Crestwood bond issue would total $4.7 million
March 30, 2005 - Roughly $4.7 million in general obligation bonds would be required to address the issues identified by the Crestwood Board of Aldermen in placing Proposition 1 on the ballot for next week's election, according to City Administrator Don Greer.
Voters will consider the bond issue April 5. A four-sevenths supermajority vote will be required to approve the bond issue, which would give the city the authorization to issue general obligation bonds in an amount not to exceed $6 million.
Proceeds from the bond issue would be used to allow the city to retire its line of credit with Southwest Bank, establish re-serves sufficient to meet the city's cash-flow needs and reconcile debts the general fund owes other city funds.
During a Board of Aldermen meeting March 22, Greer said that issuing $4.732 million in bonds would accomplish those goals. A 24-cent tax-rate increase for 10 years would be required to retire the bonds. The city's current tax rate is 25 cents per $100 of assessed valuation.
"This is our best estimate of what it takes to fix the issues that were identified as priorities by the Board of Aldermen and considered in the language which you approved for the ballot,'' Greer said.
In a March 22 memorandum to the board, Greer wrote, "In order to eliminate the line of credit, it is my recommendation that the board look to the highest point during the period of October through December as a gauge of the city's need for cash-flow purposes for the remainder of the year. While the line of credit would be paid in full as of a date in April or May of 2005, the fall months take us into our worst time for cash flow with expenses exceeding revenue.
"A good number to use would be $1.9 million. This number represented the anticipated payout during April/May; the balance would be placed into the non-expendable trust and used to meet our cash-flow needs,'' Greer wrote.
The non-expendable trust fund is designed to serve as the city's cash-flow account.
The money the general fund owes the capital-improvements fund and other funds resulted from the city's past practice of "blending'' available cash from all city funds, a practice Greer said he wanted discontinued shortly after he was named city administrator in December 2002. It wasn't until Jan. 1, 2004, that the city was able to untangle the financial mess of past blending and establish separate bank accounts for each of the city's funds.
Director of Finance Diana Madrid has completed a reconciliation of the interfund transfers that need to be repaid, Greer noted in his memo. "In order to erase the deficit positions in the general fund and parks and stormwater fund, a deposit of $2,832,645 would be required,'' he wrote.
Given that, Greer wrote, "The sum of the line of credit — $1.9 million — and the interfund transfers — $2.832 million — total $4.732 million. That translates into an annual levy of 24 cents per $100 assessed valuation for 10 years. With general obligation bonds, the money is available for the city's use within weeks of authorization.''
The problems with the city's general fund first became public shortly after Greer, who had served as the city's police chief since 1990, was named city administrator.
In January 2003, Greer told members of the Ways and Means Committee that while the Board of Aldermen was led to believe the city's general fund was balanced at the end of fiscal 2002, that was not the case.
Though the Board of Aldermen adopted a balanced fiscal 2004 operating budget in July 2003, during the preparation of an end-of-the-year budget adjustment ordinance designed to close out the city's fiscal 2003 books, city officials discovered that fiscal 2003 general fund expenses were slightly more than anticipated, while revenues, particularly those from merchant licenses, were far less than projected. A forensic audit of fiscal 2001 and fiscal 2002 was initiated after officials began an internal investigation into the accounting practices used by former City Administrator Kent Leichliter and former Finance Officer Robert Wuebbels.
"As a result of our forensic investigative procedures, we have concluded that there have been a staggering amount of disbursements, improper journal entries and misrepresentations to the Board (of Aldermen) of the city's financial position, authorized by Leichliter and performed by both Leich-liter and Wuebbels, representing mismanagement of city funds and financial reporting errors,'' states the forensic audit report prepared by Brown Smith Wallace.
The forensic audit report stated, "Although the board has ultimate authority and oversight responsibilities, it is our opinion that they could not make the appropriate and necessary fiscal decisions for the city because they were misled by Leichliter and Wuebbels as to the true financial condition of the city. Leichliter and Wuebbels' actions, as evidenced by the multitude of documents we reviewed, were in violation of numerous ordinances, the city of Crestwood's charter, possible state statutes, good financial practices, and most importantly their duties as fiduciary officers of the city of Crestwood.''
In November 2003, the city filed a lawsuit in St. Louis County Circuit Court alleging that Leichliter and Wueb-bels breached their fiduciary duties by manipulating fi-nancial records to misrepresent the city's true financial condition to Mayor Jim Robertson and the Board of Al-dermen. The lawsuit also alleges professional negligence and breach of contract by Hochschild, Bloom & Co., which served as the city's independent auditing firm from 1998 to 2002.
Based on the forensic audit, the lawsuit alleges that Wueb-bels, with Leichliter's knowledge, "engaged in a complex scheme to manipulate the financial accounts of the city of Crestwood so that the city budget would appear to be in balance and that the city was operating in a positive cash-flow situation, when, in fact, the city was operating in a serious negative cash-flow situation.''
In January 2003, Leichliter filed a counterclaim against Crestwood contending the city breached an agreement to pay him salary and benefits through March.
Leichliter served as city administrator for nearly 25 years before retiring in December 2002. Under the terms of a reassignment agreement approved by the Board of Alder-men in December 2002, Leichliter was to serve as an adviser to the board and receive his $91,056 salary and other benefits, including health insurance, through March 2004.
In a closed session Oct. 28, 2003, the board voted to terminate the reassignment agreement and all payments to Leichliter.
The city's lawsuit and Leichliter's counterclaim still are pending.