Unused developer fees spur other problems

By ELIZABETH COOPER

Observer-Dispatch

Posted Sep 26, 2009 @ 05:12 PM

Last update Sep 26, 2009 @ 08:57 PM

NEW HARTFORD —

The ongoing problems surrounding $3.3 million in unspent fees paid to the town by developers are escalating as officials work to learn more about what happened.

In the 17 years since the practice began of requiring developers to pay fees to help the town deal with the impacts of their projects, the town only has used about 20 percent of the money, records show.

And it appears key updates never were made to the study that triggered the fees or the capital plan meant to guide the program, officials said.

Now other issues have arisen, including:

* About 20 percent of the unused money likely will have to be paid back by the end of this year, not by 2013 as officials previously had said.

* Twenty-five of the 115 pre-development contracts have been lost, and it’s not known if any of them require the money to be repaid by Dec. 31, 2009, or in 2013. The funds in limbo amount to $616,854, town Budget Director Heather Mowat said.

* The millions of dollars in fees have sat unused for so long that $700,000 in interest has accumulated, but pre-development agreements signed between the town and developers say the town doesn’t have to return the interest funds to the developers.

Town officials were concerned enough about the issues that they allocated $7,500 to hire an outside lawyer at a recent Town Board meeting.

“I’m stunned,” said Catherine Lawrence, co-founder of the local watchdog group Concerned Citizens for Open and Honest Government. “I guess I’m just stunned that they could lose files and have no way of keeping track of other people’s money you are taking in,” she said.

But Town Supervisor Earle Reed pointed to the fact that the situation had evolved over several administrations.

“It goes back 17 years, some of this,” he said. “I think we should be applauded that we are at least trying to get to the bottom of things.”

Slocum Dickson Medical Group Chief Executive Officer Phil Porter said he wished the
$78,636 the company paid for a 2000 project had been better used.

“I felt better about paying the money knowing it was going to go for a good cause,” he said. “I’m sorry they didn’t use the money as they said they were going to use it, and I’m happy I’m going to get it back.”

The history

The town began collecting the development fees after it approved a pair of generic environmental impact statements — one for the Seneca Turnpike/Commercial Drive area and the other for the French Road area.

At the same time, the town drew up a 20-year capital plan for each area, listing how much money should be spent in different types of projects, including roads, storm water and sewers.

Regular updates to the plan were supposed to be done, but never were, Mowat said. The plan also suggested that the developers' fees could be used to leverage millions in state and federal dollars for projects.

But few projects were undertaken, and only about 20 percent of the funds taken in since the early 1990s have been spent.

And now the town may be running out of time to use the remaining funds.

A look at records recently provided by the town showed that of 115 projects done in the town, fees for at least 37 must be used or paid back by the end of this year. The fees from another 53 must be used by the end of 2013.

Mowat said she had been unable to determine why those two years had been selected in the first place. A look at the list of projects shows that the end dates don’t relate to when the agreements were struck or which GEIS area they fall within.

Meanwhile, 25 pre-development agreements for other projects are lost, Mowat said. She declined to give the names of the firms with missing documents.

“We have done on an exhaustive search,” she said, referencing town departments ranging from the Clerk’s Office to Engineering.

Developers’ views

Anthony Palumbo of Dove Eye Center, who paid $62,600 in 1998, called the news he may get his money back at the end of this year “a pleasant surprise.”

“I think what’s being done now is being done in the appropriate manner,” he said.

But Richard Zdyb, who paid $4,898 for a 1992 project when he owned Zebb’s Deluxe Grill and Bar, said he’d still like to see the money used for town projects.

“I live in the community, and I support the community,” he said. “I don’t believe anyone had any sort of devious plan.”

In some cases, it’s unclear who the funds even should be returned to, especially when entities have changed hands.

A call to Valley Gymnastics, which is on the list of projects that might get funds back this year found only confusion.

‘I don’t know why I’m on that list,” said co-owner Heidi Benson, who bought the business about a year ago, and knows it used to be in another location owned by a different landlord.

When asked to check Valley Gymnastics’ 1999 pre-development agreement, Mowat found that it was written out to Valley Gymnastics, but the $51,975 check bore the name of XL Realty. There was no address anywhere on the agreement, she said.

“That’s really lacking,” Mowat said. “Wow.”

One expert in municipal law said she did not believe the town was in any immediate legal danger, as long as it pays the money back at the specified times.

“I think that the municipality will have to return the unused revenue pursuant to the terms of the agreements they signed with the developers who paid the fees,” Patricia Salkin, director of the Government Law Center at the University at Albany Law School, said in an e-mail.

But she said the town can’t restart the clock and create a new return date for the money by doing supplemental studies or making a new capital plan.

The interest, however, will not have to be repaid, she said.

“This will make the developers more savvy negotiators next time,” she said.