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October 1, 2008

 

Audit faults Virgil-Greek Peak relations

Lack of oversight may have cost taxpayers thousands, state says

Virgil

Joe McIntyre/staff photographer
The pavilion at Hope Lake is seen this morning, with the lake in the background. A state audit released Tuesday found the town of Virgil’s failure to oversee Greek Peak’s operation of the town water and sewer systems and Hope Lake recreation area cost taxpayers tens of thousands of dollars.

Click here to view the audit (acrobat pdf)

BY ELAINE HUGHES
Staff reporter
ehughes@cortlandstandard.net

VIRGIL — A state audit released Tuesday found the town’s failure to oversee Greek Peak’s operation of the town water and sewer systems and Hope Lake recreation area cost taxpayers tens of thousands of dollars.
The state Comptroller’s Office examined records from January 2006 to September 2007 to determine if the town had monitored contractual operations with the ski resort and supervised other projects, such as the realignment of Clute Road.
The state ordered the audit after residents complained about the relationship between the town and Greek Peak.
In 90 days, the Town Board must submit a plan to the state detailing how it will address the recommendations.
The problems uncovered by the audit involved Greek Peak’s operation of the town’s water and sewer systems, a road reconstruction project adjacent to Greek Peak’s property and the man-made Hope Lake built on land the company donated to the town. The lake is a key piece of Greek Peak’s plans to develop a year-round tourist destination.
Town Board member Mary Beth Wright said the board had read initial drafts of the state’s report and had already implemented several of the state’s suggestions, including having the town collect water and sewer fees. Greek Peak had received $240,000 in payments from customers and turned the money over to the town.
“We take this very seriously,” Wright said, adding the audit might be discussed at the board’s upcoming meeting on Oct. 9.
Al Kryger, president of Peak Resorts, the corporation that owns Greek Peak ski center and relatyed developments, said he had not read the full report yet but thought the Comptroller’s Office was only trying to “make political hay” by issuing the report.
The company will sit down with town officials to resolve the issues in the audit, Kryger added.
Former Town Supervisor Jim Murphy said the audit’s purpose was to make sure the town’s procedures were the same as other state municipalities.
“It wasn’t that we were doing anything wrong,” Murphy said. “We just weren’t doing things the same as the rest of the towns in the state.”
In 1999, the town purchased water and sewer systems from Greek Peak for $680,000 because it could secure a bond for upgrades more easily than the resort. The town also wanted to possibly expand the sewer lines with Virgil growth’s, Murphy said.
Two separate engineers conducted a survey of the water and sewer lines, and the board enacted recommendations for Greek Peak to continue operating the systems and administering billing for water and sewer charges. There are 154 users connected to the water and sewer system.
At the time, the town employed only six people and did not have anyone licensed to operate the systems, said Murphy, adding that it is common for towns to contract these operations to a private company.
The ski resort collected charges for the water and sewer system and then turned the documents and money over to the town.
Greek Peak thought it was correctly administering the water and sewer charges and has no problem with the town taking over the billing, Kryger said.
The audit noted that of the $33,000 in overdue water and sewer charges, $32,000 of that was owed by Greek Peak. Moreover, the audit found, Greek Peak failed to levy the overdue charges on its property tax bill as it was required to do.
The audit also pointed out the town failed to secure other bids for the development of Hope Lake, which Greek Peak donated to the town in 1999.
The town knew a limited number of companies would be interested in operating Hope Lake and awarded the bid to Greek Peak, which was the only bidder.
Murphy said he did not understand why the auditors could not find a copy of the licensing agreement for the resort to run Hope Lake Park.
A copy was submitted to state Office of Parks, Recreation and Historic Preservation, which was overseeing the administration of a $40,000 grant awarded to the park, Murphy said.
The state’s recommendations included consulting an attorney to collect money owed for interest and penalties on delinquent water and sewer accounts, payment of delinquent accounts that should have been re-levied on property taxes and payment of monthly service fees and reimbursed expenses not allowed under contractual agreements.
Wright said the majority of the recommendations probably would not create any additional costs for taxpayers.
“A lot of the recommendations just don’t involve a lot of money,” she said. “For instance, we can advertise bidding on a project without spending anything ourselves.”
In a statement included in the audit, Town Supervisor John Kaminski thanked the state for its review and said the town intended to “take appropriate action to correct all deficiencies.”
Kaminski could not be reached for further comment.

Highlights of the audit’s findings

  • The town inappropriately allowed Greek Peak Resorts to collect $240,000 in water and sewer charges, which were then turned over to the town.
  • Greek Peak did not levy $32,000 in late water and sewer payments it owed on its property taxes.
  • Twenty water and sewer users were not billed correctly by the resort for late penalties. Of these users, 18 were overcharged, and two were undercharged, which resulted in the users being overcharged a total of $300 in late penalties.
  • The town overpaid Greak Peak $40,000 in monthly sewer service fees and more than $8,000 in monthly water service fees.
  • Monthly water district fees the town paid to Greek Peak were increased in February 2007 from $1,200 to $2,000 per a month without any discussion or formal action from the board, and sewer fees were increased from $1,200 to $5,000.
  • The town did not establish formal budgets for upgrades to the water and sewer system and obtained financing based solely on engineer estimates.
  • The town didn’t require Greek Peak to provide documents on the water systems staffing and annual flushing.
  • Town and company officials could not produce a copy of the three-year licensing agreement for Greek Peak to operate Hope Lake Park.
  • The town spent $13,000 on materials for an ice skating rink and $49,000 for labor and materials for a food concession stand at Hope Lake Park without seeking competitive bids as required by state law.
  • Town officials spent $11,000 on legal services and $13,000 on engineering services relating to Hope Lake without securing requests for proposals.
  • The auditors found no documents indicating the town authorized a change order for $105,000 relating to the dam and impound project at Hope Lake Park. The town also did not check whether those services were subject to competitive bidding.

 

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