Town of Lancaster gets scathing Comptroller’s report on purchase of Colecraft Building and fire contracts – Part I: Colecraft Building purchase
By Lee Chowaniec
Oct 12, 2012, 14:49
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Following is an audit report from the NYS Comptroller’s Office (OSC) on the Town of Lancaster entitled Financial Management. This audit was conducted pursuant to Article V, Section 1 of the State Constitution and the State Comptroller’s authority as set forth in Article 3 of the General Municipal Law. This audit’s results and recommendations are resources for local government officials to use ineffectively managing operations and in meeting the expectations of their constituents.
The town was requested to respond to the audit findings and its response will be also be Included.
Although individuals who regularly attend Lancaster Town Board meetings through the years will agree with the report claims and findings, as they have been saying the same for years, they will add that the money wasted in this project far exceeds the $2.5 million the Comptroller’s Office alludes to.
These same individuals also recommended to the Town Board the building of a new facility right from the get-go. Considering the size and cost of the new Police/Courts Building, one could have been had for half the money in 2003 had the option process considered a new build of a size lesser that the 76,000 square foot Colecraft Building that project costs were based on.
As stewards of public funds, the Board is responsible for making decisions that are in the best interests of the Town and the taxpayers it serves. This responsibility requires the Board to exercise due diligence when considering significant financial commitments such as property acquisitions and contracts for Town services. Accordingly, the Board must balance the level of services desired and expected by Town residents with the ability and willingness of the residents to pay for such services. Careful planning prior to committing Town funds for a proposed project is an essential step that includes identifying the requirements of the project, evaluating possible options, and estimating the potential costs. Failure to follow a thorough planning process may ultimately be more costly when decisions are made based on inadequate analysis.
Town officials did not exercise due diligence when they purchased a warehouse building in 2003. As a result, the Town invested approximately $2.5 million in a building that it no longer intends to use and, along with the County and the Lancaster Central School District, lost approximately $440,000 in property tax revenue.
We also found that officials did not properly protect the interests of taxpayers when they entered into fire protection agreements for the 2006 through 2010 fiscal years. Consequently, the Town likely provided more compensation than necessary to four fire companies.
When contemplating any capital project to be funded with public moneys, it is critical to first identify its scope by evaluating space and functionality requirements and identifying available properties that would satisfy those requirements. Additionally, Town officials must establish the extent and cost of any necessary repairs and/or renovations, and ensure that the price to be paid for the property is fair based on market conditions. To determine the current market value of real estate, the Board should obtain at least one independent real property appraisal. Such an analysis would allow the Board to compare various options and the associated costs prior to making a final decision.
On April 9, 2003 the former Supervisor (1) with Board approval, executed an agreement for the purchase of a 77,000-square-foot commercial warehouse building at a cost of $1.6 million.
The intent was to renovate this building for use by the Town’s courts and Police Department, which had recently absorbed the Village of Lancaster’s Police Department. The majority of the 40-year-old building was open warehouse space, and the front portion contained office facilities available for immediate use. The former Supervisor stated that the property appeared to have excellent potential and was located on a main road near the center of the Town. Sales information indicates that it had been on the market for approximately one year prior to the Town’s purchase.
The Board did not obtain a professional appraisal to establish the value of this property or determine if the structure would be suitable to be renovated for use by the police and courts. In addition, the Board did not identify and evaluate other possible building options for the Town’s current needs prior to purchasing this building. (The Town did hire a consultant in 1995 to prepare a building needs assessment, but did not act on that report.)
The Board also did not seek a feasibility study to identify alternative building options and the associated costs until over a month after committing to the purchase of the warehouse property. In addition, the results of this study were not available to the Board until after the deadline to terminate the purchase agreement (2) had expired. This feasibility study, completed in July 2003 by an independent consultant, presented four options for the Board to consider: a new building, two renovation scenarios of the former Village of Lancaster police building, and renovation of the warehouse building. Because the Board had already signed a purchase contract for the warehouse building three months earlier, the alternatives presented in this study were not considered. Therefore, this feasibility study provided little if any decision-making value.
In January 2004, the Town contracted for a schematic design study (3) to provide a detailed analysis of the court/police facility renovation. This study estimated that the cost for renovating the warehouse building had increased from $8.5 million to $11.4 million, including the purchase price of $1.6 million, from the time that the feasibility study was completed the previous year. A Town official told us that this amount was much greater than the Board had expected. As a result of these unanticipated increases in construction costs and a lawsuit brought against the Board, (4) the Town delayed this project for the next six years.
1)The former Supervisor served in that position for 16 years, from January 1, 1996 to December 31, 2011.
2) The contract states that the purchaser may terminate the contract on or before June 17, 2003 pursuant to certain stipulations.
3) The schematic design study was contracted with the same consultant who completed the feasibility study.
4) Several residents sued the Board in October 2003 for the cost of the feasibility study, contending that it was a waste of taxpayer money. This suit was dismissed in July 2006.
In June 2010, the Town hired an architectural firm to plan and design the renovation of the warehouse building. The architect stated that significant changes in the State’s building codes, effective January2011, would require costly modifications and upgrades to the property’s foundation, structure, and utility services, again increasing the cost of renovation. As a result, the Board no longer considered the property a cost-effective option. In early 2011 the Board abandoned plans to renovate the warehouse building purchased in 2003 in favor of constructing a new 27,000-square-foot building, and converting an existing garage to a shooting range, on property owned by the Town and adjacent to the current police and courts facility. (5)
Although the office space was used by detective staff and the warehouse for miscellaneous vehicle and equipment storage, the building has never been fully utilized by the Town. As a result, the Town invested approximately $2.5 million (6) in a property that is no longer a viable option. Included in these costs is approximately $500,000 in bond interest payments. (7) Moreover, when the Town acquired the property in 2003, as public property it became exempt from real property taxes. (8) As a result, since 2003, the Town, County, and Lancaster Central School District lost more than $440,000 in tax revenue that had to be generated from the remaining tax base. Town officials have indicated that they intend to sell this property. Because Town officials did not thoroughly evaluate the suitability, condition, and market value of the warehouse building or properly investigate alternative options before purchasing it, taxpayer money (9) was likely wasted.
5) This is the same location recommended as an option in the 1996 building needs assessment for constructing a new police and courts facility, as shown in architectural drawings dated April 17, 1996.
6) This includes the cost of the building, bond interest, and engineering studies and designs.
7) Bond interest is payable on an annual basis and the interest due in 2012 is $47,300.
8) In 2002, the last year taxes were paid by this property, it generated $44,326 in total tax revenue for the Town, County, and Lancaster Central School District.
9) The Town spent $2.5 million on the property, including the cost of the building, bond interest, and engineering studies and designs. The actual return on this purchase will be determined when the property is finally sold.
There is no doubt that the facilities that currently house the Town’s Police Department and its Court’s are antiquated and no longer fully serve the needs of those departments. The facilities have been used for over 50 years, and with the growth of the Town, the merger of the Village of Lancaster Police department and new standards required for public safety facilities, the need for a new facility is unquestioned. The reality prompted the Town Board’s pursuit of an alternative facility within which to house the Police Department and Courts.
The Town contracted with a well-known architectural firm experienced in police and court facility capital work to conduct a feasibility study to guide the Board’s pursuit of a new facility. One identified option was to purchase the Colecraft Building, the second two options focused on purchasing and renovating the existing Village of Lancaster Municipal Building and the remaining option was the construction of a new facility.
The strong recommendation at the time from the Town’s professional consultant was to purchase the Colecraft Building, including because the consultant identified it as the most cost-effective option. Although the audit report may take issue with the sequencing of events, the bottom line is that the Town continued to move forward with the Colecraft Building purchase based on its recommendation from the Town’s professional consultant. And initially, the Town relied on input from a variety of resources – including the Town’s professional consultant and the Town Assessor – to ensure that the purchase price for the Building was fair and in the best interest of the taxpayers. It is important to note that, at the time, the Colecraft Building was the only commercial building within the Town of Lancaster of which the Town Board was aware that was listed for sale and was suitable for the Town’s unique needs.
A lawsuit was commenced against the Town shortly thereafter challenging the purchase. The Town Board was advised by the then Town Attorney to suspend any work in relation to the renovation of the Colecraft Building until the lawsuit was fully resolved. In order to gain some interim benefit from the Building during the pendency of the lawsuit, and to avoid incurring other costs, the Town began to use the Colecraft Building to house the Police Detectives’ Bureau, for storage of Highway Department and other Town equipment as well to address other Town needs.
The lawsuit was not fully resolved until 2008. The delay caused by the lawsuit has without question added to the Town’s overall costs in relation to the Colecraft Building.
During the entire pendency of the lawsuit, the Board was actively seeking aid from state and federal governments to assist in financing the Building renovation. The Board was successful in obtaining a $350,000 grant to assist in this process. In 2009 the Town Board determined to move forward on the project and interviewed several engineering firms for the purpose of design work for renovation of the Colecraft Building. A professional firm was selected and design work began in early 2010.
However, principally due to the substantial building code changes that have been enacted by state authorities during the pendency of the lawsuit, the Town Board, after consultation with its professional consultant, concluded that the renovation project at the Colecraft Building was no longer in the best interests of the Town taxpayers, and the Town began to assess alternative cost-effective approaches for a new Police/Court facility. Ultimately, the Town Board determined based on all available information, that the construction of a new facility on Pavement Road was the best option for moving forward.
The conclusion in the report that the Town “wasted” $2.5 million in taxpayer money with respect to the purchase of the Colecraft Building is unfortunate and unsupportable. First, the Town has for many years used the Colecraft Building to house the Detectives’ Bureau, to store Highway Department and other Town equipment and for other Town needs. The Town has therefore gained value from its ownership of the Building, including by avoiding costs that otherwise would have been incurred by the Town if it had to address those needs by leasing or purchasing other properties. In addition, the audit report ignores that the Colecraft Building remains a Town asset, which the Town is actively marketing for sale. The Town is confident, based upon current information, that the Building retains significant commercial value. The purchase price that will ultimately be received by the Town for the sale of the Building obviously offsets purchase and other related costs already incurred by the Town.
The purchase of the Colecraft Building in 2003 was based on careful review and consideration by the Town Board of the information available to it at the time, including input and recommendation from its professional consultant. Similarly, the Town Board is currently moving forward on an informed basis with regard to the development of the Pavement Road site and the sale of the Colecraft Building, and the Town Board is confident that the Town’s residents will ultimately be well-served by a new state-of-the-art Police/Courts facility.
Note: Supervisor Fudoli, who first took office January 1, 2012, is executing this letter in conjunction with his role as chief officer of the Town and as preferred signatory pursuant to OSC guidance. He does not have direct knowledge herein and has relied on the information provided by the Town Board members. Supervisor Fudoli does not share any views expressed in this response, which represent a consensus of the other Town Board members.
OSC COMMENTS ON THE TOWN’S RESPONSE
The feasibility study, dated July 2003, appeared to compare the four options using the square footage of the Colecraft Building (77,000 square feet) as the basis, which affected the costs for the other three options (a new building and two renovation scenarios of the former Village of Lancaster police building). The police/court facility currently proposed will be approximately 27,000 square feet.
A decision rendered by the New York State Supreme Court dismissed this lawsuit as of July 7, 2006.
Because the Town did not proceed with the renovation of this building, the $350,000 grant expired in March 2012 and was never used.
The architect in charge of the current project told us that these building code changes took effect
December 27, 2010, long after the lawsuit had been dismissed.
Regarding the Town of Lancaster response to the OSC audit, as Vice-president Joe Biden said last night, “What a bunch of malarkey”. All one has to do to get the real history of events is to go into the Speakup archives and read the Town Board meeting minutes.
Please note how the town in their response never brought forward any reference to an appraisal – but references the Assessor told them the value of the building.
All the blame is now being placed on the “professional” consultants; and of course a lawsuit that had nothing to do with holding up the renovation of the Colecraft Building. It should be noted that the judge did dismiss the lawsuit based on his decision that there was no criminal intent involved, just “bad governance”. Bad governance shadowed the entire process. A project that should have cost the taxpayers somewhere around $7 million will end up costing taxpayers twice that much.
It was everyone’s fault but the sitting Town Board members from 2003 through 2011. The only board member who spoke out and suggested a new build in 2007 was then board member Dan Amatura.
If anyone should be upset, it should be the rank and file police and dispatchers that were delayed by this SNAFU process and in having to wait to move into a new facility for 11 years.
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