MERIDEN — The mayor and city councilors criticized city staff for a lack of financial transparency this week after discovering a $406,000 grant had been transferred from one project to another without council approval.
In April, city staff told councilors the grant — a Local Capital Improvement, or LoCIP, grant from the state — would be used to offset the cost of a new banquet facility at Hunter Golf Course, projected to cost $875,000 at the time. During a council meeting this week, however, Finance Director Michael Lupkas informed councilors the grant was reallocated within the city’s capital improvement plan to the city’s annual road repaving.
The city redirected the grant to road paving because, while staff initially believed the grant could be used to construct the new banquet hall, they later determined it was “questionable” whether the state would allow it, Lupkas and City Manager Tim Coon said in an interview after the meeting. So to avoid losing grant reimbursement, the Finance Department moved the grant to road paving, an acceptable use of the grant, and reallocated bonding meant for road paving to the banquet project, meaning the cost of the banquet building would be entirely bonded with no grant funding to offset it.
Lupkas and Coon described the transfers, made in April, as a simple swap of money that had a “net zero” impact on the city’s bottom line in the current budget, to which Mayor Kevin Scarpati argued, “that’s not the point.”
“I don’t believe that’s very transparent,” Scarpati said during the council meeting this week.
Once Lupkas and Coon realized the state may not allow the LoCIP grant to be used for the banquet project, Scarpati said they should have informed councilors and asked for guidance. It’s possible councilors would have wanted to use the grant for other purposes, Scarpati said, or raise total bonding for road paving in light of the $406,000 grant. Scarpati said the “number one complaint” his office receives is about the need for road paving.
“The City Council should have ultimate authority on where the money is spent. (Lupkas) doesn’t answer to the taxpayers, we do, and for any staff member to unilaterally decide where money is spent is completely and highly inappropriate,” Scarpati said in an interview after the meeting. “There are checks and balances in place for a reason, and we need to hold people accountable. The finance director is not above the City Council or my office to decide where funds go without proper approval.”
The council occasionally considers resolutions for transfers of funds proposed by the administration, however, it’s unclear whether staff was required by state law or city charter to obtain council approval in this case.
Coon, Lupkas, and the city’s law department couldn’t definitively say whether staff was required by charter or state law to obtain council approval for the transfers.
The issue came up at this week’s council meeting during a discussion of whether to reduce the amount of bonding authorized for the banquet facility project from $875,000 to $120,000. After councilors didn’t like the appearance of the banquet hall that would have been built for $875,000, the city decided to go back to the drawing board and hire an architectural firm to design a facility that could be constructed for between $1.3 million and $1.5 million.
During a tense moment, Scarpati publicly rebuked Lupkas for “unilaterally deciding” to redirect the grant without informing councilors or seeking their approval. Coon after the meeting said the decision to move the grant was not made “unilaterally” by Lupkas and that Lupkas did it with Coon’s approval.
We the People councilor Bob Williams echoed Scarpati’s concern at the meeting.
“I think you bring up a great point, Mr. Mayor. I’m very concerned about this, to think that funds can be moved around like this without clarity and transparency,” Williams said. “... I think this is something that corporation counsel should look into and get back to us.”
Council Majority Leader David Lowell said he supports Scarpati’s position, but added he doesn’t think “anything subversive” was done by staff in swapping the funding sources for the banquet and road reconstruction projects.
The City Council’s Finance Committee plans to hold an informational presentation on the LoCIP grant issue at its next meeting on Sept. 24, according to Brian Daniels, chairman of the committee.
Coon said he “absolutely agrees” with Scarpati that the city could have been more transparent about the use of the LoCIP grant, adding that “this is a case of lesson learned.”
“It’s always important to remember that councilors aren't dealing with these numbers every day, so while our rationale makes sense to us because we’re dealing with things on a day-to-day basis, councilors don’t get to have that advantage, so it always helps to explain things as clearly as you can,” Coon said. “... Part of the thing is we're administrators, and we have to be cognizant that councilors are (politicians), and sometimes decisions that make sense administratively don't make sense politically.”
When the council discussed and approved bonding $875,000 for the banquet facility in April, one of the main selling points from the city was its ability to use the $406,000 grant to offset the project’s cost. At the time, city staff told councilors that the project would “pay for itself” over the life of the 20-year bonding period through revenue generated from rent payments and additional golf tournaments attracted by the facility, however, Scarpati noted that projection was “solely based” on the city’s use of the LoCIP grant.
The city’s budget for the banquet hall has since been increased to between $1.3 and $1.5 million, all of which would be bonded if the council moves forward with the project after an architectural firm produces drawings and a cost estimate. If the city bonds $1.5 million for the facility, it’s looking at a “payback period” of upwards of 50 years, Coon said.
Scarpati said the LoCIP grant transfer is the latest in a recent series of issues that have raised questions about the city’s transparency. Scarpati also cited a recent incident in which city staff didn’t immediately inform councilors of a projected $1.6 million surplus from Fiscal Year 2018-19 and allegations by former city manager Guy Scaife that the city “deceived” water and sewer ratepayers in past years by overcharging the city’s Water and Sewer Divisions for shared services.
Scarpati said these incidents have had a “snowball effect” and have made some residents lose faith in local government.
“It's one issue after another after another that's causing them to question (the city’s transparency), and I’m questioning it,” Scarpati said. “... I can't argue that there aren’t issues. There are some serious issues that we need to address starting with the city manager to make sure he’s holding his staff accountable.”
Coon said it’s his intent to be as transparent as possible.
“If at any point the city falls short in that arena, we will strive to improve it,” Coon said. “We are certainly setting in place policies and procedures to enhance transparency and communication, and I look forward to working with council and the mayor to ensure that we reach that goal.”