Local Government TV

Thursday, August 12, 2010

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.

50 comments:

  1. This meeting was held at 4:30pm in the middle of Musikfest week in the Mayor's conference room. What citizen would be able to attend this meeting? Not any that work hard for a living to pay the taxes this administration is spending fast and loose, that's for sure.

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  2. "Nobody could have predicted the economy would have been this bad,"

    Really? Bernie, are other comparable municipalities in the same straits? Is Bethlehem better, worse, or the same? Appreciate your work on this story.

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  3. Pennsylvania the state has a rather large budget shortfall. Compared to the rest of the nation we are in the lower 50% as a percentage of income. Nevada, New Jersey, California, Michigan, Illinois, and New York are in much more dire straights than Pennsylvanians.

    Are other municipalities worse, yes Harrisburg is in the process of declaring bankruptcy, which is kind of fitting.

    Allentown has laid off city employees and cut expenses in places since 2008.

    Don't know much about Easton.

    Are other municipalities in better shape, sure.

    This is a national thing. The housing boom and the economy that followed the easy credit policies of Alan Greenspan and Ben Bernake caused governments to spend in an unsustainable fashion.

    Like any binge, the hangover sucks. We are going to have an awfully long hangover.

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  4. How can Bethlehem possibly be in the Red? It has the best of the Valley.
    How in the world is Callahan going to explain this? And we can hear the opposition: If he can't balance a small city's budget, how ever will he take care of a region?

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  5. This meeting was held at 4:30pm in the middle of Musikfest week in the Mayor's conference room.

    Excellent Point. But doesn't LVEDC
    meet at 1?

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  6. "Nobody could have predicted the economy would have been this bad,"

    This isn't true. We knew five years ago real estate sales were a disaster.

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  7. "Nobody could have predicted this"

    Yes, well the same is said about the BP oil spill, Hurricane Katrina and the Levees, the Iraq war largely being a disaster, 9/11, the Tech Boom going bust in 2000-2001 etc.

    Problem is there are plenty of people predicting things, fact is people ignore things till they blow up in their face, than say there is no way I could see it.

    Plenty of people were sounding the alarm about the economic crisis in 2006-2007. Those people were called crazy.

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  8. Every municipality and school district has financial problems. We are interested in those who creatively and legally-no smoke and mirrors- deal with the financial crises. Northampton county is prepared to start selling assets. Allentown is in a hopeless state of affairs. Easton residents pay the highest taxes and fees around. School districts have been releasing employees. So, what else is new? The interesting point would be how do you survive. If that can even work itself in to an election race.

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  9. Bernie, great work on this.

    Anon 912, finding solutions in times like these is a great thing. Bethlehem's administration worked outside the law and kept Council in the dark. That's a big problem and it needs to be addressed.

    Watching Reichard's and Holland's reactions is telling - it tells that they don't get it. They kept people out of the loop and violated their city's laws and regulations in doing so.

    In politics and law, form matters as well as substance.

    The Banker

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  10. So where's Jon Geeting telling us that the piss on our legs in Bethlehem is rain?

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  11. So this means if the casino had not been here, the city would be $13M
    in the red? Can that be possible?

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  12. Allentown has laid off city employees and cut expenses in places since 2008.

    No, Allentown borrowed millions
    to "balance" its budget.

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  13. That is correct, and it was a point mentioned several times by Donchez.

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  14. Callahan says $10 million slots levy will allow him to lower taxes ** Rybak says mayor too worried about campaign contributors.

    [FOURTH Edition]

    Morning Call - Allentown, Pa.

    Author:
    Kevin Pentn Of The Morning Call

    Date:
    Apr 21, 2005

    Start Page:
    B.3

    Section:
    COMMUNITY REPORT

    Text Word Count:
    546


    Document Text

    Bethlehem's $10 million annual levy for hosting a slots parlor would allow the city to immediately lower taxes, Bethlehem Mayor John Callahan pledged during a mayoral debate on Wednesday.

    Standing before a room of senior citizens and his Democratic challenger, Anthony Rybak, Callahan said the $10 million fee would represent nearly one-fifth of Bethlehem's current $52 million budget.

    "This would be an enormous economic boost to the city," Callahan said. "I would immediately be able to lower taxes and not have to raise them for a time."

    Callahan has been lying about the City's finances and the impact of the casino on them since 2005. He doesn't belong in Congress.

    Hell, he doesn't even deserve to be Mayor.

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  15. Council Finance Committee meetings in the City have historically been held at 4:30 in the Mayor's conference room. It was not something new.

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  16. Perhaps the bigger issue is why didn't Callahan resign as Mayor before running for Congress?

    The people of Bethlehem are paying for him to run the City, not to run for another job.

    Perhaps if he had been doing less campaigning and focused more on being Mayor, the city wouldn't be $8.5 million in debt.

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  17. Callahan's not as bad as serial candidate Morganelli. He's a local Harold Stassen. I hear Morganelli is running for Bangor Area School Board next year. The guy just can't stop.

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  18. Council Finance Committee meetings in the City have historically been held at 4:30 in the Mayor's conference room. It was not something new.

    I only pointed that out because Mr. Reynolds promised to have more accessible meetings, as well as being more trasparent with the people's money.

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  19. Beyond the deception played upon the city's trusting taxpayers, what makes this report so upsetting is the conduct of those individuals seemingly in charge. There are folks that would love these jobs.

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  20. All of you seem to have no idea what goes on in the City of Bethlehem --- (and I admit that my comments may appear to be biased since I'm the daughter of Meg Holland)

    1. Meg Holland's position is part-time and she spends at least 30 hours a week working on City of Bethlehem business -- she is onsite at her office at the city at least all day every Tuesday and Thursday and her private practice is blocks away from city hall - she does significant work from there and at home at night and on weekends.

    2. Meg Holland does not work for Callahan and is not in his pocket(she actually perfers Dent)

    3. Meg Holland has been cleaning up various financial issues and mismanagement at the City since she was elected -- the problem is that a lot had not been done in 30+ years therefore it TAKES TIME to get things changed - it doesn't happen over night - also with unions involved some changes take even longer...

    4. Meg Holland has been sending memos and analyses to city council, the mayor and business adminsitrator since she was elected with recommendations how to cut expenses and correct inefficienies - some that have led to dramatic changes

    Its extremely frustrating to read all of these ridiculous comments -- you all clearly have no idea what goes on -- why don't you set up a meeting with the Controller -- then you would have some idea!
    Maybe you should do that Bernie. Bernie maybe you should also interview the auditors and ask them what they think about what Meg Holland has been doing...


    All of your comments are ignorant and uninformed ... if I were my mom I'd ask DiGiacinto if he wants to take the job and let him go through all of the stress and difficult work... Meg Holland ran for Controller to help the CIty of Bethlehem - which she is doing ... but you're all too stupid to realize it.

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  21. Meg Holland ran for Controller to help the CIty of Bethlehem - which she is doing ... but you're all too stupid to realize it.

    Don't you understand? All civil servants are mindless drones with no experience who simply suckle at the teat of the taxpayer. They have no competence and need to take a paycut or better yet be fired.

    Welcome to the tea party movement.

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  22. Maureen, As you know, I supported your mom when she ran for Controller. As a CPA, she is exceptionally well-qualified. And I do remember her announcement about re-billing, madde shortly after she was sworn in.

    Some of these problems have been around a long time. Now that an independent audit has highlighted them, I expect her to make sure those problems are eliminated. Many of these problems, from the escrow account to invading funds to failure to seek council approval, have been publicly jnown for some time. So I do think she agould have been more proactive.

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  23. Bernie
    Someone said you favored Holland in this race. Is that true?

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  24. Maureen Thomson said...

    All of you seem to have no idea what goes on in the City of Bethlehem


    This seems quite true as an independent auditor revealed yesterday.

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  25. Maybe one positive outcome from yesterday's meeting is that no single person can realistically be expected to do either of these jobs on a part-time basis. Maybe city council needs to revisit the entire financial department's responsibilities and revamp all the jobs to reflect more realistic expectations.

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  26. " ... but you're all too stupid to realize it."

    That just made your rant even more arrogant and pompous than I first thought! Congratulations sweet pea, mommy got the job she so desperately wanted.

    Honnestly, you have the gaul to preach to the taxpaying public about how your mother was going to change the world. Newsflash; your mother never asked for an investigation of misapropriated funds. Also, in all honnesty, your mother is probably too busy with her private practice to give the attention required to matters which the part time job isn't allowing for.

    "Don't you understand? All civil servants are mindless drones with no experience who simply suckle at the teat of the taxpayer. They have no competence and need to take a paycut or better yet be fired.

    Welcome to the tea party movement."


    The Tea Party members believe competent people who are selfless and aren't looking to simply advance their careers at the cost of taxpayers should be getting these jobs.

    Government should be limited at all levels, civil servants should make no more or less than the average person in the community (I don't get a company car and Cadillac medical benefits), and government agencies should only perform the duties they are responsible for. (like fixing pot holes and plowing snow, not things like building skate parks)

    I find it insulting that more than half of the members of council are already planning for when they become mayor or go to D.C. with Mayor Callahan. Do the job you panhandled for!

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  27. Maybe one positive outcome from yesterday's meeting is that no single person can realistically be expected to do either of these jobs on a part-time basis. Maybe city council needs to revisit the entire financial department's responsibilities and revamp all the jobs to reflect more realistic expectations.

    No! Haven't you heard? We need to SLASH government. All of these people are feeding from the trough. They are all lazy, get six figure salaries, reside in lavish offices, and have martini lunches. We could have high school interns do the work and give a rebate to the taxpayers.

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  28. 2:22 PM - It's "gall." And you are calling other people out?

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  29. Honnestly = HONESTLY

    Government should be limited at all levels, civil servants should make no more or less than the average person in the community (I don't get a company car and Cadillac medical benefits)

    Perhaps you simply aren't qualified? What makes you think you are better than anyone who chooses to work in government? Judging by your spelling, you'd be lucky to find any job that requires communication.

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  30. Perhaps Mrs. Holland may wish to consider resigning to focus on her well-regarded independent CPA firm as we can't imagine anyone doing this job on a part-time basis and still manage another professional business and still have free time to care for one's family. Something had to give.

    "Meg Holland's position is part-time and she spends at least 30 hours a week working on City of Bethlehem business -- she is onsite at her office at the city at least all day every Tuesday and Thursday and her private practice is blocks away from city hall - she does significant work from there and at home at night and on weekends."

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  31. This is very embarrasing for Pretty Boy John. Bethlehem, the "jewel" of the LV with its upscale restaurant row, Musikfest, a casino and just about every other advantage is swimming in red ink. Now Callaham wants to go to Washington to add to the deficit there. Wake up 15th Congrssional District! No number of Bill Clinton cash parties will overcome Callahan's incompetance.

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  32. maureen,

    mommy show an imature lack of class by trying to pin this mess on a dead man

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  33. Nevada, New Jersey, California, Michigan, Illinois, and New York are in much more dire straights than Pennsylvanians.

    And all but Nevada (too dependent on tourism) are big government, left-wing asylums that have brought their own problems upon themselves.

    Yet there are still fools on this blog and in out in leftyland advocating for even more spending to fix a spending problem.

    Stupid or corrupt, no matter. That thinking is destroying this country, from Washington to Bell, California, to Bethlehem, PA.

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  34. I remember LC Commissioner Browning and some local Township manager writing about the impending financial disaster years ago. I think the manager had it published in the Wall Street Journal or some other major publication.

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  35. That was Beth Tp Manager Jon Hammer.

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  36. "Perhaps you simply aren't qualified? What makes you think you are better than anyone who chooses to work in government? Judging by your spelling, you'd be lucky to find any job that requires communication."

    Willie Reynolds is that you? Why are you on this blog? Shouldn't you be defending the Mayor who gave you $5000.00? (only a substitute teacher would point out typos and dismiss the content)

    BTW, I'm better because I can make it in the corporate (real) world where I don't need a union to be employed. I also know how to conduct myself with integrity, ethically, and professionally, all while working hard and not getting fired. Things most city workers would never be able to do. That's why they work for the city and join unions.

    Do you really think these people would still have a job in the private sector? Get real!

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  37. If you think this is bad, wait until someone with some balls looks into the mess in Northampton County. So far County Council, the Controller and the media have been drinking at the Stoffa love trough. Mr. Stoffa received a $43 million surplus in 2006 and every year after he got taxes albeit reduced, plus he crows about all the savings he found.

    Somehow now he is $10million in the hole and must sell Gracedale.

    Maybe we can get Digi to come to Northampton County. Of course with Stoffa, O'Hare would condemn Digi instead of praise him, whomever tries to get at the truth in the County is maligned on this blog.

    When the light finally shines on the County mess, Gracedale will be the least of the problems. And Bethlehem will seem like a fly on an Elephant.

    Oh Yeah!

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  38. Bernie
    Did you see this:

    Morning Call
    GOP head calls for ethics probe of Allentown mayor
    Updated: 21 minutes ago

    The head of Allentown's Republican Party claims Mayor Ed Pawlowski failed to get timely building permits on two of his home improvement projects and got a "questionably low" bill from a contractor whose employees contributed to Pawlowski's political campaigns, according to an ethics complaint filed Thursday.

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  39. It's obvious that the City needs a new business administrator. I get the shortfalls and the economy but the budget estimations were obviously very ridiculous.

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  40. Yeah, when he spoke about offering early retirements yesterday, I could not help thinking that he should start with himself. I do not think he "gets it," and should retire. He's worked for the City for 30 years, so I don't think he'd be hurting.

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  41. Bernie, I love how you are calling people out on this. Weren't you disbarred? Why exactly was that?

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  42. 10:20 pm Jerkoff -

    Most of us know the story. Those who don't can easily research it.

    It is tired, and it is old, and even those who disagree with him on every issue don't want to deal with it anymore.

    But you get yourself off on your own monotonous posts, because that's what jerkoffs do, right?

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  43. Anon 10:50 the jerkoff may be the guy who is censoring the comments he doesn't want folks to read.

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  44. Maureen-

    Thanks fofr the disclaimer stating who your mom was. Would never have been able to figure out by the tirade that you had a horse in this race.

    (Ha)

    Really- She wanted the position badly...the mayor wanted her badly...now they have each other.

    How's that working out?

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  45. I think why this is a bigger issue than it normally would be is because 1) Council was surprised at the amount of the deficit and 2) the budget was just flat out wrong.

    To me, that blame rests on staff, i.e. Reichard for preparing a crappy budget and not communicating with Council. It's amazing how rosy their estimates were for income from building permits, etc.

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  46. Bernie
    What's going to happen to this $9M debt? How is this handled? Why didn't council know about it?
    How could that happen? Aren't they given some type of monthly report?
    Will this woman resign or be fired? Does council have the authority to fire her? Wish she would quietly resign and allow council to move forward. Please keep us informed. No one else will,

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  47. Anon 10:50 aka the "jeroff troll", O'Hares record speaks volumes as to his character and ability to rationally view a topic.

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