When this city went into financial default last December, unable to pay off some $15 million in notes to a group of local banks, many observers felt the bankers finally had self-styled populist boy-Mayor Dennis Kucinich where they wanted him.
No major city recent memory has been able to live for long cut off from credit, and it was assumed that Kucinich would quickly be compelled to sit down with the bankers he constantly berates.
But Kucinich instead has continued to fight; has kept the unpaid banks at bay while increasing taxes and cutting costs; and now is running -- against the banks -- for reelection.
The easiest view of this Grade-B municipal serial is familiar: brash baby-faced mayor demagoguing against the target that no one loves, the moneylender.
There is also another, more serious view (and both may be true) that came to the surface in hearings held earlier this year by a House Banking subcommittee.
One version of this came from M. Brock Weir, chairman of the Cleve-Trust Corp., one of the Cleveland banks. "The real issue," he said, "is, shall political pressures be permitted to coerce one of the world's safest and most efficient banking systems into compromising universally recognized standards of prudent lending?"
The competing version came in a letter to subcommittee Chairman Fernand J. St. Germain (D-R.I.) from Ralph Nader.
"The withholding of credit to extract political concessions is not an isolated event confined to the city of Cleveland," he said. "By holding the supply of credit hostage," banks in a number of cases "have been able to circumvent the democratic process and force state and local governments to adopt policies that further the interests of local business establishments as represented by bankers."
In some ways, Kucinich has behaved almost like a banker himself. He successfully fought for an increase in taxes -- a one half of one percent increase in the city income tax which aides say will bring in $50 million extra a year. He has cut the city's workforce from 11,500 to 9,800 in slightly more than a year; Republican Lt. Gov. George Voinovich, Kucinich's likeliest opponent this fall, if both survive the Oct. 2 non-partisan primary, complains that Lucinich has cut back too far, in fact.
But Kucinich has resisted additonal steps the bankers wanted him to take. He has refused to sell a city-owned electric ompany to its private competitor, and has resisted offering tax abatement to businesses promising to relocate in the city, on grounds business should bear its fair share of the tax load.
And to some extent these important refusals -- as well as his abrasiveness and political needs -- appear to be at the back of his ongoing fight with the banks.
"We have to challenge the legitimacy of corporate rule, of the corporate incursion into the political process," Kucinich said in an interview. "I'm all for business, provided they don't interfere with the political process."
Since the 33-year-old Kucinich was elected in November 1977, becoming the youngest big-city mayor in the nation, he has been virtually at war with the city's powerful banking and business interests.
The animosity was mutual.
A congressional investigation revealed that no fewer than 50 officers and directors of the four largest banks in Cleveland "had contributed to campaign committees set up to recall the mayor" his first year in office.
The report of that probe by the staff of the House subcommittee on financial institutions supervision, regulation and insurance, also suggested that "the deep animosities and political cross-currents in which some bank officers became involved," rather than "pure hard-nosed credit judgments," led to the decision by the banks to cut off the city's credit.
In hearings before the subcommittee, many of the city's bankers said that they had cut off funding because the city refused to supply financial information. But, the bankers admitted, they had never required that of prior administrations when the notes were first issued, and refinanced several times.
"Money was made available to the city in ridiculous amounts and on ridiculously east terms [over the past 15 years]," testified Weir, a key Kucinich protagonist. "The financial community, of which I am a member, has to bear its share of the blame for what happened to the city."
No matter who bears the blame, events keep reminding Kucinich that the facts are the same: the city is financially strapped.
On Aug. 31, for example, the city again went into fiscal default on $3.3 million owned its Water Department fund. Kucinich had planned to roll over the notes, renewing them for another year while he built up the city's treasury. That had been the past practice, and Kucinich had planned to continue it through at least October, when $14.1 million in notes from other city agencies come due.
But because the city is in technical default, the City Council found a new weapon to prevent that roll-over: The city bond counsel must approve any transactions involving credit, basically to insure that city funds are invested wisely.
Since the city is in default, bond counsel has said he cannot approve of water or airport funds being lent to the city. And although the council was willing to waive the need for bound counsel approval in the past -- as recently as three months ago -- the council refused to waive that rule on the latest two defaults.
Further, the council would not approve another technical switch of funds from one city account to another that would have allowed the city to begin paying off the banks on the earlier default. And, it appeared that such a waiver would not occur until after the elections.
And, while all of the political bickering goes on, Cleveland appears to be the big loser.
Because it is in default, the city cannot raise money through traditional means. It must operate on a cash basis in a way that no major U.S. city has had to for decades. If it wants to build a bridge, it has to write a check. It cannot go to the bond or short term markets once used to raise money for major expenditures.
Through intense cost cutting, the city has stayed afloat and even begun to build up the coffers. The increase in the income tax, which began in the middle of this year, has helped.
"The first week after the default, things were pretty shaky," say city law director Jack Schulman. But since the banks have not forced the city to pay up -- pending enactment of state bail-out legislation -- the city was able to keep afloat by cutting costs.
"We have to be careful with our purchases," says finance director Terry Medvick. "We can't operate government like a candy store. We have to ask ourselves what we need, and what is the best and cheapest way to get it."
Medvick, who insists that every city purchase order, down to paper clips and pencils, cross her desk, says she was able to save the city $250,000 a year by eliminating a private security system.
"It was ridiculous," she said. "We were paying to have the alarm in city buildings wired to this security system, which in turn wired it to our police stations. Now, we just have the buildings wired directly into the police station, and the service is quicker."
The high price of dumping trash in a local landfill caused the city to adopt a new system that has garbage trucked 75 miles away but at a lower cost.
And many of the vendors selling services or products to the city have been putting the squeeze on. "People began to demand cash in advance, because they were afraid we couldn't pay them," Medvick said. "I had to tell them that's not the way we do business."
With all of the problems, though, Medvick, Schulman and Kucinich claim the city will be caught up on its bills by the end of the year.
"Last spring we were way behind," Medwick said. "Now, we are beginning to see daylight."
The cost has been high to the city administration. The city's workforce has been cut from 11,500 to 9,800 in slightly more than a year.