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Town hasn't paid $3.2 million in vendor bills over past 6 months

Employees say they were lost in the shuffle

May 20, 2016
By John Morton ( , Fort Myers Beach Bulletin, Fort Myers Beach Observer

The town of Fort Myers Beach has not paid the vendors working on its water rehabilitation project for nearly six months, creating an accounts payable scenario of $3.2 million.

In fact, only $65,000 has been paid on the work that began last fall. It is mostly being handled by Tetra Tech for engineering and Mitchell & Stark for construction, and Town Manager Don Stilwell told the Town Council on Monday that neither will be charging any late fees.

The pile of bills was brought to light by Jim Steele, a member of the town's Audit Committee who also serves as a volunteer consultant. He reports that when he questioned the lack of payment, public works director Scott Baker told him he had consistently forwarded all bills to director of administrative services Maureen Rischitelli. She reported to Steele that she had received nothing until March 22 - the day they all appeared with that date stamped on them. They date back to Sept. 30.

Baker had been initialing bills as he received them, but not dating them, Steele said.

He also said that at a recent Audit Committee meeting a member asked out loud "Is there a cover up here?"

Rexann Hosafros, a member of the council who attends Audit Committee meetings as the council's liaison, didn't see it that way.

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"I believe we had a serious flaw in paperwork," she said. "I consider that an employee issue, which is handled by the town manager."

In reaction, Stilwell on Monday told the council he is asking the Lee County Clerk of Courts to come in to examine the town's procedures.

Said Hosafros, "I think that's the appropriate thing that should happen."

Risk exists regarding loan request

Steele isn't convinced it was an innocent mistake, saying the town likely felt the pressure of staying out ahead of Lee County on the Estero Boulevard project, which features work by both entities. Still, he said "It's inconceivable how this could happen" in regard to the non-payments.

When asked if the town had the cash on hand to pay the bills, Steele said "I suspect not."

Asked the same question, Rischitelli was vague in saying "Town funds consist of cash, reserves and the pending loan."

The loan to which she refers was applied for last week from the state's revolving loan fund, with Fort Myers Beach requesting $6.8 million. Rischitelli has warned the Town Council several times that, if received, the funds may only be used for work going forward, not to pay off debt. Whether the accounts payable will be seen as debt is undetermined.

"The conditions of the loan will determine (that)," she said. "The portion of the project we are applying for (from Crescent Street to Lovers Lone, considered the first phase) is still not complete and may meet eligibility as the loan application has been a work in process."

However, Steele worries that asking for a loan to help pay off debt may not sit well with the state, which typically audits an applicant.

"They may see that (accounts payable number) and say, 'Oops, sorry,'" Steele said.

And if so?

"Well, that could be a dilemma," he said.

Options exist

One option would be to pursue a loan from a private institution, he said, but landing a decent rate could be tricky. The state's fund has a ceiling of 2 percent interest, and Steele is confident the town could qualify for 1.5 percent because it is limited in its property-tax collection capability - roughly $3 million.

According to records, the town did line up a loan from SunTrust back in October of 2014 for $7.7 million at an interest rate of 1.8 percent, Steele said, which was orchestrated by former finance director Evelyn Wicks. It did have a provision which said the bank could call for complete repayment after three years, which prompted Rischitelli to pass on it upon her arrival shortly thereafter.

"I think that's where the town made a mistake," Steele said. "It had $5 million in cash at the time, so it would have been in good shape."

Today, the town has $500,000 on hand in the form of an emergency fund, Steele said, and another $1 million earmarked for beach re-nourishment. If it felt it needed to pay a portion of the vendor bills right away, Steele said the town could "uncommit" those dollars.

As for raising property taxes, Steele said the money is needed immediately and statutes restrict the amount and frequency of increases.

"They would have to triple them at the next opportunity," he said. "That's not going to happen and it would be too late."

Steele said the town should also avoid another intra-fund transfer, which requires repayment to the fund from which the money came. That is what it did to fund part of its separate stormwater project, and hence the need of recently creating a monthly fee to recoup what had become $2 million in debt.

Little reaction at meeting

Meanwhile, council member Tracey Gore voiced surprise that no other council members questioned Stilwell when the matter came up at Monday's meeting. At that time, she asked Stilwell this: "So, hopefully the state fund will cover that and then some? And how did we get to this point in just a few months?"

Responded Stilwell, "When the town set up these projects years ago they did it with funding from the reserves and we don't want to do it that way anymore. We've got to have a funding source when we make a commitment to do something. It's not a situation where we're about to go under or anything."

On Wednesday, Gore was still wondering about a lack of urgency.

"I promised to let the public know what was happening in our town," Gore said. "I think it is an extremely important issue, but I can't speak for the other council people as to why they didn't want to discuss it. I commented publicly at the council meeting on what I knew - and I am still waiting to find out how we ended up sitting on six months worth of receipts."

She also warned the town at the meeting that contractors may chose to avoid bidding on work here once word gets out that bills aren't be paid on a timely basis.

More borrowing ahead

The $6.8 million the town is seeking "will get it through this year and into next year," Steele said, with more borrowing needed after that. The water project is estimated to be completed by 2020 and $6.9 million in cash has already been spent on it during the past two-plus years, he said. He envisions the need to borrow $34 million overall.

With that will come the need to increase water rates, he said, to cover debt service. Through what he called a "down and dirty" tax-flow projection, Steele sees a need for four consecutive annual rate increases at a monthly average of $2.75, totaling $11 at the end. The average person here uses 5,000 gallons of water per month, he said, with an average water bill of $40.05.



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