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Brecksville to pay more than $681,000 in back sewer taxes for dozens of residents, including two council members, due to tax assessment error

September 19, 2018

Brecksville to pay more than $681,000 in back sewer taxes for dozens of residents, including two council members, due to tax assessment error

BRECKSVILLE, Ohio – The city, perhaps with help from Cuyahoga County, will pay off more than $681,000 in back sewer taxes for dozens of homeowners in an upscale subdivision.

City Council approved the payments, on behalf of residents in the Four Seasons development, on Aug. 7 in a 4-1 vote. Two council members, Michael Harwood and Kim Veras, abstained from the vote because they live in Four Seasons.

Mayor Jerry Hruby, during an August council meeting, said the bailout became necessary after the city discovered earlier this year that the county, for the last 15 years, was undercharging 80 Four Seasons property owners for sanitary sewers built in 2001.

Hruby said the county was supposed to assess the homeowners $1,212 a year, split into two annual payments, for 20 years. The county charged the correct amounts for tax years 2001 and 2002 but inexplicably started assessing homeowners half that amount, or $606, in each subsequent year.

That means Four Seasons residents owe a total of $681,742 in back sewer taxes, a bill the city has agreed to pay. However, under a proposed agreement that council still must vote on, the county would contribute $95,000 toward the back taxes, with the city picking up the remaining $586,742.

Jack Petsche was the only councilman to vote against the bailout. He said the city could have collected at least some of the back taxes from homeowners, perhaps only for the time they have lived in Four Seasons. He asked Hruby to veto the measure, but Hruby did not.

“It is wrong to demand that the remaining 13,500 citizens of Brecksville pay nearly $682,000 for the Four Seasons sewer assessment without giving them a chance to weigh in,” Petsche said in a prepared statement at the Aug. 21 council meeting.

Residents never had a chance to weigh in, Petsche said, because council discussed the issue only in four executive or private sessions over several weeks leading up to the Aug. 7 public meeting.

“The vote was taken in public, but it was never on the agenda,” Petsche said. “No one, including me, knew a vote would be taken on Aug. 7, until just before the vote was taken. This is the opposite of transparency in government.”

Councilman Dennis Rose said the matter was discussed in executive session because council, among other options, considered suing Four Seasons property owners or the county for the tax shortfall. Also, council weighed the possibility that Four Seasons residents might sue if the city tried to collect.

State Sunshine Laws allow public bodies to meet in executive session to discuss litigation or pending litigation.

Rose said council also considered increasing annual charges to Four Seasons residents so that they would pay all back taxes.

“At the end of the day, I believed (the choice we made) was the most just,” Rose told cleveland.com in an email.

Rose said the snafu in Four Seasons could have happened anywhere residents are assessed to pay for infrastructure improvements. He added that the city might find another way to recoup the bailout.

“It is easy for any resident to say that (Four Seasons) residents should pay, but I doubt that any of them would say the same thing if the shoe was only the other foot,” Rose said.

Hruby said that unlike some sewer projects, the city originally never contributed to the Four Seasons sewer project. The entire amount was charged to homeowners, minus whatever the amount paid by the developer.

Rose said his vote had nothing to do with the fact that two council colleagues live in Four Seasons. Further, he disagreed with Petsche that council lacked transparency.

“My understanding is that the vote on Aug. 7 was necessary to commit the county to pay $95,000,” Rose said. “I believed at that time that council had to act then or else the county deal might go away.”

Law Director David Matty said Harwood and Veras did not take part in any executive session discussion about Four Seasons.

Harwood, Veras and other council members didn’t return emails in time for this story. Council was not scheduled to vote on the county agreement at its Tuesday (Sept. 18) meeting.

Mary Louise Madigan, spokesperson for county Executive Armond Budish, said the city of Brecksville failed to make sure the correct amount of taxes was coming in from Four Seasons residents. Nevertheless, the county has worked with the city on a solution.

A slip in time

Four Seasons was built in 2001 by Broadview Heights developer Petros Development Corp. According to Petros’ website, homes in Four Seasons cost $600,000 and up. The real-estate website Redfin lists five houses there between $619,000 and $1.5 million.

Hruby said Petros built the Four Seasons sanitary sewers, along with a water main, in 2001. The sewer project cost about $1.3 million.

Four Seasons has been built in phases, with a fifth phase now under construction. Hruby said streets and utility lines have been laid. Some homes in the fifth phase are already occupied.

The city borrowed money for the Four Seasons sewers by issuing a bond. Residents, through assessments, would pay off the debt over 20 years. They started paying in 2002 for the tax year 2001. Total repayment is due in 2021.

Matty said it was the responsibility of the former Cuyahoga County Auditor’s office, now the county Fiscal Office, to place the sewer assessments on the taxes of Four Seasons residents. He said he was unable to find any document explaining why the assessment was cut in half for the tax year 2003.

Matty said now that the mistake has been found, no law exists that requires the county to pay the assessments. One state law states the county is immune from responsibility.

Petsche said it was the city’s new Finance Director, Laura Starosta, who spotted the tax error early this year, before she was promoted to finance director. At the time, she was working under then-Finance Director Virginia Price, who retired in April.

While some city officials said it was the county that erred, Petsche said the city, which receives regular reports on assessment collections, also missed it.

Hruby sent a letter to Four Seasons residents in July. The letter explained the tax situation and said that for the final three years of the bond, residents would pay the correct sewer assessment amount of $1,212 a year.

Council meeting debate

Several Four Seasons residents attended the Aug. 21 council meeting, according to meeting minutes. One was Dan Kolick.

Strongsville Assistant Law Director Dan Kolick didn’t return calls regarding whether he was the same Dan Kolick who spoke at the Brecksville council meeting.

At the meeting, Kolick said many Four Seasons residents have lived in the subdivision since 2001. He said newer Four Seasons residents were told that their sewer assessments would be $606 a year.

Kolick said he didn’t want the city collecting back sewer taxes from residents, plus the correct amount for another three years, because that would total nearly $13,000 a homeowner. He urged council to approve the proposed agreement with the county.

Four Seasons resident Mike Berlin said the original paperwork for his home, and refinancing documents, did not show the higher assessment.

Other residents, whom Petsche had informed about the Four Seasons situation, opposed the bailout.

Annette Pedersen, a Windswept Drive resident, said the city is not offering to help pay for repairs to a broken dam in her development.

Chris Hannigan, of Westview Drive, said the $600,000 should be spent on something that benefits the entire city, not just Four Seasons.

Barb Belovich, of Sunstone Drive, said an outside party should audit the Four Seasons tax situation because the proposed settlement with the county benefits two council members who live in Four Seasons.

Matty said an outside audit would only reveal the same information he uncovered and would cost the city additional money.

Hruby said the city always considered a public utility an improvement that benefits the entire city. He added that the city traditionally has contributed to sewer projects but not for Four Seasons, at least not initially.

Councilman Gerald Broski agreed, saying the original assessments for a Riverview Road sewer project were $18,000-$20,000 a lot. However, the city appropriated funds for the work, and the assessments were lowered to about $12,000.

Petsche told cleveland.com that debate over Four Seasons continued at the Sept. 4 council meeting, which he said was attended by about 100 residents, some in favor of the county agreement, others against it.

Clerk of Council Tammy Tabor estimated that 70-80 people attended the Sept. 4 meeting. Hruby said not all of them were there to discuss Four Seasons.

Petsche told cleveland.com he’s not sure when council will vote on the county agreement. He said the measure would need four votes, and one council member who would vote yes is out of town this week. Another will be out of town for the Oct. 2 meeting.

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