom of the schedule for the inspection?

I don't think the employees in this office would do such things, but I wouldn't put it past the mayor to suggest such a tactic. Regardless, it's not whether or not the 'retaliation' would actually occur - it's whether or not the people doing business with the office would perceive that such retaliation is possible.

And why does the city need to do this in the first place? Is it really the role of city government to collect donations to run an advertising campaign telling the public that hiring a licensed contractor to do work on their homes is a good idea????

******

We've been following the public records requests from Mayor Carty Finkbeiner to the Toledo-Lucas County Port Authority and the subsequent letter from District 2 Councilman D. Michael Collins - and the frustration these individuals have over not getting their documents in a short period of time.

We've also been following GraphicsGuy's request from two months ago - and his righteous indignation that his public records request seems to be ignored while the mayor and the city law department go about their own personal vendettas.

As of today (less than weeks from the first request), Collins has received a paper with some information on the Erie Street Market financials, but it was far from a complete accounting. Mayor Carty Finkbeiner has received over 1,000 pages of documents in response to his request, though it appears more is still to come.

But GraphicsGuy hasn't even gotten a response to his letter to the law director.

Guess we know the priorities of the elected officials - and it isn't in following the state law or in what concerns the citizens.

******

As a result of some new information about the Erie Street Market, I made another public records request to obtain any documents/contracts/agreements which detail the relationship between Rob Croak and the City of Toledo and/or the Erie Street Market. Croak was selected by Carty to run concerts in the newly renovated (at a cost of $80,000 without council approval) Civic Theater. Apparently, Croak is also the general contractor for the renovations and is reported to be getting 40% of the profits from liquor sales, although today's paper says he's getting 100% of the gate receipts and no proceeds from the alcohol. We'll see...

As the mayor said in his records request, these documents should be readily available so I'll expect them today. Again, we'll see....

Turns out, Erie Street Market did NOT make a profit

You knew this was coming....

According to today's paper, Mayor Carty Finkbeiner has spent $79,879 to do work at the Erie Street Market - and that amount was NOT included in the financial statement presented earlier this week.

When these expenditures are added in, there is a loss of $53,611 for the first six months of the year.

Carty issued a press release yesterday saying, "Last year at this time, the building was running a deficit of approximately $50,000." At least that $50,000 deficit reflected accurate accounting and all expenses. Carty's estimate of a profit at ESM doesn't. And now that we know the cost of the renovations, it appears we're at a deficit of at least $53,611 - just like last year.

The mayor's public information officer told WSPD News that the costs would be covered by the profits from the concerts in that particular bay in the market. If the costs are supposed to be reimbursed by the profits, they should definitely be listed in the expenses. Whether or not there will be enough profit from the events is another question entirely. We'll see...

In the meantime, city council is angry that the work was broken down into 13 different contracts in order to avoid requiring approval by them. Toledo's city charter allows expenditures under $10,000 to be made without a separate ordinance by council, so long as the money is budgeted. There is, of course, the potential for abuse as we can clearly see in the way Carty set up the renovations at ESM. Obviously, Carty was afraid that council, which balked at funding ESM but eventually gave in, might not give its approval - especially if the financials were accurate.

So, he broke the work down into small contracts in order to avoid the legal requirement of going before city council.

"We are on the verge of making a huge breakthrough with the Erie Street Market," Mr. Finkbeiner said. "I would assume any smart person would expect that it would take some expenditures to do what we said was going to be done there."

So now anyone who challenges his expenditures is dumb?

The work is supposed to be finished this week, in time for the first events in that bay. What's not mentioned is that the first concert planned for Saturday evening was previously scheduled to be at a local club, Headliners. It's now going to be in a city-sponsored venue, taking the money and work away from an existing private business. And Carty thinks this city is 'business-friendly.'

"So now we are 48 hours before an opening and all of a sudden everyone wants to go negative, and I think that's unfair," Mr. Finkbeiner said.
...
"We are going to concede the defeat of Toledo if people don't begin to see there is a lot of good strong positive things being done and all we are hearing about is the negative," Mr. Finkbeiner said.

Um...mayor...we're not being negative - you're making bad decisions and we're pointing it out. It isn't US being negative - it's your detrimental decisions that are the problem. If you don't want people to point out the problems with your decisions, stop making bad decisions!

This story will continue to evolve ... and I'll keep you informed.

Is the ESM making a profit?

The issue of dueling public records requests seems to be resolved, with Councilman D. Michael Collins getting some financial information for the Erie Street Market.

But the information definitely seems lacking - and is in the same format as the last financial report received March 7, 2008, which detailed the data for the last weeks of 2007.


As I said in March, it's not what's in the financial statement, it's what's missing from the expenses column.

Unless 'contractual administration' includes the wages, etc...of the ESM manager, there are no wages, benefits, payroll taxes for her. There is no charge for insurance.

All city departments get charged for various 'services' other departments perform for them. There are no charges on this spreadsheet for legal, accounting, auditing or other such fees.

Since the city is paying utilities and and other overhead costs, they should be listed as expenses for the facility. There are no telephone expenses...and what about the previously detailed line item for the piped-in music, which is not listed on the city's spreadsheet? Maybe they are including telephones as 'other overhead costs?' Regardless of their classification, they need to be listed as expenses for the facility in order to obtain a true picture of whether or not the Erie Street Market is making money.

This spreadsheet shows that there is a 'profit' of $26,268. But if these other expenses are included, is there really a profit?

Clearly, this is not an accurate accounting of the costs of the facility. City Council should demand that ALL expenses attributable to the facility be included as part of the financial statement - and they should make any decisions about the Market only upon complete data.

FOIA Friday - July 25, 2008

My blog postings have followed the fiasco that is the Erie Street Market for some time now. Since the first of the year, the only financial information I've been able to obtain was a simple spreadsheet that covered the time from October to December 2007.

During Toledo city council's agenda meeting Tuesday, Mike Collins (District 2) requested current financial information for the Erie Street Market showing expenses and revenue, etc... He instructed that he wanted the information included in the council members' agenda packet which is usually delivered to them on the Friday prior to their regular Tuesday meeting.

I've made a public records request for the same information the members of council receive - if they get any at all.

We'll see what comes out of this request.

Mayor Carty Finkbeiner continues to insist that the ESM is making money, despite the fact that the last set of financials showed it lost about $7,000. The general consensus is that the ESM continues to lose money - and that's why they don't want to release the financial information.

Time will tell. But it's the persistence in making public records requests that pays off in the long run.

Competence beats enthusiasm

Last night I interviewed Jeff Green, the author of the city's business plan for the Erie Street Market (pod cast is available here).

I asked him about the contradictions and issues I found when reading the plan. To be quite honest, his only explanation was that the city gave him certain parameters and he followed them.

This is why the 'new' plan is the same as the 'old' one. It's also why the plan includes a political structure for governance, despite the fact that political turmoil was identified as an issue contributing to the original failure of the market.

While I appreciate Green's enthusiasm for the city and his willingness to help out, I think he is very naive. In effect, he offered to do the homework that had been assigned to city employee, Andy Ferrara, and then he didn't do a very good job of it. Then, he put his own name on the document, despite his admission that it wasn't the business plan he would have done if this were his own business.

Ferrara, and Mayor Carty Finkbeiner, now have someone to blame for the document and Green's reputation in terms of his competence is in question.

Off the air, Green asked me what I would have done differently - and I told him. I would not have 'volunteered' to do the work of a city employee in the first place. If, for some reason, I found myself in the position of writing a business plan for the ESM, I would have written a thorough and complete plan with the appropriate feasibility and market study, accurate financial projections based upon costs that should be included even if actual costs hadn't been provided, a focus on the return on investment, and feasible solutions to the identified problems that caused the failure in the first place. And I wouldn't have included contradictions.

Further, I told him that his reputation was at stake. He put his name to a document that clearly isn't usable in terms of providing a working plan for a business operation. And now he's going to have to live with the criticisms.

Youthful enthusiasm is not a bad characteristic to exhibit, but it only goes so far. Competence beats enthusiasm every time.

related: Karen Shanahan at Shanahan Select also weighs in on the business plan.

(Cross-posted to Eye On Toledo Blog)

Eye On Toledo - ESM business plan

Just a heads up that tonight my guest on Eye On Toledo is Jeffrey Green, the author of the Erie Street Market business plan.

We'll get the inside scoop on what he was asked to do by the city, how he arrived at some of his suggestions/conclusions - and if - and how much - he got paid.

Tune in to NewsTalk 1370 WSPD at 6 p.m. or listen live over the webstream here.

Erie Street Market business plan offers nothing new

Those who cannot learn from history are doomed to repeat it.

I've had a chance to read the new business plan for the Erie Street Market (ESM) and the above quote is so relevant I could just stop right there. (Fox Toledo has a copy of the business plan available on their website.)

To say that this new business plan is a copy of the original business plan isn't technically correct, but the approach and concept is certainly the same. It calls for almost the exact same offerings in terms of food and amenities, moves the antique vendors (again) starting no later than the end of June, continues the taxpayer support of costs for utilities for three years, and expands taxpayer support through a new marketing/internet plan.

It even suggests reinstituting the cooking classes and 'Jazz Brunch' which were part of the features when ESM first opened.

Aside from all that ...

Jeffrey I. Green, MBA, is the author of the business plan, but his background or qualifications for preparing such a plan is not included as part of the plan itself. I've emailed him (as his email was included) to ask for his resume and/or qualifications and will add that information upon receipt.

As part of the description of the ESM, Green writes:

"Another problem has been the management of the Erie Street Market. Successful public markets typically have strong and consistent management that has the vision, the skills, and the resources to guide the institution. Since the re-inception of the Erie Street Market in 1997, it has had ten managers in ten years. This reflects the Market's struggle with leadership and the political turmoil that continually surrounds the project."

However, the structure Green suggests for the new management is exactly the same as what it's had: a manager directed by a board. And who would name the board? The plan says, "These (board) members will be approved by the Mayor..." And that makes them political appointees, continuing the problem of political turmoil in the operations of this facility.

The market assessment portion of the plan lacks a market feasibility study. It includes an old LISC neighborhood market snapshot, but doesn't provide evidence for the optimistic projection of success. The plan states that since other cities in Ohio have successful markets, Toledo can too, if it can only develop a better way of appealing to customers.

It says that public market vendors cannot compete with supermarkets in terms of prices, so they must sell what supermarkets do not and should offer what supermarkets cannot - products made "on-premises in view of the customer." It also says that offering local products is not enough, as many grocery stores trend toward offering locally-grown/made items.

But then the plan contradicts itself when it says, in the Products and Services section, that the emphasis will be on food that come from local farmers and food producers.

"If implemented properly, the Market will be able to compete successfully with supermarkets and specialty food stores because of the unique product offerings, the customer service provided by the business owners, and the special shopping experience offered within the market hall and the adjacent farmers' market."

Again, this was what ESM originally offered and, as we've seen, it didn't work as the 'special shopping experience' wasn't enough to overcome price and convenience of shopping in other area venues.

Then there is the contradiction of the city subsidizing new businesses that are in direct competition with existing ones. The business plan calls these existing companies in the area 'indirect competitors,' but they are direct competitors who do not have the benefit of subsidized rent, utilities and marketing. This aspect is not addressed in the business plan as it should be.

The impact of city-subsidized businesses going into direct competition with existing businesses will have an impact on those existing businesses - which will be reflected in taxes paid by those existing businesses and in the number of individuals they employ. Even if such analysis is not part of the business plan, per se, those potential losses should be balanced with the public costs associated with the subsidies and should be included in Toledo City Council's review of the Market.

Another tidbit found in the "Products and Services" portion is the idea to recruit a large unique food retailer to the location. Whole Foods has often been mentioned, even though they declined to be a part of the revitalized Westgate Shopping Center because of market considerations. However, the plan states, "management believes the success of the Market is in keeping with the original plan." "Management" is not identified. Further, if the thought is to stay with the original plan, why did we need a new business plan? Why not just bring out the old one and call it a day?

There are some other contradictions in the plan. It says the city should reconstitute the ESM Development Corporation, but then states (page 7) that the ESMDC is 'working with Neighborhoods and Fleet and Facilities' to finish some projects relating to signage, facades and the demo kitchen. Completion of these projects is even included in the 2008 timeline. So which is it? Do we need to recreate the ESMDC or is it already currently running the market?

The plan calls for an increased marketing budget, but doesn't say where the additional funds will come from. It says the facility is inefficient to heat and cool, but includes nothing about how to improve or solve this problem, as the city continues to pay utilities. It says the facility should be profitable and such profits should go back into the operation. But if it's not, after three years, it would be sold or, if no buyer is found, closed down with all assets auctioned off.

The plan includes a 2008 projected income statement, but it is missing several significant expenses including bank charges, credit card fees, delivery expenses, depreciation, interest charges, maintenance, wages, payroll taxes and repairs. Without these expenses in the budget, it shows a net operating income of $144,257. If these expenses are included, I doubt there will be any operating profit.

If you're going to return to the original plan for the Market, you certainly need to review why that original plan wasn't successful. I was disappointed that the failures of the original plan are not addressed as part of this new one. Improvements in the spacing and infrastructure for the food bay might address some of the problems that arose, but there is no analysis of why the original vendors failed and what would be different today to allow similar types of businesses to be successful. There is also no analysis of the current economic conditions in the city of Toledo and surrounding area or how this might impact the operations of the market.

My review of this new business plan offers nothing new in terms of what has already been done and failed. There is nothing in this business plan to give anyone any confidence that things will be different going forward. If this is all the city has to offer, taxpayers would be better served by just selling the facility NOW, rather than spending another million dollars or so to postpone the inevitable.

And considering the pending purchase agreement Toledo has with Tetra Tech for a complete Swan Creek River Walk (which would include the ESM), now would be the time to insist that any agreement with Tetra Tech include the purchase - today - of the ESM.

Toledo has proven it cannot management the ESM profitably, not to mention that it has no authority in its charter to even embark upon such a venture. There is absolutely nothing to suggest that this business plan will make any difference.

Those who cannot learn from history are doomed to repeat it.

Censorship by city government? 'Not business friendly' post #8

Yesterday I was at the Erie Street Market and I talked to several individuals there. What I learned astounded me.

I had two individuals tell me that they had called WSPD to talk about things at the ESM (during the city's takeover of the facility from Citifest - background here) and later that same day they were confronted by a representative from the city (which owns the property and issues the leases) who told them not to call the radio station again.

Comments were made about their leases and how easy it was to raise rents or break the lease and 'replace' them.

Of course, neither person wanted to go on the record for fear of actually losing their space at the Market. When I pressed them, they could not say if the city's representative was acting on their own or under direction from the mayor's office. Regardless, I was not surprised to hear of the heavy-handed tactics to silence criticism.

Sadly, this is what I've come to expect in Toledo - threats, intimidation, ad hominem attacks, etc. Perhaps this is part of the reason we're losing population?

City officials can't add

Friday we finally got the financials for the Erie Street Market for November and December after the City of Toledo took over the operation of this city-owned facility.

Today, The Blade has a story on the losses incurred by ESM and the article makes it clear that our city administrators need a refresher course in math.

The Market lost $7,842 in this 90-day period of time ... a time, as commenter Tim Higgins said, that should have been one of the most profitable time periods for retail outlets.

Bob Reinbolt, the mayor's chief of staff had this to say:

""It showed a negative net income, and the reason for that is we paid $5,714 in bills for CitiFest," said Robert Reinbolt, chief of staff for Mayor Carty Finkbeiner. "Then there were security costs, and part of those costs were associated with CitiFest."
...
"When you look at it, it shows loss. But in reality, it's a break-even if you don't count the CitiFest expenses," Mr. Reinbolt said."

According to my math, if the city had not paid those costs 'associted with Citifest,' the ESM still would have lost $2,128 - 11% of their total revenue. And this doesn't include the questions I raised in my earlier post about expenses which aren't listed on the 'financial' report.

And then there is the subsidy provided by the city - approximately $300,000 per year in utilities. Projecting a $306,148 profit for 2008, while continuing the utility subsidies which are NOT included in the financial statements, means the city is NOT going to make a profit on this entity.

As former District 5 Councilwoman Ellen Grachek said, "The time has come to gracefully exit, if there is such a thing, from the Erie Street Market."

Erie Street Market did NOT make a profit

Despite claims to the contrary, now that we've received a summary of the unaudited financial statements for this operation from the city (and calling it a summary is kind), it's clear to see that the Erie Street Market did NOT make a profit in November/December following the takeover by the city. (background here).

NBC24 reporter, Aaron Brilbeck began his morning with Bob Reinbolt, the mayor's chief of staff, refusing to turn over the numbers saying "No I won't go on your silly TV station just so you can make a fool out of me."

This afternoon, mayoral spokesman Brian Schwartz told Aaron that the numbers had been turned over to the city's finance department which promptly rejected them as being 'inaccurate.'

However, just before 6 p.m., Schwartz emailed a spreadsheet to NBC24. WSPD morning show host Fred Lefebvre called in to Eye on Toledo to report that NBC24 did have a story on the losses during their 6 p.m. newscast.

Here are the unaudited numbers the city provided:



My first thought on seeing these numbers was to wonder at why something so simple took 2 months to produce. But then I looked at what was - and wasn't - included in the figures.

Unless 'contractual administration' includes the wages, etc...of the ESM manager, there are no wages, benefits, payroll taxes for her. There is no charge for insurance. Even if utilities and other overhead costs are assumed by the city, they should still be listed somewhere on the financial statement, especially now that the city is running the operation. Without an accounting of those costs, even if paid by another source, there is no true account of the viability of venture.

City departments get charged for various 'services' other departments perform for them. There are no charges on this spreadsheet for legal, accounting, auditing or other such fees. There are no telephone expenses...and Citifest detailed a line item for the piped-in music, which is not listed on the city's spreadsheet.

Perhaps it is the lack of these items which resulted in the finance department characterization of the report as "inaccurate."

Even without these expenses, the ESM did not make a profit in November/December as claimed by the mayor and various staff in January. And these numbers should make anyone seriously question whether or not it can make a profit at all - and whether or not the city should continue sponsorship of this entity, or just sell it.

Still waiting for public records on Erie Street Market

Yesterday, I talked with Tim Livingston, of NBC24, about the financial records for the Erie Street Market and a story they were working on. Both of us have been waiting for the November/December financial statements ... for a long time.

Last night Aaron Brilbeck covered the story, "No financial records for Erie St. Market," and he did a really nice job of demonstrating the lack of accountability within the city.

While I'm as frustrated as the NBC24 staff about the lack of response to the public records request, I'm also concerned about public statements made in early January that the Market made a profit in November/December after the city took it over.

In fact, that was the reason I made the public records request in the first place. I sent the following email to Brian Schwartz:

"Brian - there have been several statements lately (mayor and staff) that the ESM made a profit in November and December. I'd like copies of the financial statements for these two months, which you must have in order to know that there was a profit."

At that time, I was told to check back in a week...which I did, with this email:

"Hi Brian -

You said the financial statements for the Erie Street Market would be done by the end of this week and to check back with you on this. I did so earlier in the week, but haven't had a response."

His response?

"The financial statements for the Erie Street Market are not done yet."

I followed up again, as it was now January 31st and I got the following response from Mr. Schwartz on February 1st:

"Maybe a threat or two would help as well. Get a little angry. Andy Ferarra is who you should solicit the ESM records from. He had until today to get them done and, of course, took until today to get them done."

Now, this communication seems to indicate that the financial reports for November and December are done. However, they were not forthcoming, despite this clarification from Mr. Schwartz:

"Ferarra just went into a meeting with the mayor. I believe he was supposed to have that report for that meeting. If I can get a copy, I'll get it."

Rather than call Andy Ferarra, I spoke to the Commissioner of the department, Ferrara's boss, Todd Davies. He explained that they had finally gotten all the accounts set up and that the financial reports should be able to be generated within about two weeks.

On Feb. 29th, not having any response to my request, I again had a phone conversation with Mr. Davies. He told me that the financials were done but that my request had to go through the law department first. We had an interesting discussion that this law department review was because of who I was and who I worked for. He asked me to formalize the request to him by sending him an email - which I did:

"Todd - per our conversation today, I have copied the email exchanges between me and Brian S. regarding my request for public records - specifically, the November and December financial statements/reports for the Erie Street Market - since the City of Toledo assumed control of this entity from CitiFest.

As you will see in the emails, I was notified to contact you directly, which I did on Feb. 1 via phone. At that time, you informed me it would be about 2 weeks to provide the documents.

Please let me know when the information can be emailed to me (if available in electronic format) or when I can inspect the information in order to determine what, if any, copies I may like to have made."

But in another twist in this long story, my response came not from Mr. Davies, but from Katerina Bekyarska, who was filling in for Brian Schwartz.

"Maggie,

it has come to my knowledge today that you have been trying to obtain information on a couple of things. The first one from what I understand is the financial reports for the Erie Street Market for November and December. Actually, yesterday I inquired about that and was told that those will be ready some time next week."

My response to her:

"As I'd been instructed to follow up directly with Todd Davies on the ESM financials, I've been doing that and spoke to him today. He told me the information was ready but that the request had to be reviewed by the law department. And yes, that is for me - not for general requests for information. I'm sure there's nothing there that would be excluded from the public record, but if you'd also like to track this request, that's fine with me."

Additionally, I questioned why the commissioner of the department would tell me the reports are done, but that his subordinate would tell Ms. Bekyarska that it would still be another week. Her response:

"I do not know why Todd had said this to you. There may be a miscommunication. Andy Ferrara is working on them and does not have them completed yet."

(Perhaps no one really knows what's going on in the city? And these are the same people who are in charge of the entire budget?)

In still another twist in the complicated effort to get a simple report, I had a phone call this morning from Mr. Davies who informed me he's still working on getting those records for me. I can't help but think it's because the issue is again getting news coverage with NBC24's story last night.

So - in early January city administrators and the mayor make public statements that the ESM made a profit in November and December after the city took over the operations. However, two months later, the financial statements are still not done - so how in the world would they even know?

Funny - but lack of financial accountability was one of the reasons Mayor Carty Finkbeiner used for taking over this operation in the first place.

And if you were someone who was just curious about these public records, would you have gone through all of this rigmarole - or would you have given up on ever getting a response to your request? Perhaps that is the point...

I'll keep you posted on our continuing efforts to obtain these public records.

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;
...
8. REVENUES
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."

The importance of NORIS

That's the title of my Eye on Toledo column in this week's Toledo Free Press, and I hope you'll take the time to read it. Vallie Bowman-English, the Clerk of Toledo Municipal Court, will be my guest on Eye on Toledo Thursday, Dec. 27, and we'll discuss just what NORIS means to her and her office. I believe that NORIS is vital to community safety - every bit as
important as police or fire departments - and the mayor should fund this
before he wastes tax funds on his various pet projects.

Also in this issue of the TFP is a great article on Camp Adventure and a must-read by Justin Kalmes which focuses on comments by city of Toledo staffer Andy Ferrara about Citifest and the Erie Street Market. Interestingly, what Ferrara says now seems to conflict with earlier statements about the ordinance on council's agenda for January 2, 2008, not including any 'public funds.'

Enjoy!

Mayoral spin on Citifest audit - UPDATED

Mayor Carty Finkbeiner had requested an audit of Citifest, a non-profit agency charged with putting on various events in the downtown area and, for the last several years, with managing the city-owned Erie Street Market. (background on the issue is here)

Yesterday, he issued a press release on the outcome of the audit, saying "While there is no evidence of wrongdoing or misappropriation, it is clear that CitiFest did not meet their managerial or fiduciary responsibility to the City of Toledo in managing the Erie Street Market."

Now, there's no explanation of why the Mayor believes this and there's nothing in the audit report accompanying the press release to indicate such responsibility had not been met. Interestingly, the big question prior to beginning the audit was whether or not the expenses/losses at the Erie Street Market (ESM) are what caused Citifest to run out of money. That issue isn't even addressed.

What is addressed are the following with the auditor's comments in italics:

* were monies for electricity costs properly allocated to ESM? We noted no exceptions and electricity income appears to be properly allocated to ESM.

* was reimbursement for security services properly allocated to ESM? The amount of the security reimbursement income is $7,497 for the nine months ended September 30, 2007 which appears to be properly recorded and allocated to ESM.

* were payroll expenses for Erie Street Market personnel appropriately reflected in the books and records of Erie Street Market? All allocations were consistent and appear to be reasonable.

* were professional fees for services to or at ESM properly allocated to ESM? After review of all legal invoices by CitiFest representatives, the allocation of legal fees to ESM was increased by $2,559. ... Based on additional analysis by CitiFest representatives, professional fees allocated to ESM were increased by $5,276 from $13,897 to $19,173 for accounting and legal fees which had been previously allocated to CitiFest. After adjustments, all allocations appear to be reasonable and calculated consistently.

* were insurance expenses properly allocated? There were some adjustments to the liability/property insurance allocations, but it doesn't say if the adjustments were up or down. Under health/dental/vision insurance, "appropriate payroll deductions from one of the employees for this additional coverage had not been made and ESM was owed $355 which was not reflected in the September 30, 2007 financial statements. However, all amounts owed are expected to be ultimately collected."

* were advertising expenses properly allocated to ESM? One invoice was billed to ESM Catering and should have been billed to ESM. It appears that the advertising charges reviewed were related to ESM activities and properly allocated.

* were bank service charges appropriately and consistently allocated? Total bank service charges allocated to ESM, Antique Mall and ESM Catering were $8,637, of which approximately $6,750 resulted from bank overdraft fees. Bank service charges have been allocated consistently under this policy.

* determine the basis of the $2,500 per month general and administrative fee that Erie Street Market pays to CitiFest and determine what services Erie Street Market receives in consideration for this payment. ... we understand this charge was an administrative fee for the estimated time spent on ESM matters by the following employees of CitiFest: Executive Director, Executive Assistant and Special Events Coordinator. The monthly amount of $2,500 for the services of those individuals has remained the same since 2004, when it was approved by the Board of Trustees of CitiFest as part of the annual budget process. There is no written agreement between CitiFest and ESM to support this amount.

For the nine months ended September 30, 2007, the amount charged by CitiFest to ESM for these services was $22,500. This amount was approximately 19% of the total salary, payroll tax and employee benefit costs of the individuals who held these positions in 2007.

We examined the invoices from DTID (Downtown Toledo Improvement District) to ESM for September, October and November 2006 all of which were paid in 2007 and we noted no exceptions. These expenses were appropriately allocated to ESM.

So that's what the report said, but somehow I wonder if Carty actually read it. His press release also says:

"Due to the commingling of funds, it was impossible to determine if overdraft fees were charged to the Erie Street Market for expenses incurred by the Market or by Citifest."

Now, the audit says "Total bank service charges allocated to ESM, Antique Mall and ESM Catering were $8,637, of which approximately $6,750 resulted from bank overdraft fees." So how can Carty make the claim that it was impossible to determine? He can't.

Finally, his press release says:

"Finally, as managers of the Market, CitiFest leadership had an obligation to report operating losses so that staffing or other expenses could be adjusted. They made no such effort despite the fact that members of my administration and I met with CitiFest leadership regularly through 2007. CitiFest officials never indicated that there were financial difficulties until they ran out of funding in November, and had incurred in excess of $40,000 in bad check fees."

I'm not sure what Carty's expecting in this regard. Two representatives from the city sit on Citifest's board and both were present at the meetings over the last year where the financial issues/problems were discussed. One representative works for the City Auditor and appears to report to City Council. The other works for the Mayor.

So, Mayor, who's at fault for you not knowing about the financial difficulty - Citifest or your own employees who should have been sharing this information with you and their superiors on a regular basis? Personally, if I were to send a rep to sit on a board, I'd expect some kind of report monthly following each board meeting - and I'd read them. Perhaps Carty's employee did make regular reports but they never made it through the bureaucracy? Or maybe they did and were ignored until it was too late? Who knows?

But, the 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.

Per the press release:

"The City of Toledo has assumed management of the Erie Street Market and is in the process of developing a business plan to ensure the Market’s su "

I believe the last word is supposed to be 'success,' but this is copied as received.

Unfortunately, Carty's actions have resulted in the closing of Citifest while a consistently failing ESM is going to get a new business plan from the city, despite the city's proven inability to provide a successful plan in the past.

Just a question, Mayor. When ESM continues to fail, who will you blame then?

UPDATE: Here is The Blade's take on the press release sent out (which, remember, included the letter from the auditors to the city). 13ABC had a blurb in their morning headlines section. NBC24 comments on the audit and not the Mayor's press release - they also have a copy of the audit report available. And here is the Fox 36 Toledo coverage. Also, here is WSPD's coverage and sound clips from Citifest Board Chairman Brian Epstein.

Toledo Free Press looks at Citifest

This week's Toledo Free Press has a terrific article on Citifest and the struggles they face with the City of Toledo in light of their management agreement to run the Erie Street Market.

Interestingly, the article says that Citifest did not want to do the Rallys by the River which lose money - but that Finkbeiner wanted them during the summer, so Citifest had to host them.

And then there is this, which I think says it all:

"(Citifest board chair Brian) Epstein refuted Schwartz's claim the market has a constant revenue stream that allows it to self-sustain.

“There isn't” a revenue stream, Epstein said. “Revenues aren't covering expenses. That's how you get an operational loss. If they can't understand that, how the hell are they running the finances of the city?”"

***

I'd also suggest that you read my column about 'quality of life' amenities...they're the result of economic development - not the cause of it.