Keeping Track: Who's to blame for Fairfield Metro fiscal crisis?
While the Board of Finance convened a special meeting Wednesday on cost overruns at the Fairfield Metro Railroad Station, Kurt Wittek -- the Blackrock Realty principal and private partner with the town and state on the project -- said he's meeting privately with officials to try to resolve the multi-million-dollar funding gap on finishing the depot.
Interim First Selectman Michael Tetreau announced Monday that costs for the town's third train station are anywhere from $2 million to $6 million over the $34 million budget -- and the town is on the hook to cover that expense.
A major component of the overrun, according to Tetreau, is the cost of disposing of more contaminated soil than was expected on the former factory site.
Kenneth Flatto, who had the first selectman's job for 12 of the last 14 years before leaving in May for a state job, said Blackrock Realty should find a place on the portion of the property that it controls to accommodate the soil. He said that might mean Blackrock would lose parking spaces for its private commerical development, which has yet to materialize, but added that alternative is only fair because the town and state were forced to step in when its financial problems prevented Blackrock from meeting its contractual obligations for the project several years ago.
"We are where we are and we're trying to work with the town to solve this at the least cost to everybody," Wittek said Wednesday, but added that excess contaminated soil is only one factor in the ballooning budget.
Though Wittek said he couldn't comment specifically on the construction project, since he was not involved in its oversight, it is not that unusual "to have some quantity that was more or less than you expected."
When Tetreau stepped to the podium at Monday's Representative Town Meeting to deliver a presentation on the status of Fairfield Metro, he prefaced his remarks by telling the legislative body the report was unlike others it had received from Flatto.
Indeed it was. As stunned RTM members tried to digest the numbers and what the shortfall could mean for the town's financial future, many strode to the microphone to ask why they had apparently been left in the dark about a change in the agreement with the state that put the onus for cost overruns on the town.
"As shocking as it is, it also leaves me speechless," said Nicholas Mirabile, R-9. "The previous first selectman's updates were nothing more than fluff pieces."
Flatto said Tuesday that he was as surprised as everyone else by the news. The last report he received in April had indicated the project was under budget.
Selectman James Walsh, who was sworn in as selectman the same day the Board of Selectmen approved changes in the town's agreement with the state -- but not until after that vote was taken -- said, "Since I've been on the Board of Selectmen, we've never been told any numbers."
He contended the new agreement will result in the town losing $12 million, since he said it dropped a clause that would have required the state to pay the town $300,000 a year from station parking revenue for 20 years, so Fairfield could recoup the cost of the initial $6 million it bonded.
Finance board members and RTM members stated they were not aware of the changes that were agreed to by Flatto. But Flatto insisted they were told that any budget overruns would be covered by the town, and added there was no change made to the parking revenue agreement and, therefore, he didn't feel it was necessary to bring it up.
Who knew what when?
According to minutes of the RTM session on May 24, 2010, the first after Flatto and Selectman Sherri Steeneck approved the contract modifications, Flatto gave a report to the legislative body. The minutes state that Ed Bateson, R-3, asked what would happen if the project costs went over budget. "First Selectman Flatto said that the state funding is limited to $19.4 million. The hope is that the project will come in and items like a waiting area would not have to be sacrificed." He also said that the property is still owned by a private party and was hopeful the rest of the project works out. "He does not want to risk potential exposure by the town," the minutes state.
The Fairfield Metro documents -- the original agreement, the modification and the closing letter -- have all been available on the town's website for about a year.
In the March 31, 2003, original agreement regarding revenue from parking, it states: "To the extent that there is any revenue earned from the surface parking each year, Conn DOT shall pay to the town the first $300,000 of revenue, net of all operating and maintenance costs and expenses for the surface parking area and its improvements. If net revenues exceed $300,000, then Conn DOT may, in its sole discretion, pay the town some or all of such additional net income. Conn DOT's obligation to pay the $300,000 shall terminate on the earlier to occur of 20 years commencing on the date commuters begin using the surface parking and the time that the sum of the payments to the town reach $6 million."
Neither the modified agreement signed March 18, 2010, nor the closing letter of April 28, 2010, addresses the issue of the parking revenue. Flatto said that remains the same, although the cost of bonding the $19.4 million will now be part of the expenses taken from the parking revenue by the state.
The modified agreement does, however, on page six state: "Any and all additional costs for the state-town project will be the responsibility of the municipality."
Tetreau said it shouldn't be a surprise that the town is responsible for the excess costs.
"I believe this was stated clearly during updates last year," he said. "However, I believe that it should be expected on a project with such unknowns and this type of risk that the project would have been closely managed to minimize this risk."
Tetreau said since the amount of testing is determined by the amount of contamination, "the overruns on the testing phase were an early indication that the excavation of soil, moving of soil and clean fill replacement costs would also then be over budget. It is just not acceptable not to know the status of the project and the projected costs much sooner than we found out."
He said town boards and commissions should have received a management summary letter to go along with the modified agreement listing every change to the old agreement "and clearly describing the impact."
Board of Finance Chairman Thomas Flynn said there was no reason the contract modification would come before his board since there was no appropriation or bond resolution required.
"I do find it astonishing that a contract which could end up costing the town as much as $12 million more than originally estimated was not reviewed or approved by the RTM," he said.
And when they received periodic updates, Flynn said, and asked Flatto about the financial status of the project, "We were never informed, or was it remotely mentioned, that there was any potential issue with the financial position of this project."
GOP first selectman candidates Robert Bellitto Jr., vice chairman of the finance board, and RTM member David Becker, both said they knew that the town would be responsible for any Fairfield Metro overages.
"That the town was liable for any overages as a result of the modified tripartite agreement should have surprised no one," Bellitto said. "It was reported in the local media as early as April 30, 2010."
He said he questioned Flatto at a June 2010 finance meeting about several aspects of the modified agreement.
"Mr. Flatto stated that the documents `were signed, sealed and delivered' and that there was no cause to worry," Bellitto said. "We now know that statement was inaccurate."
Becker said he was at the selectmen's May meeting, and has read both the original and revised contracts.
"I knew the possibility for trouble existed, and I know I'm not the only one -- a select few of us, including the deputy majority leader, raised our concerns at the time, to no avail," he said. "RTM members are on record asking about how the soil remediation was going, and for asking about budgetary updates. (Flatto) repeatedly kept those detailed questions at bay, making it seem as if everything was on track and any overages would be covered by savings."
Jamie Millington, the RTM majority leader, said he was aware of concerns raised by Bateson, but said RTM members were led to believe the project was coming in under budget.
"We need to find out who knew what and when they knew it," Millington said. "Once again, the Board of Finance and RTM were provided critically flawed cost projections."
RTM member Kathy Braun, an outspoken critic of the project, said, "Unfortunately the RTM was excluded from the April 2010 contract revision process, nor did any of the updates thereafter adequately explain the risks and exposures or the likelihood of losing parking revenue."
She said that revision should have been vetted and voted on by the RTM. Braun said she read the revision after the fact, "but at the time there were only glowing reports of progress and cost under-runs and when questioned the first selectman never said we would lose parking revenue."
Alexis Harrison, an RTM member and one of the "Concerned Citizens" who sued Flatto over his removal of Conservation Director Thomas Steinke's environmental oversight of the project, said when a resolution to set up a special review committee failed, "I think many of us, and I certainly don't want to speak for fellow RTM members, put our faith in the first selectman and that his monthly address would be substantive and address important issues pertaining to the largest project in our town's history."
Harrison, who said she personally reviewed "hundreds, if not thousands" of Fairfield Metro documents, said an independent commission should investigate all aspects of the town's role in the project.
Could it have been avoided?
What could have been done to prevent this problem and what can the town do in the future?
Braun and Becker said the RTM should have gone forward with a Metro study committee, a resolution they co-sponsored, and Becker said he doesn't believe Flatto had the authority to sign the new contract without RTM approval.
"The special committee would have clarified many of these details under a town-sanctioned process before the contract was, in my view, improperly signed," Becker said, adding he plans to see about again trying to establish such a committee.
Bellitto said regardless of who knew what and when, the finance board and RTM did not have the legal authority to do anything about it, and it is the Board of Selectmen alone that has authority under the charter to approve the contract.
"Going forward, I advocate that the town charter be revised so that both the Board of Finance and the RTM have the right to review, approve or reject any contract that significantly impacts the town budget before it is executed," Bellitto said. "It is not in the best interest of the town for such contracts to be negotiated in back rooms, away from the light of constructive criticism and objective review."
For Fairfield Metro, Tetreau said, the town will be hiring its own on-site construction manager to oversee the remainder of the project. The finance board was also expected to vote at the special meeting to hire an independent auditor to review the accounting and financing of the project.