State audit report doesn’t put Town of Lancaster in a positive light

LANCASTER- A recent audit conducted by the Office of the State Comptroller on the Town of Lancaster has reported that the Town of Lancaster Board “did not exercise due diligence” when they purchased the former Colecraft building in 2003 and town officials “likely” provided more compensation than necessary to four fire companies.

When the former Colecraft warehouse was purchased at a cost of $1.6 million the intent was to renovate the building for a new police and court facility.

The board did not conduct a appraisal or feasibility study to look at other building options and the associated costs until more than a month after committing to the purchase of the property, it stated in the report.

Town of Lancaster Council Member Ronald Ruffino said he met with the chief of police, the supervisor at the time, and consultants to make sure it was a suitable location.

“We certainly just didn’t go buy a building,” said Ruffino. “We had consultants and experts’ looking at it making sure it was well worth for what we wanted to use it for. It was structurally sound. It passed with flying colors. There were minor items we had to correct, but nothing was a show stopper.”

In 2004, the town contracted for a design study and it was then learned the cost to renovate the building would increase to $11.4 million instead of the initial $8.5 million.

Town officials said this amount was much greater than they expected. The project was delayed six years due to the increased costs of construction and a lawsuit brought against the town by residents.

“That building back then would have been the proper site for a public safety building without a doubt,” said Ruffino. “We would have gotten more bang for our buck. That building would have been 48,000 square feet for about the amount we are spending now for 27,000 square feet. I’ll never change my statement that it was the right facility. It was centrally located.”

It wasn’t until June 2010, the project came back onto the table and an architectural firm was hired to plan and design the renovations of the building. But due to the amount of time that went by, state building codes changed and the architect firm informed the board that it would cost even more to modify and upgrade the building.

“Everything was there,” said Ruffino. “But because of the lawsuit with the land, the code changed because of 9/11 and the structure was no longer suitable. If it was built back in 2003, it would have been up and running, state-of-the-art facility and it would have provided any future expansion that would have been needed.”

In the audit it concluded that the building has never been fully utilized by the town. As a result, the town invested approximately $2.5 million in a property that is no longer a viable option and included in these costs is approximately $500,000 in bond interest payments. Also, when the town acquired the property it became exempt from real property taxes.

Town officials did respond back to the audit claims, and even though Supervisor Dino Fudoli signed it, along with Council Member Mark Aquino, Fudoli did not fail to mention that he does not share any views expressed by the town board as he was not in office at the time and has no way of knowing what occurred.

Town officials said the conclusion the audit reached with the building was “unfortunate” and “unsupportable,” stating that the town has used the building to house the detective bureau, store highway department and other town equipment.

“The town has thereby gained value from its ownership of the building, including by avoiding costs that otherwise would have been incurred by the town,” the letter read.

But as a result, the town, county, and Lancaster Central School District have lost more than $440,000 in tax revenue that had to be generated from the remaining tax base.

Even though, town officials are planning to sell the property, the audit stated 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 was likely wasted.”

The building is currently up for sale and town officials say the purchase price will offset the purchase and other related costs incurred by the town.

The audit also reported that when the town entered into fire protection agreements with its four companies- Bowmansville, Twin District, Town Line, and Millgrove- during the 2006 and 2010 fiscal years, the town “did not properly protect the interests of taxpayers by providing more compensation than necessary.”

All four of the town’s fire protection contracts contain provisions, in which town officials are to review the fire company’s financial records, which was not regularly exercised. The town did not make sure that the amount of real property taxes provided to each fire company was correct and needed.

The amount of real property taxes levied to fund the amounts due to the fire companies, pursuant to the fire protection contracts, increased by approximately four percent each year from 2007 through 2010, the report stated.

The fire company financial statements show that the fire companies were accumulating a substantial amount of cash during the same period. Since 2007, the fire companies have not needed all of the real property taxes levied by the town. This enabled them to increase their cash and cash equivalent balances by more than $1.9 million, from $3.09 million at Dec. 31, 2006 to $5.03 million at Dec. 31, 2010.

While a certain amount of cash should be retained for emergencies and contingencies, this level of cash reserves is “excessive relative to the amount of property taxes levied.” It was recommended that the board should annually review the fire companies’ budgets and financial statements to be in a better position to negotiate contracts that are more fiscally responsible to the town’s taxpayers.

Town officials stated parties have agreed on freezing the level of town’s financial support of fire company operations during the two-year term for 2012 and 2013. Also, any public monies held the fire companies are required by law and are used for fire protection purposes.

The board has 90 days to present a corrective action plan to the state.

The next Town of Lancaster Board meeting will be held at 8 p.m. Monday, Nov. 5, in the town hall, 21 Central Ave., Lancaster. This meeting will include the public hearings on the tentative and special districts budgets at 8:15 p.m.