Possible bond issue topic of Crestwood work session

By MIKE ANTHONY

Executive Editor

A work session to discuss the possibility of placing a general obligation bond issue before voters that would resolve Crest-wood’s well-publicized financial woes is scheduled this week by the Crestwood Board of Aldermen.

The work session is scheduled for 7 p.m. Wednesday, Dec. 29, at City Hall, 1 Detjen Drive.

Aldermen on at least two occasions have discussed the possibility of placing a $5 million bond issue on the April 5 ballot that, if approved, would allow the city to retire its $2 million line of credit with Southwest Bank and establish reserves sufficient to meet the city’s cash-flow needs.

A $5 million general obligation issue would require a property tax-rate increase of 26 cents per $100 of assessed valuation for a 10-year period. A four-sevenths supermajority would be required to approve the bond issue that would increase the city’s current property tax rate of 25 cents per $100 of assessed valuation to 51 cents.

Aldermen discussed the possibility of placing a general obligation bond issue on the ballot during work sessions in Decem-ber and September.

During the September work session, al-dermen made it clear that they do not wish to eliminate or further reduce services the city currently provides to residents.

And just two weeks ago, aldermen voted 5-3 to close any discussion about eliminating or outsourcing the Police Department or Fire Department and “clearly affirm its intention to maintain the city’s fire services and its Police Department,” according to the motion made by Ward 1 Alderman Richard LaBore.

The discussion of the city’s Police and Fire departments came before aldermen conducted a public hearing on the fiscal 2005 budget, which was adopted Dec. 14. Aldermen voted earlier this year to adopt an ordinance changing the city’s fiscal year to a calendar year, effective Jan. 1.

The city’s previous fiscal year ran from July 1 to June 30. The change in the fiscal year is designed to allow the city to better control its expense position.

Fiscal 2005 general fund revenues are projected at $8,644,300, while total expenditures are estimated at $8,753,339 — a deficit of $109,039. The budget also projects transferring $250,000 from the general fund to the general fund non-expendable trust fund to help bolster the city’s reserves. The non-expendable trust fund ultimately will serve as the city’s cash-flow account.

Internal service fund transfers from the capital improvements fund and the park and stormwater fund totaling $295,847 and a $90,132 long-term internal service fund repayment to the general fund from the capital improvement fund would result in projected net general fund expenditures of $8,617,360 — a surplus of $26,940.

But Greer has made it clear that the adopted fiscal 2005 general fund budget will be the last one that will work for the city and that voter approval of additional revenue in the April 5 election is essential to maintain the level of services that residents currently enjoy.

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 December 2002.

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 Admin-istrator Kent Leichliter and former Fi-nance 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 Alder-men) of the city’s financial position, auth-orized by Leichliter and performed by both Leichliter and Wuebbels, representing mismanagement of city funds and fi-nancial reporting errors,” states the forensic audit report prepared by Brown Smith Wallace.

In November 2003, the city filed a lawsuit in St. Louis County Circuit Court alleging that Leichliter and Wuebbels breached their fiduciary duties by manipulating financial records to misrepresent the city’s true financial condition to Mayor Jim Robert-son and the Board of Aldermen.

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 Wuebbels, 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.”

The scheme “devised and perpetrated” by Wuebbels and Leichliter included fabrication of revenues, improper inter-fund transfers and fraudulent submissions of warrants, the lawsuit alleges.

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 Decem-ber 2002. Under the terms of a reassignment agreement approved by the Board of Aldermen 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.

The reassignment, according to the agreement, will end “no later than March 1, 2004, unless terminated earlier upon the majority vote of Crestwood’s Board of Al-dermen.”

In a closed session Oct. 28, 2003, the board voted to terminate the reassignment agreement and all payments to Leichliter.

The city’s lawsuit also seeks a judgment rescinding the reassignment agreement and ordering Leichliter to repay the city the salary and benefits he has received under the terms of the agreement.

The city’s lawsuit and Leichliter’s counterclaim still are pending.