Jon Lender: Watchdog Panel That Guards Against Political Influence Is Bypassed In Deal With Democratic Donor – By Jon Lender (courant.com) / Oct 6 2018
A squad of financial watchdogs called the State Properties Review Board has saved Connecticut taxpayers $86 million since 1975 on government purchases, sales and leases of property by insisting that such deals be based on valid market standards instead of political influence.
But they’re being bypassed in the Democratic Malloy administration’s controversial plan to use $5.5 million in taxpayer funds for the purchase of a vacant, 8-acre parcel in the town of Orange from Edward Crowley of Branford — a businessman who has donated $20,000 to the state Democratic Party since 2013.
The planned $5.5 million cost to taxpayers is 11 times what Crowley paid for the parcel three years ago.
The review board saves taxpayers’ money by doing what its name suggests: It reviews prices that the state pays for properties it buys or leases for government use. Board members use established market valuation standards to decide if the state is paying too much, or is otherwise getting a bad deal. If so, they refuse to approve a transaction. Their decisions are binding.
So it might be reassuring if they were to subject the Orange deal to their normal, rigorous scrutiny. But they won’t have a chance to do that as things stand now.
Why? It’s because of how the deal was structured after negotiations between Crowley and the budget office of Gov. Dannel P. Malloy, who did not seek re-election and leaves in January.
The state would give a $6.1 million “urban grant” to the town of Orange to buy the land and cover related expenses — so the town is the purchaser, even though state taxpayer funds are being used, and the review board only has the legal jurisdiction to rule on purchases by the state, not by towns.
The Properties Review Board [serves as] a firewall against bad deals like this.
— State Sen. Scott Frantz, R-Greenwich
Crowley’s parcel, located on the Metro-North commuter line, had been proposed for the better part of a decade as a site for a train station and a surrounding “Transit Oriented Development,” or TOD. But the station proposal was given the thumbs-down late last year by the state Department of Transportation for budgetary reasons. Crowley then went up above DOT to the top of the Malloy administration and, within months, negotiated the $5.5 million deal with Ben Barnes, Malloy’s budget chief, who heads the state Office of Policy and Management (OPM).
After that, the town of Orange was presented with the deal, and residents voted to accept it at a special town meeting Sept. 5, after being assured it wouldn’t cost them any money.
Republican critics of the deal reacted with dismay and even puzzlement this past week, when told by Government Watch that the review board won’t have its customary role in the approval process.
“I feel even more strongly that this deal should be stopped,” said Sen. L. Scott Frantz, R-Greenwich, who had already raised questions about it during a Sept. 20 meeting of the State Bond Commission, of which he is a member. (The commission had previously approved the grant for Orange without its details being aired.)
Frantz added that “the fact that the Properties Review Board won’t play a role in reviewing this” deprives taxpayers of protection, because the board serves as “a firewall against bad deals like this” with excessive costs. “The optics of this are terrible,” Frantz said, “with the property being bought with taxpayer funds for multiple times what it appears to be worth from a political contributor who gave $20,000 to the Democratic Party.”
‘Puzzled’
Meanwhile, Rep. Christopher Davis, R-Ellington, who also sits on the bond commission, said he is “puzzled as to why this isn’t being done in the traditional way.” By that he meant having the DOT directly secure Crowley’s property, since that agency would take control of the land if it ever were to be used for a train station, which doesn’t appear to be a possibility any time soon.
Barnes told Government Watch that the deal is structured as it is because Orange would be in control of the surrounding transit-oriented development, including residential and commercial space along with a major parking garage. It wasn’t set up this way with the intention of avoiding State Properties Review Board scrutiny, Barnes said.
Whether bypassing the review board was intentional or not, Davis said, it would still be worthwhile to have the panel scrutinize the deal, even if it’s not legally required. “Why not have it go through the watchdog group?” he said.
That would not be up to the review board; it doesn’t have the power to demand to review a proposal to which the state is not a party.
If the deal had been structured as a direct property acquisition by the DOT, state procedures probably would have been different than those followed by Barnes and OPM — at least with regard to the appraisal of Crowley’s property.
Crowley obtained his own appraisal of the property of $5.47 million in May from a firm on a DOT-approved list of appraisers, and he and Barnes agreed on that price. However, the appraisal said that valuation “is subject to the Extraordinary Assumption that train station construction proceeds, allowing development of [a surrounding residential/commercial development]. … If the train station construction does not proceed, the value is subject to change.” There’s no guarantee when, or if, a station ever will be built in Orange under a future governor.
But Barnes says the state’s goal in giving Orange the money to buy the land is to preserve the opportunity to build the train station and the surrounding “transit-oriented development” for 30 years into the future.
Critics say that’s not necessary now, because the DOT could always use its power of eminent domain to acquire the land if it ever wants to.
If the DOT were purchasing the property itself, it would follow policies and procedures that include a requirement that “two appraisals shall be obtained for any property where the damage figure” — that is, the compensation by the state to the owner — “exceeds $500,000.” That requirement “may be waived,” however, the policy statement says.
The DOT policy statement also says that an “Appraisal Review Panel has been established to review all appraisal reports” to be sure they represent “a fair and just value.” That is in addition to the formal, binding review of such proposals by the State Properties Review Board.
Unresolved Issues
No money has actually been paid on the deal, because of unresolved legal issues:
- One is a 60-day legal agreement under which Dichello Distributors of Orange — which sold the 8 acres to Crowley in 2015 — has the right of first refusal to buy back the land, abutting its plant, at the $5.5 million price agreed on between Crowley and the Malloy administration. There are still weeks until the 60 days run out. Crowley bought the land in 2015 through his limited liability company, Orange Land Development LLC, as he severed his interests as co-owner and president of the Dichello beer distributorship. He now operates the Stony Creek Brewery that he founded in his hometown of Branford.
- Also, OPM and Orange need to resolve discrepancies in how each has described the deal to the public. At the Sept. 5 special town meeting in Orange, First Selectman James Zeoli said the town would have to grant the state an easement providing access to the property for a possible future train station — but Orange still would be able to sell the property at any price, and at any time it chose, according to a New Haven Register article. Based on that description, residents overwhelmingly agreed to accept the deal, with some apparently also viewing it as a way to avoid construction of affordable housing there.
But Barnes wrote to Zeoli on Sept. 26, saying that for the deal go through and the grant money to be paid, the state is insisting that the parcel remain under its current transit-oriented development designation over the long term and not be rezoned for light industrial use, as has been suggested locally. He also said the state wants assurance of Orange’s commitment to affordable housing.
Zeoli said during the week that “there seems to be some confusion … at this time” and “we’re waiting to understand completely the final rules.” He said town and state lawyers have talks scheduled.
Malloy has defended the deal by saying that Crowley’s property “is immediately adjacent” to the Yale West Campus and along the train line and I-95. “We have secured the perfect site for a train station for economic development purposes, as well as aiding our transportation efforts along the I-95 corridor,” Malloy said.
Crowley — a Republican who has donated to candidates and committees of both major parties — broke with many in his business by publicly supporting Malloy’s proposals years ago for changes in liquor laws that were unpopular with retailers, including instituting Sunday sales.
The six-member State Properties Review Board was created in 1975 by the legislature as a reform — in response to a scandal over the state government’s leasing of substandard properties at excessive prices from politically connected property owners. Its current chairman, Edwin S. Greenberg, a Stamford Republican, has served on the panel for decades. He declined comment when approached recently by a Courant reporter about the Orange proposal.
The review board has largely succeeded in replacing political influence with accepted market standards as the basis for the state’s property transactions. During the four years from July 1, 2013 through June 30, 2017, the board’s recommendations resulted in “quantifiable … taxpayer savings” that totaled $3.7 million, an annual average of $928,000, according to official reports. In addition to reviewing state purchases, the board also scrutinizes any sale of state land or buildings to private owners.
Board members are paid $200 per diem and they meet often; 10 meetings a month are not unusual. They sometimes meet on site at properties they are reviewing. The chairman’s compensation is capped at $30,000 a year, and the regular members’ at $25,000, according to state law.
