LC Exec Cunningham Slashing Workforce

From Lehigh County– Lehigh County Executive Don Cunningham today (8/17) announced that an additional 50 positions will be eliminated from the county workforce as the county continues to wrestle with lost revenues and tight budgets.

“We have been working all year to have our cuts affect as few people as possible,” Cunningham said, “But there’s no way to avoid the fact that there will be some people affected through the reductions as we prepare our 2011 budget.”

Lehigh County has not realized any net growth in tax revenue since 2008 and revenue projections for 2011 remain the same. That has forced the county to reduce its operations and the size of its workforce, Cunningham said.

The current full time work force of 2,171 employees is less than the number of workers employed by Lehigh County in 1990. The reductions announced today will take the total number of county employees down to 2,122 or three-and-half percent below the 1990 level. In total, Cunningham’s Administration will have cut 150 positions during the last several years.

“We will be notifying affected employees and work groups this month,” Cunningham said. “These moves are being made as we prepare to present next year’s budget at the end of this month.”

Cunningham announced some of the higher level reductions today that will take place in the administration. Upon taking office in 2006, Cunningham restructured several departments to address specific needs in the county. Those changes included the job neutral creation of a capital projects manager to handle a large backlog of building and infrastructure needs in the county. It also included the restructuring of the Community and Economic Development Department to focus on downtown improvements in the boroughs and cities and the creation of across municipality partnerships in the county’s townships.

That restructuring included the job neutral creation of a regional partnerships manager and a main street manager.

The positions of capital projects manager and regional partnerships manager will be eliminated for the 2011 budget, Cunningham said. The job functions will be consolidated with other positions, just as the role of the public information director will be consolidated with other positions. The result is the elimination of three key administrative positions within the Administration.

“It’s important for any cutbacks to affect the front office and the administration the same that it does operating departments and line functions,” Cunningham said. “It’s also important to show that in government positions and programs can be created and then taken away when the need, and the funding, no longer exists.”

During the last five years, Lehigh County has built Coca Cola Park, renovated and expanded its Courthouse, upgraded and moved its 9-1-1 Emergency Communications Center, re-built or repaired more than 20 bridges, relocated its Domestic Relations facility, started construction on a new Community Corrections Center and overhauled its Cedarbrook Nursing Homes for energy efficiency.

“We staffed up at a time when we needed to get the job done,” Cunningham said. “While we still have capital needs that remain, the workload is reduced. It’s important that staffing in government reflect the current needs of the operation.”

The Capital Plan for 2011-2015 that Cunningham presented last month is only $52.1 million, a more than 50 percent reduction from the average $120 million plan of the previous years. Only $1.8 million of that is expected to come from county general operating funds in 2011.

“Everyone thinks that government only ever gets bigger. That may be true in some cases but here in Lehigh County our staffing operations are smaller today than when we arrived five years ago. That’s a testament to our managers and our work force. The changes will not be easy but we will survive.”

Earlier this summer, Cunningham announced a freeze of the Green Future Funds for the future, which is used for the preservation of farmland, open space and the upgrade of parks. In addition, Cunningham announced a freeze on the purchase of any new vehicles with general county tax dollars.

“We will continue to announce proposed changes this month leading up to the release of the 2011 budget on Aug. 31,” Cunningham said.

Bethlehem Pension Fund Making Death Bets and Other Little Details

Do you have life insurance? You do? Boy, do I have a deal for you!

Let's say your life insurance policy will pay your beneficiaries $100,000 if you keel over. Well, I'll give you $60,000 now, and all you have to do is assign that policy to me. Your kids don't need that money anyway. Of course, once you sign away, I'll be calling you once a week to make sure you're still feeling well. I'll also be giving you lots of drinks to try, even if you complain they taste a little funny.

This is what's known in the alternative investment biz as a "life settlement." Believe it or not, it's one of the more ridiculous "hedge funds" in Bethlehem's pension fund. I told you about that yesterday. Bethlehem is playing "You bet your life!"

Why not just take all that dough and play craps at the casino?

Two Pennsylvania Counties - Westmoreland and Allegheny - have been crazy enough to get mixed up in this morbid scheme.

After all, who could possibly complain? Dead people? Senile seniors? Well, the Government Accountability Office (GAO), for one, is concerned about a "lack of clear, consistent state oversight." Another little group called The Securities and Exchange Commission (SEC) wants life settlements classified as securities.

Senator Herb Kohl (D-Wi), who chairs the U.S. Senate Special Committee on Aging, is a little more concerned about the pitfalls faced by seniors:

"Most seniors don’t know that when they sell their policy, their health records can be passed off to multiple third parties as their policy is resold time and again. Most seniors are also unaware of what their tax liabilities are, or that they may be uninsurable in the future. Furthermore, most seniors may not know that they are participating in insurance fraud if they purchase life insurance with the intent of flipping it for a life settlement. Known as stranger-originated life insurance, or “STOLI,” such scams have led to a spike in litigation since 2005. In Florida alone, insurers have filed three multi-million dollar federal lawsuits in the past year alleging that the true nature of the life insurance transactions were misrepresented."

In their quest for a quick buck, Callahan's crew has turned a blind eye to the warnings of the GAO, SEC and Senator Kohl. Moreover, there's something inherently distasteful about a public pension investing in funds based on the hope you die soon.

What's next, Soylent Green?

Other Little Details

(1) Hedge funds make up a whopping 12% of Bethlehem's pension fund. Even alternative investment cheerleaders would probably agree that percentage is simply too high.

(2) Mike Shone, a pension fund manager for many of our Counties, tells me only a handful throughout the state - about three or four - are willing to take the risk of investing in hedge funds.

(3) Northampton County's Director of Fiscal Affairs, Vic Mazziotti, tells me most hedge fund managers are paid 2 and 20, i.e. they get 2% of the investment up front, followed by 20% of whatever is earned. Thus, they have an incentive to take risks, hoping for a big payout. And if they lose, it's only money.

Your money.

It's The End of The World As We Know It

"Is there a doctor in the house?"

Except for cartoons, when the hell have you ever hear that? It took me 59 years, but those are the exact words I heard as I walked into a crowded Bethlehem School Board meeting at East Hills Middle School last night. All the hot air had affected some poor preteen in the hallway, and he keeled over.

He's very lucky to be alive.

The Northampton County Bulldog, Ron Angle, was there. So was I, not as a bottom-feeding blogger, but in my capacity as his one of his Evil Minions. That's not unusual. We both laughed as the school board inanely tried, and failed, to appoint a replacement for Judy Dexter. Two board members were participating by phone, and some poor bastard had to run the phone to a mike or speaker every three seconds.

Eventually, he keeled over, too.

After Judith Dexter finished telling everyone she really liked getting flowers and pies, the issue was the ArtsQuest TIF. This is where things get really get bizarre. Ron is allied with Jeff Parks, gazillionaire Linny Fowler, project managers and about four different unions. That's right, foo-foos, union thugs, Ron Angle, John Stoffa and even John Callahan (MIA) are united in a pitched battle against School Board Prez Loretta Leeson, who really should audition for the role of Wicked Witch of the West.

Leeson is downright anal about public comment. She strictly limits speakers to three minutes. Business Manager Stacey Gober sits there with a stopwatch, and rudely shouts out "thirty seconds" as people speak. When people attempt to ask questions, Leeson replies there's no discourse. But the second a speaker walks away from the podium, she'll cheap shot him with all kinds of rebuttal at a time when he's unable to respond.

Angle, of course, was nearly tossed. He went beyond his allotted three minutes and basically called Leeson a liar. She started banging the gavel as Gober kept telling Ron his time was up.

This is where things got even stranger. I'm the writer, but last night, Angle wrote a speech for me. It must have been a pretty good one because everyone clapped when I was done, although that might be because it only took me a minute.

Then another strange thing happened. A woman I know was in the audience. She's a babe. Haven't seen her for years. She not only recognized me, but planted one on me, right in the middle of the meeting. Stoffa saw it, too.

That's when I keeled over.

Angle, Stoffa, Jeff Parks & Linny Fowler as the four horsemen. Pretty woman kissing me. Dogs lying with cats. Toads from the sky. It's the end of the world as we know it.

Bethlehem City Pension Investing in Hedge Funds

Bethlehem Business Administrator Dennis Reichard is currently exploring the idea of buying out some long-time employees. Based on an independent audit showing that the City finished last year $8.5 million in the red, he might want to start with himself. Among many other problems, Bethlehem actually missed its annual $2 million pension contribution last year. A few years before that, Mayor John Callahan had to borrow $34.6 million to make up a shortfall in the police and fire pensions. Now, it appears that City pensions are investing in hedge funds, and enough to bother the City's independent auditor. Let me fill you in.

$34.6 Million Needed to Replenish Pension Fund

Between 2000 and 2002, a combination of bad investments and unforgiving stock market led to a $20 million loss in the Christmas City's fire and police pensions. Ho. Ho. Ho. In 2004, the State ordered Mayor John Callahan to come up with $34.6 million, enough to cover both the loss as well as the amount the City should have earned over those two years.

Conocrd Public Finance, now a faithful Callahan campaign contributor, was only too happy to propose one of those painless bonds. You know, the kind where you make no payments at all the first year. They added this "will not have a negative impact on the City’s credit rating."

Council member Jay Leeson had no interest in the Municipal Novocaine being offered by Callahan's Financial Dentists, but was instead concerned this was probably the worst fiscal crisis in Bethlehem's history. "[T]he origin of the City’s crisis dates really back to a pattern of borrowing from Peter to pay Paul, and draining the surplus funds from municipal authorities, such as the Bethlehem Authority, the Housing Authority, the Parking Authority.”

As we've since learned, things could and would actually get worse.

Leeson argued the only way out of this crisis was Municipal Root Canal, a tax hike. "You don’t borrow money and then invest it in the stock market unless you can afford to lose it. But that is essentially what we are doing is borrowing money to put it in the equity markets. That assumes we can afford to lose it. We cannot afford to lose it, given the circumstances that the City is in. We cannot afford to assume that risk."

This was unthinkable to Mayor John Callahan, who insisted (in 2004) that the City had turned the corner economically, that Leeson is just painting "doomsday scenarios" while he "rolls up his sleeves" a lot and presents "creative solutions." People like Leeson are just "irresponsible."

Callahan's pain-free bond was approved, after which the City's credit score was reduced by S&P. Subsequent years proved Leeson was, if anything, too optimistic.

City Misses $2 Million Pension Payment.

Last year, the Callahan administration demonstrated its creativity and responsibility by missing its annual pension payment, set at $2,047,975. It finally caught up in April, thanks to the casino. Bethlehem was required to pay $139,198 more than if it had paid on time, but the City denies this is any form of late fee or interest penalty. It probably would be irresponsible for me to make that suggestion. City administrators assure Council President Bob Donchez it will never, ever, ever, ever, ever, ever, not ever ... ever happen again. Ever.

I'm sure this will have no impact on the City's next S&P rating.

Despite $20 Million Loss and Missed $2 Million Payment, City Pension Invests in Hedge Funds

At last week's Finance Committee meeting, City Council President Bob Donchez was understandably concerned when auditor Tracey Rash mentioned "unusual investments" in the City pension fund. (You can see their exchange here).

Donchez: "This pension investment. Is this something that you're concerned about? Because if we go back to 2006 ... 2005, we took a bond out for the pension, to fund it. Is this a very high risk or am I completely wrong?"

Rash's answer? "I can't address the risk associated with the investment. What I can say is that it caught my eye because it wasn't a typical investment in a pension fund. ... It was enough to make me look at the pension investment law and make sure you were in compliance with the law and make some inquiries to your Solicitor and Financial Advisor."

Translation. "Are you folks out of your frickin' minds? After borrowing $34.6 million and then missing a pension payment completely, why the hell are you investing in something this stupid?"

The two investments that caught Rash's eye are in Graham Global Investment Fund & Green & Partners, LP. A google search quickly revealed that these are hedge funds.

What Exactly Are Hedge Funds?

According to a Securities and Exchange Commission (SEC) staff report, a Hedge Fund is "an entity that holds a pool of securities and perhaps other assets, whose interests are not sold in a registered public offering and which is not registered as an investment company." It's a $2 trillion industry where managers are not required to report how much money they oversee or how much money they make or lose each month. As explained in an University of Maryland article, hedge funds are unregulated and exempt from SEC disclosure and registration. This enables them to earn much higher returns than your usual mutual fund, but they are more risky. "They are highly secretive investment vehicles." Wall Street reforms have had no impact on them, either.

New York City's three pension funds for police officers, firefighters and civil employees are considering investing in these loosely regulated hedge funds. According to a CFO at one of the Lehigh Valley's leading corporations, they do deliver positive returns, even in a down market. He considers them a legitimate option to diversify a large size pension fund. But this assumes the fund selected has a successful track record, something Bethlehem's pensions funds can't claim.

That University of Maryland article tells us 326 hedge funds went out of business in the first half of 2006. In May 2007, two Bear Stearns hedge funds lost approximately $1.6 billion of capital due to overexposure to bad mortgages. Likewise, the Swiss banking firm UBS AG shut down a hedge fund in May 2007 that lost more than $124 million from similar bad investments. In the UK, public and private pensions alike are wary of hedge funds because of their perceived risk, potential for big losses, and concerns about a lack of liquidity.

In the eyes of their detractors, hedge funds are little more than a Ponzi scheme. “There were accepted practices going on in the industry up until 2008 that in retrospect look like a problem. Funds were using the liquidity of incoming investors to pay out the established investors without testing the investments themselves. It was hard to see this until everyone hit the exit at once and everyone starting asking for their money back at the same time."

Given Bethlehem's troubling history with its pensions, it's no wonder that these investments bother Rash.

Why Don't Hedge Fund Investments Bother Mayor Callahan?

On his Congressional Facebook page, asks, "Where was Congressman Dent when Goldman Sachs sent up to $4.3 billion in taxpayer fund to overseas banks?" He's "glad that the Wall Street reform bill passed last night because it eliminates taxpayer funded bailouts and holds Wall Street CEOs accountable."

Does Callahan realize that money invested in hedge funds could easily go to offshore accounts? Has it dawned on him that there is no accountability at all?

Dent Condemns Callahan's Fiscal Mismanagement

"Where's the Mayor. By the way, where's the Mayor?"

That's the question Democratic City Council member David DiGiacinto asked after being told about Bethlehem's $8.5 million negative fund balance last year. Business Administrator Dennis Reichard defended the fiscal mismanagement by saying, "This isn't stuff that anybody's going to jail on."

LV Congressman Charlie Dent has reacted to Callahan's red ink with this statement:

“Mayor Callahan needs to stop making the false claim he has balanced six city budgets. Mayor Callahan has tried to hide the truth from the people of Bethlehem, and now he’s just in hiding.

“Here’s John Callahan’s record: Bethlehem’s budget deficit was $3.2 million in 2008, $5.3 million in 2009, and is on its way to another deficit this year. To pay bills Callahan has raided funds, such as the Parking Authority and Water Authority, and even borrowed the earned-income tax money being held for other municipalities. Of course he broke his promise to provide an immediate tax cut with Sands Casino host fees. In fact John Callahan has only raised taxes, doing so four times as Councilman and Mayor.

“The same day this disastrous audit was released to the public, Candidate Callahan criticized Congressman Dent for his vote against a permanent tax increase that will kill jobs to fund a six-month bailout. That legislation is exactly the kind of bad fiscal policy Callahan has used in Bethlehem. Council President Bob Donchez correctly criticized Callahan for repeatedly using one-time revenue sources to pay for recurring expenditures, masking structural failures in his fiscal policy.

“Let’s be clear -- Mayor Callahan alone is responsible for deficit spending in the City. Since he’s been mayor, he has increased the city’s annual budget by 54 percent, including a pay raise for himself in four straight years. In the middle of an economic downturn, he authored a 2010 budget that increased spending by 10 percent.

“Ironically, Mayor Callahan blames the economy even as Candidate Callahan supports the policies of the Pelosi Congress that are squeezing taxpayers and squashing job creation. These include an economic stimulus that now costs $862 billion, a $2.6 trillion health care bill, perpetual bailouts, and innumerable job-killing tax increases and punishing mandates on individuals and small businesses.

“So what can we learn from my opponent’s record? That he will continue to support the agenda of more wasteful spending, higher taxes, permanent bailouts, and fewer jobs. This is Callahan’s record in Bethlehem, and it is his plan for Washington.”

Bethlehem's $8.5 Million Loss Is Callahan's $12,400 $19,400 Gain

When Bethlehem's outside auditors told City Council that the City had finished 2009 in an $8.5 million sea of red ink, Mayor John Callahan was nowhere to be found. Maybe he was busy practicing his ribbon-cutting skills.

City financial advisor Concord Public Finance, which has proposed most of the City's borrowing schemes, was also MIA. But don't you worry. Concord may be lousy for Bethlehem's finances, but it's been very, very good for Mayor Callahan's campaign coffers. Here's a breakdown of the $12,400 given to Callahan since 2008:
Michael Setley - $1,500 to Callahan on 4/15/08 and another $3,900 for the Congressional race.
Daryl Peck - $2,000 to Callahan on 4/11/08 and another $1,600 for Congress.
Christopher Gibbons - $2,000 to Callahan on 4/14/08, and $1,400 for tighter regulation on people like him.

Updated 8:45 AM: Add another $7,000 to that pot! - From copies of earlier campaign finance reports.

Gibbons-$1,500-12/24/04
Gibbons-$1,000-10/16/03
Peck-$1,500-12/24/04
Setley-$1,500-12/24/04
Setley-$500-10/20/05
Setley-$1,000-10/16/03

It's interesting that professional/issuance fees associated with financing deals were rolled into borrowing, a portion of which found their way into Callahan's campaign coffers. If that isn't sticking it to the rate-taxpayers, nothing is. What a sweet deal for both the financial experts and the candidate(s). It's almost like money laundering!

Gracedale Update: Angle Removes Gracedale From Council Agenda

In what has to be viewed as a positive sign for Gracedale workers, Ron Angle has removed Gracedale from next Thursday's Council agenda. He did so after meeting with AFSCME and County administrators yesterday afternoon.

Council member Lamont McClure also participated in the discussions.

Unwilling to discuss details, Angle said he is "encouraged" and believes they are going in the right direction. Angle had been ready to discuss the sale or lease of Gracedale at next week's Council meeting, but will instead continue these negotiations next week.

Ironically, as I was talking to him, he was called by a mid-state businessman interested in purchasing the County nursing home. County Executive John Stoffa has publicly stated he is called at least once every week.

Updated Tuesday Night: Gracedale may technically be back on the agenda, but Council Prez Ron Angle assures me he will take no action until exhausting all possibilities with union negotiators.

LVR Appeals Refusal to Produce Callahan Cell Phone Records

Superbowl weekends are always an excuse for mid-Winter parties and booze, leading to more than the usual number of accidents. So it's no real shocker that in the early morning hours of Superbowl Sunday three years ago, there was an accident in Bethlehem. No one would be surprised to learn that the driver at fault was driving the wrong way on a one-way street, or that he was speeding, or that he had been drinking, or that the impact of his accident would have him and his companion hanging upside down in an overturned vehicle.

What is a surprise is that the driver slammed into and injured a Bethlehem police officer. Even more surprising is that although the odor of alcohol was detected and a Bethlehem police officer was actually hospitalized, there were no field sobriety tests and no trip to the DUI center. A bigger surprise is that the driver in question was Dino Cantelmi, Mayor Callahan's brother-in-law. Eyebrows go up a little more when the officer assigned to investigate just happens to be one of the Mayor's friends, who was promoted ten months later. But the biggest shocker is that this story never appeared in either of the two daily newspapers, who love to scoop each other on the Bethlehem battleground. Even a week or a month after this accident, this would have been big news.

Instead, everything stayed inside a cone of silence. At least for awhile. It took three years, but the story finally came out. Three years later, my biggest question is what did Mayor Callahan know? Was he involved in keeping this story under wraps?

I filed a Right-to-Know request seeking cell phone records for both the Mayor and Police Commissioner on the day of the accident. Now I can track my own cell phone calls from three years ago, but Bethlehem officials incredibly answer that no records exist.

"The City maintains records of cell phone invoices, however individual cell phone records are not kept in the normal course of business. Therefore, the record you request does not exist and the City is not required to compile a non existing record pursuant to Pennsylvania Right to Know Law section 705."

Dead end? I appealed to the Office of Open Records yesterday.

Here's why. This is exactly what happened in another case, Bartholomew v. Smithfield Tp., AP 2010-0184. In that case, the Appeals Officer ruled that a City has "constructive control of its telephone bill and any records related to its account with the telephone company. Therefore, it is required under the RTKL [Right to Know Law] to retrieve a copy of any records that would include the information requested, if any exist, from the telephone company."

So if the telephone company can produce the cell phone numbers called that day, Bethlehem must turn them over. If City officials want to drag their cling to this invoice argument, they will have to file affidavits indicating what efforts were made with the phone company.

Ruh roh.

My appeal also seeks the photographs of the damaged vehicles. The City just ignored that part of my Right-to-Know request.

The Office of Open Records has thirty (30) days to rule on my appeal.

Permitgate: A-town GOP Chair Calls For Ethics Investigation

I've told you before that Dr. Bob Romancheck is a stud muffin. He's also Allentown's GOP chair, and in a news conference yesterday morning, called on Allentown's Ethics Board to investigate Allentown Mayor Ed Pawlowski over Permitgate. Here's what he said:

"As a result of information first noted on Lisa Pawlowski's Facebook page, it became clear that as long ago as last December, Mayor Edwin Pawlowski was undertaking major renovations to his home. She even posted photographs of some of the work in progress. Earlier this summer, she again began to discuss a 'mancave' and new basement for her husband. This was another major project, as she noted, required at least three trips by contractors.

"Mayor Pawlowski failed to obtain permits for any of this work. Moreover, the work in question was done by a local construction firm that benefits from city contracts and contributes significant amounts of money to Pawlowski's campaign fund.

"When one of these renovations was reported in local blog, 'Lehigh Valley Ramblings', Mayor Pawlowski immediately secured a permit that very day. A few days later, Lehigh Valley Ramblings reported more work being done by Pawlowski, who then secured a permit that same day.

"Today, I am asking Allentown's Ethics Board to conduct an investigation into Mayor Edwin Pawlowski's failure to obtain permits for work he's had done at his home and for which permits are required. Also, because the permits that were obtained are based on questionable low estimates (such as $500) I am asking the Ethics Board to inquire into the actual cost of these renovations and what was actually paid.

"This information was made known to Allentown City Council. Unfortunately, they have refused to take any steps to look into this matter. They should investigate further, if for no other reason than to have Mayor Pawlowski clear the air.

"These questions have instead lingered, seemingly as an unfortunate by-product of one-party rule in Allentown. While the Mayor seems to think otherwise, he should be held to the same standard as the people he serves. The Mayor is not above the law."

King Edwin told The Morning Call's Jarrett Renshaw that Romancheck's complaint is "political nonsense." There goes Dr. Bob's invitation to the "mancave."

Here's the Permitgate trail, with Lisa Pawlowski starring (inadverdently) as Deep Throat:

7/23: Pawlowski Builds "Mancave" With No Permit

7/26: Embarrassed Pawlowski Gets Permit For Mancave

7/30: Pawlowski & Permits: It's Good to Be King

8/2: Allentown Stonewalls Request to See Pawlowski Permits

8/4: Permitgate: Pawlowski Gets Two More Permits

Updated Sunday 3 PM: Here's a link to the actual news conference.

Despite $5.2 MM From Casino, Bethlehem Finishes '09 in $8.5MM of Red Ink

Although the festive sounds of Musikfest wafted into Bethlehem Mayor John Callahan's conference room from time to time on August 11, the mood inside was somber. Four City Council members, Business Administrator Dennis Reichard and Controller Meg Holland were among the twenty-seven people who listened as independent auditor Tracey Rash, of accounting firm MaherDuessel, sang a funeral dirge about the City's dire finances in 2009.

According to her audit, the City finished last year with a negative cash balance of $8,548,661. She explained this negative difference between assets and liabilities as the result of a $5 million deficit last year. Although the Christmas City received $5.2 million in casino revenue, it still finished the year in the red. "Nobody could have predicted the economy would have been this bad," said Business Administrator Reichard. Council member J. William Reynolds, who chairs the City's Finance Committee, tried to make lemonade out of lemons, explaining that other cities are going through similar crises. "We have a City to run," he asserted.

But Ms. Rash raised question about whether it's in the right direction, detailing "significant deficiencies" and "noncompliances" peculiar to Bethlehem, extending beyond its $8.5 million negative fund balance or $5 million deficit.

City Misses Pension Contribution. - Last year, the City missed its annual pension payment, which had been set at $2,047,975. It caught up in February ($510,945) and April ($1,676,228) installments, spending $139,198 more. The City denies this is any form of late fee or interest penalty. "Cash flow issues" were blamed for this missed payment, and City administrators assured Council President Bob Donchez there would be a timely payment this year time.

City Spending Without Prior Council Approval. - Rash lists three instances in which City Administrators transferred money last year in violation of Ordinances requiring advance Council approval: $335,643 in casino funds went for operating expenses; $2.4 million was "borrowed" from the Treasurer's Escrow Account; and another $500,000 from the sewer fund. "There were transfers made without Council approval," deadpanned Rash. Reichard indicated it is likely that he will ask Council to approve transfers from the Treasurer's Escrow Account this year

City "Borrows" EIT Money Collected For Other Municipalities. - Bethlehem collects Earned Income Taxes (EIT) for other municipalities. But instead of sending the money on its way, Bethlehem made two advances to itself last year from this fund. This has been a City practice since 1974, when cash flow is tight. Reichard told Council Prez Donchez that "at this point," the City has not dipped into that account this year.

Commingling Restricted and Unrestricted Funds. - Bethlehem commingles restricted and unrestricted funds in one bank account. "If there are restricted funds within that bank account, they could be used for unrestricted purposes," explained Rash. "There was a deficit in certain funds and we were concerned that restricted funds may have been used. We're asking the Administration to look and make sure no restricted funds were used for unrestricted purposes." According to a City response on the draft audit report, that practice has been going on since the 90's to prevent shortfalls in the General Fund.

Commingling Wireless and Land line Funds For 911. - The City gets $1 per land line from phone companies for administration of its 911 services. It gets .75 for each cell phone. That money is supposed to go to the state, which then distributes grants, based on need. But Bethlehem has been keeping the money from wireless accounts, and now owes the state $2,598.461.

Internal Service Fund Running at Deficit. - In response to questioning by Council member David Gigiacinto, Rash told Council that the City maintains an "internal service fund" for medical insurance. That fund is in the red, and "those expenses will have to be caught up."

"Unusual Investments" in Pension Fund. - Rash noted that the pension fund has two "unusual investments." "Is this a very high risk?" asked Council Prez Donchez. "I can't address the risks associated with the investments," replied Rash. "What I can say is that it caught my eye because it isn't a typical investment." Donchez asked Reichard to supply a more detailed explanation at the next Council meeting.

911 Personnel Costs. - For three years, the City has exceeded the seventy per cent threshold it can use from the 911 fund for personnel costs, by $381,000 per year. The City is going to have to reimburse that fund.

911 Unallowable Costs. - $288,000 in unallowable costs were diverted from the 911 fund, and need to be reimbursed. No one explained where exactly this money was spent.

Treasurer's Escrow Account Irregularities. - "There were grant revenues and expenses run through the Treasurer's Escrow Account, which should have been accounted for in a different type of fund," explained Rash. The audit elaborates that some national grants were recorded inaccurately. But she conceded, in response to questioning from Donchez, that the "grants situation" has improved over the past three years.

Council members Reynolds, Evans, DiGiacinto and Donchez all stressed that next year's budget has to be lower. And Council Prez Donchez cautioned that revenue estimated must be more realistic. "You can't high ball them. They're going to have to be on the low-ball side. If you get extra, that's icing on the cake."

After giving these marching orders, Council discussed plans to borrow $5.8 million on top of the $73.5 million owed by the City at the end of 2009 for basic capital projects, like repairs to a boiler pipe in the police department that is leaking 180 degree water over the heads of police officers.

Council member David DiGiacinto suggested holding off on this borrowing plan, but the other two members of the Finance Committee - Eric Evans and J. William Reynolds -overruled him. Council President Bob Donchez and member William Mowrer,as nonmembers of the Finance Committee meeting as nonvoting members.

One Council member, David DiGiacinto, was clearly upset by what he considers fiscal mismanagement. In an unusually stormy (and lengthy) meeting for Bethlehem, he traded barbs with Business Administrator Dennis Reichard, questioned why Mayor John Callahan was absent, and challenged Controller Meg Holland's oversight.

But that's another story.

DiGiacinto Spars With Bethlehem Officials Over Poor Audit

David DiGiacinto has only been a member of Bethlehem City Council since January, but was clearly disgusted by Bethlehem's bad marks in an independent audit of the City's finances in 2009. In a local government known for its civility, he had some testy exchanges with Business Administrator Dennis Reichard and Controller Meg Holland at an August 11 Finance Committee meeting.

Listening to a presentation by Tracey Rash, a CPA with MaherDuessel, he summed up his complaints. "Basically, we had a negative fund balance ..., we have misuse of transfers, we transferred funds we shouldn't have transferred. Some of them, I guess, are considered illegal, against City Ordinance. We had internal control failures. We had an inability to make payments, pension fund payables. I'd say that's pretty much a disaster, fiscally mismanaged year. Wouldn't you agree with me?"

"No," answered Business Administrator Reichard. "There's not one bank statement that was negative. ... We did not fiscally mismanage this City. I take exception to that. Every bill was paid, every debt service was paid, every payroll was made."

"That's not what this audit says," countered DiGiacinto.

"This isn't stuff that anybody's going to jail on," responded Reichard, becoming defensive. "You may want to look at fiscal mismanagement. We're managing the City the best that we can. That's your words, that's mine."

"Where's the Mayor. By the way, where's the Mayor?" asked DiGiacinto. Mayor John Callahan was absent from yesterday's meeting, and DiGiacinto's question went unanswered as Chairman Reynolds tried to keep the meeting from spinning out of control.

DiGiacinto: "Is it true or not that the casino revenues last year, without the transfers from the Escrow and the fact that you didn't pay a lot of bills on time, ... that's how you really got through last year, Dennis? Let's be factual."

Reichard: "Isn't it true that if the federal government didn't bail out all the corporations ... "

DiGiacinto: "We're talking about Bethlehem here."

Reichard: "Awww, same thing. Same thing."

At the end of their exchange, DiGiacinto said he's simply unable to understand how Council adopted this year's budget, to say nothing of 2009. "You have a bad economy, as everyone likes to say around here, and you don't act conservatively? That's the disappointing part about all this. Instead, you raise the budget by six million bucks."

Then DiGiacinto asked Controller Meg Holland, "Where've you been?"

DiGiacinto had been Meg Holland's Democratic opponent when she ran for Controller in 2007.

Furious, Holland exploded, "You want to know where I've been. I want to know where the person before me was. That's what I wonder, because this has been going on for years. ... It has not been the fault of this Administration."

She then detailed some changes she's recommended: increasing fees when police serve at private functions; increasing medical premiums; adding use permit fees; and re-billing accounts receivable; stopping the practice of allowing some City employees to take cars home, which costs $100,000 per year; and re-negotiating cleanup costs with ArtsQuest, which often costs the City more than it receives in payment, which is sometimes ten months after it was billed. "I think an expense like Musikfest - the cleanup and whatever, there should be some up front money given for that. We're paying people on a daily basis to go out there and clean up. We're not gonna' get paid 'till ten months later? We should be getting half of that fee up front."

DiGiacinto pressed Holland, asking her what she's doing about the problems identified in the audit, such as juggling funds in different accounts. Holland replied that was being done thirty years ago. "I'm asking you now, I'm not asking about thirty years ago," insisted DiGiacinto. "What are you gonna' do about it? Nothing? Just let it go, it's OK? It's a simple question. I mean, I thought that was part of what you were going to do."

"Darn! Or was that gonna' be you, as the Controller?" sniped Holland.

Once again, Chairman J William Reynolds intervened, and another question from DiGiacinto went unanswered.

DiGiacinto to Controller: "Where've You Been?"

DiGiacinto: "Where's the Mayor?"

David T. DiGiacinto calls Bethlehem's finances a "disaster." "Where's the Mayor?" he asks.

Paying Teachers By Cutting Into Food Stamps

Just a day after ensuring that Bethlehem's struggling schools get the $15,000 owed by Hillary Clinton's campaign, LV Congressman Charlie Dent is being slammed for voting daring to side against the Edujobs bill.

Republicans are generally opposed to solving problems by throwing money at them, and that's the most likely explanation for Dent's vote. But he also has to be bothered that a Democratic Congress is paying for teachers by reducing food stamp benefits to our most vulnerable citizens. That's right. In our worst economy in the last seventy-five years, Democrats in all their wisdom reduced the one stimulus program that actually helps poor people. But poor people don't vote and teachers do.

Could you feed a child on $4.50 a day? That's a lot of ramen noodles.

Mission Accomplished: Clinton Pays School Bill

Hillary Clinton's $15,000 debt to Bethlehem's struggling schools is finally paid, two years after it was first incurred. This would never have happened but for the pressure exerted by Charlie Dent Congressional campaign. John Callahan's campaign manager derided it as "cheap politics," but it worked.

Of course, the Callahan blogger is blowin' oil. In a post entitled, "Bernie O'Hare Thinks You Are Dumb," Jon Geeting is still calling complaints about this unpaid bill "petty crap flinging" and "corny nonsense."

That's OK with me. He can flap his wings all he wants, but all this "petty crap flinging" and "corny nonsense" reduced the tax burden to Bethlehem School taxpayers by $15,000. That's chump change to Johnny Casino, but it's a lot of money to most of us. It's 50 football helmets. It's 30 laptops.

Geeting also points to an unpaid bill, outside of Dent's district, for an RNC event that was canceled. He demands to know why Dent isn't clamoring to get that bill paid, too. Maybe because it's outside his district, the event was canceled, and involves neither a school nor Callahan. After all, Callahan did help to arrange and appeared at Hillary's visit two years ago.

Geeting claims it would be illegal for Callahan to pay that bill, but I certainly never suggested Callahan should pay it. What I did suggest was that Clinton could find a way. For example, he could ask Callahan supporters to make contributions to Hillary's campaign, earmarked for Bethlehem schools. For Christ's sake, he was the President. I think he could come up with $15,000. And he did, thanks to the pressure started by Charlie Dent.

So who really thinks you're dumb?

ET: Bethlehem's '09 Budget is $8.5 Million in Red

At his Congressional web page, Bethlehem Mayor John Callahan brags that he's balanced six budgets. Better make that five. On Thursday, I told you that Bethlehem's annual outside audit would reveal a $8 million shortfall in 2009. It's actually $8.5 million, according to The Express Times.

Last year, a brand new firetruck sat unused because the City was unable to pay for it. It had borrowed money for the purchase, but had to dip into that fund to pay operating expenses. But that's minor compared to what Lynn Olanoff reports. Last year, the City was also late with a $2 million pension payment, which cost it $158,000 in interest.

I'll be at today's City Council Finance Committee, and will give you a more detailed report tomorrow.

In his 2007 State of the City address, Callahan actually claimed, "[W]e need to give a direct financial return to all of our taxpayers in the form of a tax cut." That appears unlikely anytime soon.

Now if only he could ask Clinton for $8.5 million ...

Gracedale Update: AFSCME, County to Meet Thursday

Can a deal be struck? It seems doubtful to me, but at least the County and the unions are willing to talk.

Today, at 3 PM, Gracedale workers will meet in the gazebo to propose concessions that will reduce County operating costs.

On Thursday afternoon, AFSCME - which represents the lion's share of Gracedale workers - will sit down with the John Stoffa administration and two Council members. Lamont McClure had agreed to participate in these negotiations at last week's Council meeting, but now that his audience is gone, he's lost interest. As a Council member who's missed three meetings in a row, that's no surprise.

Council Prez Ron Angle has reportedly replaced McClure with Peg Ferraro, the Council member who stated both sides need to work together.

I hope they leave the rat at home.

Update (9:30 AM): McClure now Coming after all. Perhaps embarrassed by this blog, McClure has reversed himself and will attend Thursday's meeting.

Stoffa: Gracedale Has Lost $3.8 Million Over Last 22 Years

At last Thursday's Council meeting, council members Lamont McClure and Ann McHale threw around figures to establish that Gracedale has historically made money for the County. Their pronouncements prompted thunderous applause and standing ovations from the nursing home staffers who packed the meeting. But as it happens, those figures are bogus.

On Monday, Northampton County Exec John Stoffa released figures showing that, over the last 22 years, Gracedale has cost the County $3,826,497. Those figures have been confirmed by Fiscal Affairs.

The Evolution of Gracedale, aka Valley of the Nuts

A friend suggested that you might be interested in a brief history of Gracedale. I spent a few hours yesterday in Easton Library's famous Marx Room, named after Groucho. What I've learned is that, since its existence, somebody has always been trying to kill Gracedale, which was almost named Valley of the Nuts. Just as important, Gracedale has consistently redefined itself over the years.

1. The early days. - Gracedale is part of what was originally a 600-acre farm, settled by the Moravians in 1745. Single dudes had to live on a similar-sized farm called Christian Springs, where they had access to plenty of cold showers. Gracedale was for the married folks.

How did it get its name? There were actually two factions. One group of prissies wanted to call it Gnadenthal. Being German, that sounds pretty tough, almost like a name for one of the Transformers. But it actually means Dale of Grace, or Kindness.

Another group of Moravians, led by Ronald Von Angle, wanted to call it Neissthal. That's another German name and it sounds pretty tough, too. But it translates to Nutty Valley, or Valley of the Nuts, supposedly because of all the hickory and walnut trees.

For some reason, Valley of the Nuts sounds perfect to me, but Moravians had a love feast and went with Kindness.

2. Indian Attempt to Kill Kindness. - Everything went dandy for the married Moravians at Gnadenthal, a farm of "unsurpassed fertility." But in 1763, a group of Indians on their way home from Bethlehem were provoked and robbed. The response was an uprising that coincided with other uprisings elsewhere, and quickly spun out of control. One of the places ravaged, in East Allen Township, is now the home of County Executive John Stoffa. I kid you not! Stoffa was only in his teens in 1763, too young to own real estate. Andrew Hazlet was the unfortunate owner.

In an account published by none other than Ben Franklin, we learn that Hazlet attempted unsuccessfully to defend his home from attack. "Hazlet attempted to fire on the Indians, but missed, and he was shot himself, which his wife, some distance off, saw. She ran off with two children, but was pursued and overtaken by the Indians, who caught and tomahawked her and the children in a dreadful manner; yet she and one of the children lived until four days after, and the other child recovered. Hazlet's house was plundered."

When word of this and other atrocities reached the Moravians at Gnadenthal, they stockaded the entire farm, which was considered the "bread basket of Pennsylvania." Fortunately for the Moravians, they had built up such a good reputation with local Indians that most actually assisted in defense.

When all was said and done, Gnadenthal was spared. Who the hell wants to attack people who have "love feasts" and name farms "Gnadenthal"?

3. The first poorhouse. - In 1837, Pennsylvania imposed one of those "unfunded mandates" on Northampton County, requiring it to construct a home "for the Employment and Support of the Poor." According to Express Times historian James Wright, "The philosophy then current in America was that the poor could provide some relief for themselves by doing agricultural labor to defray the cost of their care through the sale of farm produce." Moravians were somehow induced to part with 235 acres for $90 per acre, along with a large dwelling house, stone barn, outbuildings and excellent spring.

An almshouse was added in 1838. It's a three-story stone structure that still stands today and is known as the Greystone Building. Total cost? $6,284.99.

4. Life in the poorhouse. - In its first year of operation, Northampton County had 117 "paupers" in residence, administered by exactly one steward (for the dudes) and one matron (for the dudettes). If someone got out of hand or refused to work, the steward could lock him in a dark cell and feed him nothing but bread and water for 48 hours.

Among the tattered papers I reviewed are notes concerning one inmate from the Slate Belt, another Ronald Von Angle. He became enraged when imprisoned, vowed revenge, and apparently used a cigar to pick the lock. He was never seen or heard from again.

All kidding aside, social reformer Dorothea Dix visited Gnadenthal twice. Dix was an advocate for the poor and mentally ill. She believed mental asylums were a humane answer to the cages, stalls and pens in which the mentally afflicted were housed in yesteryear's version of group homes. Kinda' the exact opposite of today's approach. She gave the home high marks.

5. Cholera's Attempt to Kill Kindness. - Did you know there was a cholera outbreak in 1849? It's a vicious disease that attacks the intestines, causing diarrhea and nausea, leading to dehydration, shock and death. There was no vaccine at the time. No public health department, either. It hit poorhouses and factories hardest. In Bucks County's poorhouse, 120 of 150 residents died. The Durham Iron Company was hit hard, too. People refused to leave their homes for fear of contracting the disease.

Some of Gnadentahl's residents did unfortunately contract cholera and die, but comparatively few. Once again, Kindness dodges a bullet.

6. Transition for Almshouse to Retirement Community. - Sometime around WWI, other agencies began to provide services to the poor, making poorhouses irrelevant. The population that did exist got older and more infirm. Farmers have to be hired to till many of the fields. The population diminished as staffing needs doubled.

7. 1951: The Birth of Gracedale. - As the poorhouse dies a slow death, County officials embark on a new project, a bnursing home. By the end of 1951, a new and modern institution costing approximately two million dollars is completed and placed in service. The retirement home's new name, Gracedale, is the English translation of Gnadenthal. Three physicians, four pastors and several hundred undertakers are always on call.

In 1951, Gracedale still had 100 pigs and 500 laying hens. The hens found jobs at the Courthouse. The pigs joined unions.

8. 1975: Unions Threaten to Kill Gracedale. - In the wake of Indians and cholera comes the union, with a third attempt to kill Gracedale in 1975. Following an AFSCME vote to strike on July 21, 1975, leaflets are passed out that demonstrate pretty clearly just what these union workers really think of the residents. "It is obvious that Gracedale must be closed for an indefinite period of time. Some residents can go home with relatives or friends, hospitals should be notified to be ready to admit the ill, while our County Home may be able to care for the balance. ... Call the Commissioners. Demand your rights. Together we shall overcome the Commissioners' brand of politics in Northampton Couny."

This threat to kill Gracedale, of course, failed. But no matter how much unions claim to care about the residents, their 1975 leaflets indicate they were willing to subject residents to removal, all for the sake of a few bucks.

Conclusion. - Over its lengthy history, Gracedale has evolved from working farm to stockade to poorhouse. In its last sixty years, it has been a nursing home. As the number of quality caregivers increase, a County-run nursing home is becoming increasingly irrelevant. As the poorhouse faded away, it is time for Nutty Valley to assume a new role.

Sources:

NORTHAMPTON COUNTY COMM'RS TO NAME NEW ALMSHOUSE "GRACEDALE", Easton Express, 12/24/51.
COMMONWEALTH MAGAZINE, GRACEDALE (July 1952)
TRENDS AT "GRACEDALE": MORE AND OLDER GUESTS, MORE WHO ARE INFIRM, Easton Express, 8/18/53
GRACEDALE: Moravian Setting for Modern Northampton County Courthouse, by Edward F. Reimer
MODERN MEDICAL CENTER SETS GRACEDALE APART FROM OLD COUNTY HOME, Easton Express, 8/18/53
10-STORY GRACEDALE TOWER IS DEDICATED, Free Press, 2/19/1975.
ALMSHOUSES, FACTORIES HIT BY 1849 CHOLERA EPIDEMIC, James Wright, Looking Back, The Easton Express, 12/31/89, page C-6.
GRACEDALE FOUNDED AS MORAVIAN SETTLEMENT, JAMES WRIGHT, Easton Express (date unknown)
GRACEDALE: Moravian Setting for Modern Northampton County Courthouse, by Edward F. Reimer

Do Clinton and Callahan Care About Bethlehem Schools?

Johnny Casino's boys are gonna' be busy today. At Noon, Moveon.org will descend on LV Congressman Charlie Dent's Bethlehem office, demanding that he do something about evil corporations. Then, at 4 PM, Moveon and the LV Dem Coalition will be rapping on Dent's door again, this time for clean government. But they better hurry or they're going to miss a private reception for Bill Clinton at the Cindy Feinberg estate.

You won't get in the door unless you have lots of the green stuff. Or your name is Villani. Or Cantelmi. Or Brong.

So much for evil corporations and clean government.

Speaking of clean government, do you think that schools should be forced to subsidize political contests? How about schools that must increase taxes and lay off teachers?

Since Bill is going to be here anyway, can't John Callahan ask for his help to recover or pay the debt that Hillary Clinton has owed the taxpayers of the Bethlehem Area School District (BASD) for over two years? Hillary, accompanied by Callahan, visited Liberty High School on April 20, 2008, during the Presidential Primary. She incurred a bill of $15,082 to the school district’s taxpayers. Bill has previously offered to raffle himself off to help pay his wife's massive campaign debt. This seems like a perfect opportunity for Clinton to square the books with Bethlehem's school district.

It will mean a little less money for Callahan, but he'd want to help Bethlehem taxpayers, wouldn't he?

Repeated efforts to reach out to Clinton’s campaign and the Democratic Party in order to secure payment have been numerous and fruitless. Minutes from the BASD board meetings show that school administrators turned to John Callahan for assistance in collecting the debt as long ago as February of 2009.

The debt remains unpaid.

Recently, Anne M. Morton, the Board Treasurer of the BASD, sent a memo to Dennis Reichard, Bethlehem's business manager.



On Friday, the Dent Campaign called on Mayor Callahan to use monies raised at President Bill Clinton’s fundraiser for him to cut a check to the Bethlehem Area School District and settle the debt after over two years.

“Mayor Callahan has raised over $1,000,000 for his campaign,” Millan said. “He’s likely to raise a substantial amount of funds during President Clinton’s visit, why not take just $15,082 from that amount and make the school district’s taxpayers whole?”

The Dent campaign sent out a phone call today to people in the Bethlehem Area School District’s communities offering them the chance to contact John Callahan’s campaign office if they think he should pick up the bill.

Update: Callahan campaign manager has told The Morning Call that Callahan will say something to Clinton's staff. Why not Clinton himself? All Clinton has to do is ask donors to make contributions directly to Hillary's campaign, with the notation that the funds be earmarked to pay the debt to Bethlehem schools.
Updated 6:00 PM: Just a few short days ago, Callahan campaign manager Justin Schall was deriding attempts to collect the money owed to Bethlehem schools as "cheap politics." Well, it worked. The Morning Call has just reported that Hillary Clinton's campaign has finally, after two years, been shamed into paying the $15,082 owed.