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Officials debate DDA’s large debt to village

by CJ Carnacchio

May 30, 2012

"Sticker shock."

That was the way Oxford Village Councilman Dave Bailey described the $165,176 bill that the Downtown Development Authority received from the village for a variety of services and debts paid for by the municipality on the DDA's behalf since 2010.

"It was shocking when I first saw that number," he said. "I had no idea. But I think we will survive it."

The discussion of this bill spanned two meetings – the May 21 DDA meeting and the May 22 village council meeting.

In a May 24 telephone interview with this reporter, village Manager Joe Young noted that $165,176 amount was as of June 30, 2011. He indicated some of it has been paid, so the actual amount the DDA owes currently stands at $146,973.

"Evidently, for a while, there's been things falling through the cracks," said village President Tom Benner.

The DDA must reimburse the village for things such as the director's salary, health insurance and Social Security; bond debt payments; custodial services; telephone bills and credit card bills. These are all costs which the village initially paid using funds from its own coffers with the expectation it would be reimbursed by the DDA.

"There technically is no sticker shock," said DDA Board Member Anna Taylor. "We realize that the money (for these expenses) at one time was in the (DDA) account. It's either spent or it's not spent."

Exactly how the DDA ended up owing the village such a large sum dating back to 2010 is a matter of debate.

Some officials believe it's because the village never gave the DDA any invoices so the board could formally approve payment as part of its monthly bill runs.

"The list (of bills being paid by the village on the DDA's behalf) has been growing over the last two years," said DDA Director Madonna Van Fossen. "I don't believe they have appeared on the bill run because I did not have an invoice for them."

Van Fossen indicated she "assumed" she would get invoices from the village for bond payments, salary, benefits, etc. just like she did for the police and Department of Public Works services provided in the downtown area.

"The DDA, I believe, has a right to see a complete bill run (each month)," Bailey said. "If there's items that don't appear on the bill run, then it seems to me like somebody's dropped the ball. I don't know enough about either organization, I hate to say, to have an opinion about who exactly has been dropping the ball."

Some officials believe it's possible the DDA board may have previously approved some of these invoices for payment, but the village simply never withdrew the money from the DDA's bank account.

"Some of the problem is we probably approved these bills and the money was never extracted from our account (by the village). That's where I'm having an issue," said DDA Treasurer Ed Hunwick. "This is where part of the problem is – it's not happening in a timely fashion."

Some believe the DDA received invoices from the village, but they were never placed on the monthly bill run for approval by the board.

"Yes, they have invoices," Young told council. "They have items that they could have paid. We don't prepare their bill run. The DDA prepares their bill run."

Young, Van Fossen, Hunwick and representatives from H&R Block, which provides financial assistance to the DDA, were directed to meet, resolve the matter and work out procedures to prevent it from happening again and ensure payments are made in a timely manner.

"(The bill) has to be paid," Taylor said. "The DDA owes it. We know that. But we need to make sure that it doesn't happen again. If we've gotten to this point with the system that we have in place right now, it says to me that the system that we have is not working. We need to fix it."

"It's long overdue," said Benner, who also serves on the DDA board. "It's absolutely asinine that it has gotten to this point where there's discontent (and) confusion (over) whose money is whose."

When it started

Van Fossen reported she first became aware of the situation in December 2010 when she received a statement from the village requesting payment.

"There was no documentation provided," she told the DDA board. "There was no detail provided."

Van Fossen said she requested copies of the original invoices from the village, but never received them.

In February 2011, she indicated she was provided with a spreadsheet listing each amount owed along with a description. Another request was made for copies of the original invoices, but none were received.

Van Fossen said on May 17, 2012, she finally received a "stack of" invoices and check stubs for the DDA to review.

"If a supplier or vendor were to take an invoice to (General Motors), Ford or Chrysler, as an example, and say . . . 'Here, I have an invoice from 2010. I'd like to be paid,' you'd be laughed out of that building," noted DDA Board Member Tom Jones, who owns Funky Monkey Toys.

"It's not good business," he said. "Real businesses don't operate that way. That knock on the door should have come two years ago."

"I do want to apologize for not coming (here) and knocking at the door, asking for payment," Young said. "I apologize for not coming to this board about it."

Procedural issues

Taylor was not pleased the village was paying DDA bills without board approval.

"If it is not authorized by this board for payment, even if it's Madonna salary, it should not be paid by the village or anybody else, period," she said. "That way we have total control over what is being paid."

The proper procedure is supposed to be the DDA receives an invoice, it's listed on the monthly bill run and presented to the board for approval.

If approved, the village is then supposed to pay the bill by cutting a check from the DDA's bank account.

"It's not that difficult," Taylor said. "We get (a bill). We authorize it for payment and it gets paid. Nobody else pays our bills but us until they get over to the village offices."

"I don't care if it's a bond payment, it has to be on our bill run," she continued. "Unless it's approved, it doesn't get paid."

Councilman Tony Albensi echoed that sentiment. He said the DDA should be receiving a "detailed bill run" and "if they're not getting that, then they should be."

"(The village) should not pay the bill until (the DDA) board has approved that bill," he said.

Young explained the village paid some bills, like bond debt payments, to avoid defaulting, and others to maintain services without interruption such as custodial and medical coverage. The bond debt is in the village's name.

"Some bills we pay on (the DDA's) behalf and all we need is (to get) reimbursed," he said.

Benner and Bailey agreed Young's been doing the right thing in this regard.

"The village will make payments, so we don't hurt anybody's credit," Benner said. "I don't want to see the village's credit rating have a problem . . . If you (the DDA) don't make your bond payments, then it reflects (on) us and we can't allow that."

"If you don't pay your bills, bad things happen," Bailey said. "I believe that our manager and his administration in general has been protecting the village from some of those bad things that might happen like our (bond credit) ratings might go down.

"We wouldn't want those kinds of things to happen."

Hunwick agreed.

"The DDA does not want that to happen as well. We're all in this together."

More control, please

Right now, the DDA has no ability to transfer funds from its account or write checks to pay bills. This is all done through the village offices.

Hunwick would like to see this changed.

"I think it's important for this (DDA) board to have more control over our funds," he said.

"I would prefer that we as an entity pay our own bills, but if the village insists that they pay our bills, we at least should have control over transferring the funds from one account to another on a monthly basis," he said.

Giving more financial control to the DDA board would also benefit the village in Hunwick's opinion.

"I would think that the village would probably want to alleviate some of their headaches (from) having to manage our finances as well as the village's finances," he said.

"If you want to manage your own money – and I wish you would – something has to be done with your own two people that are preparing the bill run," said Benner, referring to the DDA's director and treasurer.

No withdrawal without approval

The village made it clear that it will not arbitrarily take money from the DDA to satisfy the $146,973 in outstanding bills.

"I'm not going to transfer money from your account to the village account without your approval," Young told the DDA board.

Benner agreed.

"Once the council approves (the DDA) budget, we don't touch your money," he said. "Joe would have to come to us for authorization to take money out of your account and we do not do that."

"(Young) has never once asked us to make a deduction out of (the DDA) account," Benner noted.

To cover its debt, Young suggested the DDA use some of the $206,000 it has drawing interest as part of an investment pool through Oakland County.

"Some of that money needs to be redeemed in order for (the DDA) to pay back the village," he said.