Municipal cash flow diverted to Snow Bowl project

Tue, 04/18/2017 - 21:42

Lynda Clancy

Rod Smith, of R. H. Smith and Co., talks with Camden citizen Chris Morong April 18 about the audit of the Ragged Mountain Redevelopment project. (Photo by Lynda Clancy)

Camden Select Board member Jim Heard.

Rod Smith, of Smith and Co., delivers his Ragged Mountain Redevelopment audit report to to the Camden Select Board April 18.

Rod Smith, of R. H. Smith and Co., talks with Camden citizen Chris Morong April 18 about the audit of the Ragged Mountain Redevelopment project. (Photo by Lynda Clancy)

Camden Select Board member Jim Heard.

Rod Smith, of Smith and Co., delivers his Ragged Mountain Redevelopment audit report to to the Camden Select Board April 18.

UPDATED: Camden citizen Chris Morong was right: The town has yet to be significantly reimbursed for funds that taxpayers originally authorized to spend in 2013 for the redevelopment of the Ragged Mountain Recreation Area. According to an independent audit of the project, Camden has put out $743,134 more than what has been returned in payments for work completed at the Camden Snow Bowl over the last three years. And while that was happening, town leadership seemed to be unaware. And, the town has yet to send the bills.

According to the audit, not only did the town spend unauthorized money from its own coffers on the project, it failed to invoice the nonprofit that had pledged to raise $4.5 million to help with the project. To date, the town has received but $3.8 million from the Ragged Mountain Recreation Area Foundation.

The finances became clear April 18, following a three-month audit of the $6.5 million project. The auditor sent the report to the town April 12, and it was discussed publicly April 18.

In a four-page report, auditor Ron Smith wrote: “During the project many change orders were produced, which affected the overall cost of the project. It appears that revised budgets were not done or approved to account for this. Furthermore, it appears that there was no plan of action on the town’s part to evaluate existing costs and project cost overruns. This resulted in an impact not only to the overall project cost, but the town’s finances, as well.”

“They [the Foundation] were asking for bills for a long time and the town didn’t know how much much was owed to them,” said Smith, who is with the Buxton-based company R. H. Smith and Company.

Smith spoke to the Camden Select Board and interested residents who gathered in the Washington Street Conference Room for a regularly scheduled board meeting. With a simple spreadsheet illuminated on the screen behind the seated board members, he translated the numbers to a narrative.

“It was a story of how the town did business,” said Smith, painting a three-year picture of municipal management that faltered in protecting taxpayer interests.

“The way this happened was beyond the pale,” said Camden Select Board member Jim Heard, after listening to Smith deliver his findings to the town, and after hearing multiple Camden citizens express frustration over the project’s mismanagement.

“I feel ashamed and I am embarrassed,” said Heard. “I am pissed I wasn’t more insistence with Pat [Finnigan, Camden’s former town manager, who resigned in January] for getting more information when we needed it. If I were not vacating this position in a few months, I would resign right now. The reason I m not going to resign this evening is because there is plenty of work to be done, and that would leave the board with three people.”

Heard’s sentiments were echoed by his fellow colleagues, Don White, Marc Ratner and John French.

They had received the audit April 18, they said, and had met for an hour in executive session preceding the public meeting with Town Attorney Bill Kelly.

During the open meeting, Smith reiterated that money spent on Snow Bowl improvements — trail work, new snow guns, erosion control, new chairlift — eventually totaled $6.547 million. Of that, $743,134 derived not from the voter-approved bond money nor the donations raised privately by the Foundation.

“They came from town coffers and put a drain on the town,” he said.

How did that happen?

Partially through sheer mismanagement – “not a good way for government to do business,” said Smith.

He wrote in his audit report: “....It was noted that various contracts entered into with vendors to provide services on this project committed large financial resources over and above the total project cost agreement at the Nov. 5, 2013 Town Meeting appears to lack appropriate documentation. In some cases, change orders to contracts were done verbally or through emails.”

But Smith stressed that the town and the Foundation, whose board consists of local residents supportive of the Snow Bowl, and some of whom also sat on the municipal redevelopment committee, “are on the same page.”

The town and Foundation, “need to continue to dialog,” he said. “You are in this together and are going to get out of this together. You have no choice.”

The Town and the Foundation Relationship

The redevelopment of the municipally-owned Camden Snow Bowl ski area officially got underway in 2014 when contractors began tearing down the Big T-bar, bulldozing trees, and clearing new trails on the mountain.

The project had germinated years earlier, and citizens had been well acquainted with it before Camden voters approved in 2013 a $2 million bond to proceed. Another $4.5 million was to be raised through private donations, through the efforts of the nonprofit Ragged Mountain Recreational Area Foundation. In total, the $6.5 million was to pay for the earthworks, sewer system overhaul, installation of a new chairlift, relocation of the old chairlift, and the construction of a new lodge.

The goal was to improve the Snow Bowl ski area, evolve the town’s Ragged Mountain Recreation Area to a four-season enterprise, and help stimulate the region’s outdoor economy.

The redevelopment, however, began to incur unanticipated expenses, beginning with poorly executed tree clearing on the hill, which sent soil run-off into Hosmer Pond, and resulted in a Maine Department of Environmental Protection violation notice.

“It was a terrible way to treat our mountain,” acknowledged board member Heard, at the meeting.

Issues with the used chairlift added to the list of unanticipated expenditures.

By 2015, the town and the Foundation realized that $6.5 million had already been spent on the project, and the project was short $2 million for a new lodge. The Foundation resolved to help raise more money for construction of the new lodge.

According to the audit report: “During FY 2015, spending on the project and new unanticipated project cost overruns advanced rapidly. The town did not communicate additional cost overruns or ask the Foundation for funds, even though the Foundation repeatedly asked for progress billings. As a result, it appears the town used town monies in excess of the allocated $2 million to fund the project. Our review suggests that the town approved and paird approximately $750,000 in project expenses beyond the amount approved by voters.”

By 2016, the financial picture at the Snow Bowl, even apart from the redevelopment, was bleak. A deficit for the 2015-2016 season stood at $216,303, and the deficit for the previous season, 2014-2015, was $82,633. Together, the Snow Bowl hovered in the red at approximately $297,000.

The situation at the Snow Bowl began to affect other town budgets. In Spring 2016, the Select Board had chastised itself for not paying closer fiscal attention to the mountain.

Then Town Manager Finnigan froze all municipal expenditures and was directed by the Select Board to investigate ways to recover the budget. The Camden Select Board created a Snow Bowl budget team, a committee of seven men, to help sort through the finances of the municipally-run ski mountain and help shape a budget for the new fiscal year, July 1, 2016 to June 30, 2017.

After six weeks of work, the budget team sternly suggested municipal leadership to pay closer attention to the business of running its ski area, but the members voted 4 to 1 to support a $926,000 budget for the Camden Snow Bowl, as requested by then-Snow Bowl General Manager Landon Fake.

Ragged Mountain Redevelopment Project

The mountain has been supported by the town in varying degrees since the town assumed ownership of its real estate and operations in 1983.

In 1990-91, Camden voters approved funding the Snow Bowl with $149,000 of their tax dollars; in 2009-2010, it was $55,000. In 2012, and following several years of good snowfall, the town contributed zero dollars.

In 2008, Camden voters approved a non-binding measure that positioned support for borrowing up to $2 million for Ragged Mountain Recreation Area improvements, if matched by a minimum of $4.5 million raised via private money by the nonprofit Ragged Mountain Foundation.

Following that vote, project proponents commenced soliciting contributions, as well as holding public fundraisers.

Voters in 2013 approved moving forward with the $2 million expenditure for the mountain. The project included trail-clearing and building, a new chairlift, expanded snowmaking capacity, sewer and parking lot improvements, and construction of a new lodge.

The Foundation met its $4.5 million fundraising mark, with a cushion of almost $300,000.

The matching funds — $2 million of town funds and $4.5 million in donations — were to be expended together, not one before the other, and expenditures were planned to match the cash flow of donations over a two-year period.

The intent was to “provide the capacity to accommodate up to 600 skiers per day with adequate parking, lodge space, uphill lift capacity, and ski terrain serviced by snowmaking and enhance year-round trail use for hikers and mountain biking,” according to the plan.

A 2013 report generated by an independent firm, and paid for the Foundation, concluded: “All together, the improvements will provide a comfortable carrying capacity of 600 visitors and a peak capacity of 1,000 visitors with adequate parking, lodge space and ski/snowboard terrain, generating an average of 35,000 skier visits annually.”

Project projects included in an independent sustainability plan paid for by the Foundation established the business goal by which the Snow Bowl has been operating for the past three years.

Aside from debt obligation, the projected budget included no town matching funds in 2015 and 2016. Instead, the budget anticipated additional revenue would derive from the increased numbers of daily and season ski tickets, ski school enrollment and new lodge rentals.

Instead, warm winters and project over-costs dampened budgets.

Because of over-costs, the project cost increased from $6.5 million to $6.8 million, before the new lodge was even built.

Today, the project is finished, except for the new lodge.

Over the course of two years, the Snow Bowl incurred a $300,000 deficit, attributed to a slow season start, mechanical issues and warm weather.

That deficit was absolved by Camden taxpayers at June 2016 Town Meeting, when they voted to absorb it by increasing their own taxes.

The mountain, many agreed at town meeting, was integral to community fabric and economic health.

In July 2016, the Camden Select Board approved a $926,000 budget for the 2016-2017 season, with the hopes of better snowfall and stronger revenue.

Chairman T. C. Bland dissented, and Chris Morong, who was not a voting member, also opposed it. Before the vote, he wrote a stinging memo to the Select Board.

“While it is hoped that the Snow Bowl will break even or sometimes even make a profit, the Snow Bowl should be viewed as a cost center to the town,” he wrote. “We must keep in mind that the Snow Bowl is not Sunday River or Sugarloaf. While our trails have been widened, our snowmaking capabilities have expanded, and we've replaced the Big T with a Triple Chair, we are still the same small mountain on the coast of Maine that is susceptible to warm weather and rain.”

He requested the Select Board not approve the budget.

It did, however, and Fake entered the 2016 fiscal year (July 1) with the $926,000 budget.

Morong, however, continued to scrutinize the numbers. He pressed for, and received, information through the Freedom of Information Act from the town office.

In February, using numbers he received from Finnigan, he concluded that the project cost to date had been $6.8 million and suggested the Foundation had been invoiced for $3.84 million, leaving a discrepancy of $971,227. (Read Camden and the Snow Bowl redevelopment: One citizen's inquiry into the cash flow)

While town leaders and the Camden’s town attorney Bill Kelly strongly advised then against drawing conclusions from Morong’s calculations, it turns out, he wasn’t that far off.

According to Smith’s forensic audit, the town has only invoiced the Foundation for $3.8 million, and has apparently overspent its own money on the Snow Bowl project by $743,134.

Smith’s findings don’t make Morong feel any better.

“It’s discouraging that it took a private citizen to raise the issue and get results,” he said, following the meeting. “It makes me wonder, if I hadn’t done this, what would it have been like further down the road? How much worse would it have been?”

The Select Board thanked Morong April 18, and thanked Interim Town Manager Roberta Smith for helping set the town back on an even keel.

But there still looms the conversation between the town and the Foundation over the money that Camden believes it is owed by the Foundation. And there is the question of a $300,000 expenditure by the Foundation that is allocated to its own fundraising expenses.

Auditor Smith pointed out that there had never been a formalized agreement between the town and the Foundation establishing principles and details.

“We didn’t have a an greement,” said Chairman French. “Somehow, that got dropped.”

And, there is the question of how much money is really needed to construct a new lodge. Will the redevelopment project need another $2.7 million to get it built, or $3.4 million?

Camden resident Dorie Klein asked the Select Board, “With $743,134 over budget, who is going to pay it back?”

Heard responded: “That is the conversation.”

The auditor had stronger words of advice for the town.

“You chose not to follow good sound fiscal practices,” he said. It is now time “to get back to them.”

His report urged that Camden adopt best practices and a corrective action approach to government.

“You have capacity to get out of this problem,” he said. “The Foundation is a good neighbor. You are in a problem together. Work to get out of this hole.”

Board Chairman John French said: “We always had best practices but we got away with them. We owe Roberta a huge thanks. She has really come to the front for us, and Bill, and the staff. We didn’t pay enough attention to it, we didn’t ask for financials, we didn’t stay on top of it.”

And Morong, who set the whole ball in motion last year for a closer look at the redevelopment finances, is just glad the audit is over.

“I hope that the Select Board and that the Ragged Mountain Foundation can reach a positive conclusion,” he said. “I want to see the Snow Bowl get back to basics, to be a family-friendly, local ski area and stop pretending we are another Sunday River/Sugarloaf. Because we are not.”

The auditor had similar advice for the town as a whole: “Get best practices, follow your practices, and get back to basics and simplicity.”

Camden's Snow Bowl audit results delayed, no decision on DEP consent agreement, yet

Camden and the Snow Bowl redevelopment: One citizen's inquiry into the cash flow (Feb. 2, 2017)

Camden Snow Bowl Manager resigns; Camden commences new town manager search (Jan. 27, 2017)

Camden Town Manager resigns (Jan. 18, 2017)

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