JOHNSTOWN — In advance of the Nov. 3 referendum that could abolish the city of Johnstown’s independently-elected Water Board, the city treasurer has taken control of two bank accounts previously controlled by that board.
Johnstown Water Board President Mike Capparello said he received notice from NBT Bank and city Treasurer Mike Gifford on Sept. 9 notifying him that for the first time in its 38-year history the board’s appointed water clerk would no longer have “signatory authority” over the city Water Department bank accounts.
“We can’t pay anybody,” Capparello said. “Pretty much, they’ve taken on the theory that they’ve won the referendum already.”
On Aug. 27, the Common Council voted unanimously to put forward a referendum to abolish the Water Board on the November election ballot. This will be the second time over the past five years the council has attempted to abolish the board. In 2015, the city’s Charter Review Commission, chaired by current Mayor Vern Jackson, recommended the Water Board be abolished as part of a city charter reform package, but voters rejected the proposal, 817-583.
The status of the Water Board, and the scope of its authority over the city’s water fees and water department personnel has been a raging controversy in the city in recent years. The conflict has included accusations of official misconduct, a grand jury report, arrests, lawsuit threats, Water Board members escorted by city police out of the Water Department building, and resignations.
Gifford said he supports abolishing the board, but whether the public approves it or not he intends to have oversight over the money going in and out of that department.
“In terms of what might happen in November — I’m not saying I don’t care — but what I say to people is ‘Whatever the outcome is, it’s not going to change the way I view my job here’,” he said. “I’m responsible for the financial statements and I need everything that goes into those statements under my control, so to speak.”
On Aug. 29, Gifford wrote a letter to NBT Bank Vice President James I. Sullivan stating, “City of Johnstown Water Department inappropriately has signature authority on two NBT Bank accounts. Kindly make arrangements to place these accounts under my signature authority.”
Capparello said NBT Bank has agreed to remove the Water Board’s appointed clerk, Barbara Koehler, from “signatory authority” over two bank accounts containing money from the city’s water rents collected by Koehler.
Gifford and Capparello confirmed Koehler resigned Wednesday.
Capparello described one of the two NBT accounts as a “checking account” containing approximately $3.2 million, which is supposed to be used for Water Department expenses, primarily payroll costs for its employees, and the other as a “savings account” containing approximately $700,000 in surplus funds built up from prior years.
Capparello said he doesn’t know exactly how much money should be in either account because the long-standing practice of the board clerk signing checks meant to be used by the city to pay for the expenses of the water department was suspended by Gifford in October 2019, creating a backlog of uncashed checks.
Gifford on Friday confirmed he has uncashed checks from the city’s water fees, as well as sewer fees, going back “at least a year” held in the safe in his office. He said he stopped processing checks from the board clerk in October 2019 partly in response to the board’s decision to hire outside legal counsel to defend against a Fulton County grand jury probe.
Gifford said he believes it was illegal for the board to hire its own attorney, and if he continued to process their checks it would appear as though he were “signing off” on that activity.
Members of the board have argued it is not illegal for them to have hired an outside law firm because the entity can’t trust the legal advice of City Attorney Michael Poulin, who they argue has a conflict of interest because the city charter requires him to represent both the city government and the Water Board, and the two entities disagree over the scope of the board’s authority.
“They’re paying an attorney who they shouldn’t even be paying because our own city attorney told them that they can’t hire an attorney and they hired him anyway,” Gifford said. “And they can’t keep committing fraud by issuing checks to this attorney, so that’s part of the reason I took control over the bank accounts.”
Former Water Board President John Swierzowkski, who resigned in August, said Poulin should have recused himself from the dispute. He said Gifford taking control of the board’s bank accounts is aimed at encroaching on the board’s independence without voter approval.
“This basically renders the Water Board useless and unable to defend themselves in a court of law,” he said. “This is a slap in the face to the voters.”
Poulin did not return phone calls seeking comment for this story. Jackson and several members of the council also did not return phone calls seeking comment.
Gifford said he doesn’t know how much money is tied up in the uncashed checks, but the city has been “fronting” the payroll costs and other expenses meant to be paid for from those revenues. He said the cost of paying the city’s Water Department expenses from the city’s general fund check book was not a factor in his decision to take control over the Water Board’s bank accounts.
“Certainly, it’s a cash drain, OK, but our cash flow has been excellent, during my time here, which is why we’re able to handle it,” he said. “At some point, the cash is not good, and then you have to [rectify it]. We will be doing that after the budget gets finished.”
Gifford on Friday said he could not provide estimates or totals for the city’s general fund balance reserve, but would have those figures “within a week.”
Capparello said he complained about the bank accounts to the state Financial Control Board which referred him to the state Comptroller’s Office. He said he registered his complaint with the comptroller on Sept. 17, but he said he believes it can take up to 21 days for a response.
Gifford said he believes a city “Investment Policy” passed as a resolution on April 15, 2019 puts all authority gives him direct oversight over all of the revenues coming into the city. Gifford said he’s wanted to take control over the board’s bank accounts since the policy was passed, but he held off in part because he doesn’t know for certain the action will hold up to a legal challenge.
“In a sense, yeah, I do wonder about that, and I do get concerned about all of this back and forth, arguing and such, and I don’t like that,” he said. “Sometimes I think there are times when you just talk it out, and, apparently, we can’t, so it’s sort of a last resort.”
Capparello and Swierzowkski said they believe the city charter clearly gives the Water Board and its appointed clerk authority over the city’s water and sewer revenues.
Section C-6.3. of Johnstown’s City Charter states “The Clerk of the Water Board shall keep a record of the proceedings of each meeting of the Water Board; keep records of all the books and accounts of said Board; collect all water rents and charges; issue permits and orders; invest all Water Department funds in such a manner as to gain maximum advantages to the Water Department, and perform all other duties prescribed by the Water Board. The Clerk of the Water Board shall also collect all sewer rents assessed by the City and maintain records of sewer rent accounts.”
Capparello and Swierzowkski both said they are uncertain whether they will file or participate in a water ratepayer Article 78 lawsuit against the city to reverse control of the accounts.
“The only thing we can do is wait and see if we win the referendum, and to get control of our bank accounts again, because without the bank accounts we can’t even hire outside legal advice — we can’t do anything,” Capparello said.
The next Johnstown Water Board meeting is set for Oct. 13 at 6 p.m. in the Common Council chambers.