Court rules MVSD cannot issue rebates to cities

WEATHERSFIELD — Niles will not receive a $1.2 million rebate through the Mahoning Valley Sanitary District after a court of jurisdiction rejected the district’s proposal to give millions of dollars in rebates to the cities it serves.

MVSD passed a resolution in June 2017 to distribute $5 million in surplus funds to the cities, with $3.7 million for Youngstown, $1.2 million for Niles and $100,000 for McDonald. Rather than keep the money, the board planned to distribute refunds to Youngstown, Niles and McDonald for infrastructure improvements and related equipment necessary to maintain and distribute safe water.

After the board passed the rebate resolution, a court of jurisdiction, consisting of Judge Lou D’Apolito of Mahoning County and Judge Ronald Rice of Trumbull County, decided whether MVSD could issue the rebates. The court dismissed the MVSD motion to return the surplus funds and said the request has remained dormant since it became “abundantly clear this court was not willing to simply provide rubber-stamp approval to the solicitation.”

State Auditor Dave Yost previously had sent a letter to the court of jurisdiction, noting the district’s financial obligations that he said were relevant to question the rebates. Those financial obligations included $38.7 million in loans and payments on $9.15 million in bonds, rehabilitation or replacement of obsolete infrastructure, improvement projects for the dam and spillway and a five-year fiscal forecast that didn’t include distribution of $5 million in refunds.

“The request for distribution was not supported by the state auditor and, in fact, was ill-advised by such,” a judgment entry states. “Meanwhile, the MVSD has allowed the request to remain pending to the detriment of any municipality presuming these funds should be included in their budget.”

Niles was one city in particular that had claimed a stake in the money by including the $1.2 million rebate in its Financial Recovery Plan. Niles, which is in a state of fiscal emergency, must update the plan annually to reflect progress and goals the city has met in order to be released from fiscal emergency.

City Auditor Giovanne Merlo said the recovery plan, due July 15, will not include the proposed rebate.

“We’re just in the preliminary stages of the revisions,” Merlo said.

Service Director Ed Stredney said the proposed $1.2 million rebate was never included in any of the city’s budget items or counted on for any upcoming or existing projects. However, the denial of the rebate will delay some infrastructure projects for which the money could have been used.

“We weren’t planning on using it for anything other than special projects like water line replacements,” Stredney said. “We did not plan on that rebate for any of our day-to-day operations.”

Mayor Thomas Scarnecchia said he’s very disappointed with the court’s decision.

“We received a letter a year ago that we were going to get that money and I put it in the plan,” Scarnecchia said.

Council President Barry Steffey said he never expected the rebate because there were too many grey areas surrounding how the money would be refunded or how it could be used. MVSD Board President Vern Richberg said the money was a part of the district’s reserves and was never actually allocated. He said the district is meeting all of its financial obligations and is fiscally sound.

“We never had approval to reallocate the money,” he said. “We had proposed it and then sought the court of jurisdiction’s approval, so to speak.”