December 10, 2014 / 1:55 AM / in 5 years

East Cleveland to decide on bankruptcy filing after Q1 -official

NEW YORK, Dec 9 (Reuters) - East Cleveland will wait until after the first quarter of 2015 to decide whether to seek bankruptcy protection, the city’s finance director said on Tuesday, noting such a filing is only one of several options under consideration.

The assessment was less dire than comments last month by Ohio’s state auditor, Dave Yost, who said the small suburb of its much bigger neighbor Cleveland was on the “verge of collapse”.

“That (filing for bankruptcy) has not been decided at this point,” Finance Director Jack Johnson said in an email to Reuters. It is currently one of the options being considered of several available. A decision won’t be until after first quarter 2015.”

East Cleveland has been struggling financially for years. Mobile phones belonging to city workers have been disconnected. The fire department does not have a working ladder truck and there is no money to fix street sweeping machines.

“During 2014, only sheer luck has kept it from that one unexpected expense that would jeopardize the payroll,” wrote Dave Yost in a letter dated Nov. 21. “That luck is unlikely to continue, given the growing number of problems and expenses that have been deferred for lack of money.”

“East Cleveland is insolvent,” and the City is “on the verge of collapse,” Yost wrote.

The letter went on to list a catalog of problems including what it described as anecdotal evidence that doctors were refusing treatment to city workers due to outstanding bills they believe should have been paid by insurance.

East Cleveland, with a population of under 20,000 and little outstanding debt, is tiny compared to some of the far bigger municipalities that have filed for bankruptcy, such as Stockton and Detroit. But its troubles highlight the financial hardship faced by many smaller municipalities around the country.

Yost said a recovery plan to mend East Cleveland’s finances had failed due to a number of factors, including lower ticket revenues from drivers jumping red lights and limited savings from shared services. The state declared the city to be in a “state of fiscal emergency” in 2012.

According to the state’s most recent audit that covered 2012, the city had about $5 million in debt outstanding, including around $411,000 of notes and $3.2 million owed to a state public works program. During the year the city ran a deficit of $4.9 million. Total revenues were about $18.2 million. (Reporting by Edward Krudy; Editing by Ken Wills)

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