Roads over budget far more than other towns (March 16, 2011)

CHELSEA — The town drove its road budget into the red far more often during the past six fiscal years than three similarly-sized central Maine towns did.

Chelsea spent more than budgeted for roads in five of six fiscal years from 2004 to 2009, averaging a 5.9 percent annual overdraft during the period.

With the 2004-05 fiscal year, Chelsea turned in its worst performance, spending 21.8 percent more on roads than budgeted and shifting an unfunded liability of $151,631 onto local taxpayers.

Only once during the period studied did Chelsea come under budget: the 2008-09 fiscal year, when it was under budget by 3.8 percent.

The town’s contracting methods are the focus of at least one police investigation, and an analysis of how the town performed on its road plans shows that — while not uncommon elsewhere — shortfalls in a road budget happened much more frequently in Chelsea.

Hard road to hoe

As Chelsea’s road contracting methods come under the scrutiny of law enforcement, the Kennebec Journal compared the town’s performance on managing its road expenditures to that of other local towns with similar population and area.

Readfield, Jefferson and Pittston are the closest Kennebec County towns in terms of population, and also are similar in terms of square miles.

Though the comparisons aren’t perfect — towns may embark on capital improvement projects or have larger road needs overall in a given year — looking at budget variance provides a window into how towns manage and scrutinize their spending on roads.

For example, Pittston never recorded an overdraft in its road account over the period studied — even though its annual road spending was almost always greater than Chelsea’s, according to audited town reports reviewed by the newspaper.

Observers of municipal government say that, given the vagaries of weather and the wide variety of needs from one year to the next, it’s easy to overdraft a road account in a given year.

“You never know what winter’s going to be like,” said Kate Dufour, a legislative advocate for the Maine Municipal Association who handles transportation issues at the Legislature. “So, you could be paying all kinds of overtime, buying more salt and sand than you expected.”

That’s why cushions are in place to give officials flexibility to increase the amount they had planned to spend, Dufour said.

Title 23, Section 2705 of state statute allows a road commissioner to exceed by 15 percent what voters had appropriated for roads at annual town meeting.

“This (15 percent cushion) gives you some kind of flexibility to deal with Mother Nature,” Dufour said.

Opaque overdraft

Indeed, Dufour said annual fluctuations in road budgets are common. And there’s no penalty for officials who exceed budgeted spending by more than 15 percent.

But in cases of overdrafts exceeding 15 percent, Dufour said officials are required to go back to voters for permission to raise more money, or to move funds from a different account.

“They’d have to ask for permission to authorize that overdraft,” she said. “It would have to come out of someplace — either the designated fund or another fund. And they would need to get permission from people at a town meeting.

“Usually, (voters) understand if you explain why you went over.”

There’s no record Chelsea voters were ever asked to authorize moving funds to cover the 21.8 percent road budget shortfall from 2004-05 — either at a special town meeting or the 2006 annual Town Meeting — an apparent violation of state law.

Voters at Chelsea’s 2006 Town Meeting approved a pro-forma article allowing officials to “carry all remaining overdrafts in the prior year budget to the Fund Balance for the 2006/07 budget.” That would have meant adding the $151,631 liability to the following year’s budget.

The town audit for the following fiscal year, which ended June 30, 2006, shows the town was $221,118 in the red. But it doesn’t refer to the $151,631 overdraft from the prior year, and it doesn’t specify how the overdraft was covered.

Reserving money

Robert Drisko, a candidate for selectman who served as town manager from 1998 to 2005, believes the series of overdrafts between 2004 and 2010 is the fault of Carole Swan, chairman of the Board of Selectmen.

Swan was arrested Feb. 10 on municipal corruption charges connected to the awarding of town road work.

Former town officials, including Drisko, have alleged Swan acted as the town’s de facto road commissioner so she could disburse much of the town’s road work to Marshall Swan Construction — a construction firm owned by her husband.

When Drisko began as town manager in 1998, he said the town had done a poor job setting aside money. By his 2005 retirement, Drisko said Chelsea had a $480,000 reserve account.

Drisko came back as interim town manager in 2008.

“Guess what? … the account had been wiped out,” he said. “I believe that a good deal of the funds in the undesignated fund balance account were funneled into road work by Carole (Swan).”

Drisko said Swan used reserve account money without a public vote to cover road budget shortfalls — especially by 2008, when the road budget had ballooned to double what it was only two years earlier, in 2006.

Drisko said voters at Town Meeting in 2009 approved a warrant item giving selectmen permission to automatically transfer up to 10 percent of the budget of any line item account to another. The allowable amount formerly was 3 percent.

“I do recall that Carole (Swan) proposed that this type article be included in the town report so a special town meeting would not have to be called to transfer budgeted funds from one account to another account,” Drisko said.

“Carole always tried to get more than was budgeted in that road budget,” he said. “We had to fight that all the time.”

Linda Leotsakos, a former Budget Committee member, said it is a fairly common practice to move money from one account to another, with approval of the voters.

But she said a 10 percent authorization is “high.”

“You can see that significant amounts could be transferred with the apparent approval of voters” after the 2009 Town Meeting vote.

Federal grants booked

But the worst year for Chelsea’s road spending was well before that, in 2004-05.

That’s when the town went over budget by 21.8 percent after receiving $211,000 in emergency funds from the Federal Emergency Management Agency for storm damage in 2004, according to former Selectman Rick Danforth.

Danforth said the town did not receive what was anticipated from FEMA, so new money had to be appropriated to cover the total cost of some emergency road work.

“We had already done the work and were hoping to get the full amount down the road, but we didn’t,” Danforth said. “We only got a partial payment from FEMA.”

He said because the work had been declared an emergency, officials did not need voters’ approval for the overdraft.

Danforth said a special town meeting had been called to vote on funds for the Nelson Road bridge.

Drisko said costs to repair a 15-foot-deep hole in a Nelson Road bridge also was included in the 2004 overdraft. He said the town fixed the hole, paid an engineering firm for a wetland study and purchased 20, 48-inch culverts.

“We planned to do that project the following year,” Drisko said. “We bought the culverts and stored them on property next to the bridge. We did a patch job, which was fairly expensive, and had that project set to do in the following year. When I retired, the project didn’t get done. I don’t know what happened to those culverts.”

Town managers in other towns said it’s risky to credit the full amount of an anticipated FEMA grant, because those awards often fall short of being fully funded.

Is it an emergency?

Meanwhile, Drisko said a bona fide emergency is the only reason a town should exceed its budget for roads.

“It really shouldn’t be a continuing thing,” Drisko said. “I can see once in a while, but on a continuing basis? No way. A budget would be the planned work, and that should stay within the budget. If there’s an emergency, that’s beyond your control.

“I can’t see any town arbitrarily going out and paying for more roadwork, unless there’s an emergency. That’s the only time.”

The Kennebec Journal has reported several instances in which emergency road work was doled out without bids to Marshall Swan Construction, including a no-bid $66,600 culvert project on Windsor Road in 2009 that sparked environmental sanctions from the state.

Marshall Swan Construction also won 93 percent of Federal Emergency Management Agency disaster funds paid to the town — $315,270 — after the Patriot’s Day storm of 2007. Town officials have been able to document a competitive bid for only one of five of the Patriot’s Day projects awarded to Marshall Swan.

In an August 2010 interview, Carole Swan — an 18-year member of the Board of Selectmen — vigorously denied funneling work to her husband’s firm, calling those allegations “a vendetta.” A judge is currently deliberating whether to grant her access to the Town Office while a graft investigation proceeds.

Staff Writer Matthew Stone contributed to this report.

Mechele Cooper — 623-3811, ext. 408

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