Posted by Ed Builder, Billerica can't agree about 40B profits BILLERICA -- Developer Steve Dresser insists the town is setting a dangerous precedent.
on April 2, 2007, 12:34 pm
24.34.144.49
link:http://www.lowellsun.com/local/ci_5576214
By Jennifer Amy Myers, jmyers@lowellsun.com
Article Last Updated: 04/02/2007 11:39:51 AM EDT
A report recently released by the town's 40B Financial Compliance and Audit Committee alleged that Dresser inflated reported costs and collected an additional $2.7 million in profits over what is allowable under state law in the sale of the 44 townhouses at Salisbury Hill Estates on Salem Road.
"The report is not based on facts," Dresser said. "They are not accountants and I do not believe any of them have a background in construction. They lack the professional expertise to make these judgments."
Committee member Al Ramos retorted that although none of the committee members are professional auditors, many have financial and law-enforcement backgrounds.
The committee, formed by a fall 2005 Town Meeting vote, is charged with auditing financial compliance on all past, present and future projects built under the state's Chapter 40B affordable-housing law. The seven members are appointed by the town moderator, finance committee and selectmen.
The group reviewed a report by Feeley & Driscoll, P.C., an auditor hired by the Salisbury Hill Corporation, as well as the monitoring report from Citizens' Housing and Planning Association (CHAPA) and other public documents.
"We did not conduct interviews or seek explanations from any representatives from the entities referenced herein, as this was deemed beyond the scope of the committee's authority," according to the committee's report.
The committee's analysis found that common costs were stated at $490,760 in an Aug. 9, 2002 contract between Salisbury Hill Corporation and contractor J.J. Phelan & Son, Co. However, the cost certification for July 11, 2001 through Dec. 31, 2004 stated that the common costs were $1,442,626, a difference of $951,866.
"The developer costs are almost three times more than the file documentation supports," according to the report.
It goes on to cite the May 19, 2003 estimate for site work produced by Judith Nitsch Engineering Inc., the consultant hired by the Zoning Board of Appeals, projected at $468,888.
"Both the J.J. 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," the report continued.
The committee reviewed the building permit, which states construction cost at $2,999,700, However, the cost submitted by the developer was $4,493,506, a difference of nearly $1.5 million.
The committee then re-calculated the developer's profits, coming to a conclusion of $3.78 million, a figure $2.7 million, or 49 percent more than the profit margin allowable by state law.
The committee stated that the excess profits should have been reinvested in local affordable housing.
"The 40B program is counter-intuitive to our social and economic system in that it rewards the contractor-controlled inefficiencies (high expenses) with profits based solely on those same expenses," the report continued. "The program, though well-intentioned can only work with non-profits whose purpose is to reinvest profits into more affordable housing."
Dresser said that the committee based its findings on estimated costs stated on the building permit. He added that, in any construction project, costs change over time. Additionally, Dresser said that the committee did not include all common costs in the calculations.
"I am very confident that the files support the numbers on the report," Ramos said, adding that the committee waded through two boxes of paper work in compiling its report.
Inspector General Gregory Sullivan is investigating the project, which Dresser said he was aware of, but did not know about the 40B Audit Committee until the report was released to selectmen.
"Nobody called me or asked me any questions," he said. "Their role is redundant because there was an audit provision set up in our agreement with the town."
Dresser also said he did not think it was within the charge of the committee to be making commentary on 40B, and that "the people on this committee obviously have an issue with 40B."
"I do not want to go to court with anyone, but I need to do what I have to do to protect my professional reputation," he added.
Among the recommendations made by the committee is that the selectmen hire a consultant to conduct a line item by line item audit on the certification, to see if there are invoices to support the costs, and engage legal counsel to pursue any recourse the town may take to seek restitution.
"We are pretty sure this will end up in litigation," Ramos said.
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