Posted by Ed on March 20, 2007, 9:20 pm An independent estimate for the site work produced by Judith Nitsch Engineering Inc. the consultant hired by the Zoning Board of Appeals that was dated May 19, 2003 further supports the J.1. Phelan & Son contract amount. The independent arms length estimate produced by the engineering firm using Means Site & Work & Landscape Cost Data, for 2003, estimates common costs of $468,888. The Judith Nitsch Engineering report and the contract appear to have a close correlation to each other (difference of $21,872) but reflect a significant difference from the developer certified costs of almost $1 million dollars ($951,866). Both the J.1. Phelan contract amount and the Judith Nitsch estimate appear to be adequately documented but we found no such documentation in the files supporting the developer certified amount of $1,442,626. 2. The original pro forma (undated) estimated construction costs of $3,951,200. The actual costs submitted by the developer however were $4,493,506. The difference The following are the re-calculated developer profits that include only the building construction costs and the common costs. We will assume for demonstration purposes only that all of the other costs totaling $1,978,643 are adequately supported and documented. Total sales $9,253,959 Profit $3,784,856 Using the developer allowed profits of 20% of the project costs, the amount the developer is entitled to earn is $1,093,821. According to our analysis, for these two tasks the developer earned $2,691,035 or 49% in excess profits that could be reinvested in local affordable housing initiatives. The second reason for program abuse, in our opinion, is that the Department of Housing and Community Development's (DHCD) zeal to increase affordable housing disregarded effective controls to prevent the towns from being exploited by developers in pursuit of maximizing their profits to the detriment of well thought out local planning principles and initiatives. The following are recommendation that we believe would rectify the developer excess profits and lack of enforcement controls; I. The Board of Selectmen (BOS) with the help of the Housing Partnership Committee should identify funding sources that can be used to hire a consultant to do a complete audit on every line item submitted on the certification to see if they are properly supported and to determine if there are identity of interest transactions involved. 2. Once funds for a consultant are identified the 40B audit committee should solicit interview and hire a consultant familiar with 40B laws/regulations, housing development and construction to pursue what we believe may be excess profits associated with the Salisbury 40B development. 3. We recommend the BOS write a letter of support for pending legislation that would hold developers accountable and penalize them for intentionally falsifying cost certifications. 4. We recommend the BOS direct the Zoning Board of Appeals to require and enforce more accountability in their agreements. This could be done via a hired consultant to review all costs and contracts. 5. We recommend the BOS through the respective procedures create an adequately funded litigation fund so that the town can vigorously challenge 40B projects that are clearly detrimental to its interests and are not supported by town or regulatory advisory boards. 6. We recommend the BOS engage legal counsel to pursue any recourse such as civil penalties or other actions the town may take to seek restitution Although our recommendations may not address all of the 40B concerns that we have identified in this report, we believe that they will go a long way in putting integrity and fairness into a process that has little accountability and no effective controls. Respectively submitted: Ronald DiOrio, Chairman Edward Bunker, Member Alan Ramos, Vice Chairman Patrick Hogan, Member Richard Veilleux, Secretary Jean Landers, Member Gilbert Moreira, Member
24.34.144.49
and the costs provided by the developer are $951,866. The developer costs are
almost three times more than the file documentation supports.
between the pro forma submission and the certification amount is $542,306. The building permit we reviewed, which was signed under the pains and penalties of perjury stated that the construction costs were $2,999,700, ($272,700 for 4 units)
which is even less than the pro forma amount. If we use the amount submitted in the building permit application the difference between what the contractor claims the expenses were and what the permits stated as late as 4/3/03 is an astonishing
$1,493,806.
$5,469,103
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The reasons that we believe the excess profits were allowed to occur are two-fold. First, the 40B program is counter intuitive to our social and economic system in that it rewards contractor-controlled inefficiencies (high expenses) with profits based solely on those same expenses. This program although well intentioned can only work with non-profits whose purpose is to reinvest profits into more affordable housing. The current regulations as they exist allow for developer exploitation with a state mandated stamp approval.
7 . We recommend that the BOS inform all local, state and federal enforcement agencies with jurisdiction over this development of its findings so that they may take whatever enforcement actions are available to them to prevent misuse and exploitation of the 40B laws.
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