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Final state audit claims LDC costs taxpayers

Rochester Business Journal
October 12, 2012

Monroe County taxpayers are paying $39 million more than necessary for public safety because services were obtained through a local development corporation, the final version of a state audit released Friday states.

The audit by the Office of the New York State Comptroller describes the deal as seriously flawed because it favored one company affiliated with a former county administrator and others with close ties to the county.

“This is a bad deal for Monroe County taxpayers,” Comptroller Thomas DiNapoli said in a statement. “Officials claim they were attempting to save money. Instead they saddle taxpayers with unnecessary costs for the next two decades.”

The audit—the third involving a Monroe County LDC in the last 13 months—covered the period from Jan. 1, 2010, to February 29, 2012.

In a response included in the most-recent audit, the county defends the LDC, saying the public-private partnership saves taxpayers $10 million. It responded to charges of favoritism by saying the process fully complied with state law.

The administration of County Executive Maggie Brooks released a draft of the audit Aug. 31, along with a prepared response characterizing the audit as “baseless and deeply flawed.”

“Mr. DiNapoli’s unnecessary reviews of successful public-private partnerships suggest that he is hostile to utilizing the efficiency and ingenuity of the private sector to protect taxpayers and reduce the size of government,” Chief Financial Officer Scott Adair said in the statement.

“The LDC model was actually established in law by New York State government to allow local governments to do exactly what Monroe County is doing right now: take on important projects, while achieving savings for taxpayers.”

Unfavorable contract terms will result in overpayments of $39 million, the audit states.

Among the biggest issues are additional costs of $12.7 because the contract did not specifically address vendor discounts, the audit states. Also, the county took on $5.5 million in debt to pay for replacement equipment and coverage enhancements that should have been incurred by the LDC.

Auditors also found $20.6 million of the total cost of the contract could not be accounted for.

The county entered into a 20-year contract on Jan. 1, 2010, with newly formed Monroe Security and Safety Systems LDC—known as M3S—to provide public safety and security systems and services, the comptroller’s office said.

Shortly thereafter, M3S reached an agreement to pass the terms of the contract to Navitech Services Corp., the audit states. Navitech’s chief operating officer is Stephen Gleason, who resigned in 2008 as the county’s chief financial officer.

The $212 million agreement will cost the county an average of $11.2 million annually over 20 years, the audit states.

The first of the three audits of a Monroe County LDC by the comptroller’s office was released in September 2011. The second was released in June.

The September 2011 report determined that the county wasted significant dollars by creating an LDC to support its information systems and paying the LDC $1.9 million in management fees.

An audit released June 1 found that an LDC created to issue bonds to cover the county’s operating expenses cost taxpayers $33 million in debt.

The county has disputed both audits.

(c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.


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