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December 11, 2005Audit reveals special assessment district messTRAVERSE CITY - East Bay Township is dogged by an unfunded liability of more than $2 million, due either to miscalculations or mismanagement of special assessment districts for water and sewer projects, a new audit shows."Holy mackerel," said township trustee Beth Friend. "I've been asking for answers on special assessments for months now and I guess I'm getting it." Special assessment district concerns are the latest blow to a Grand Traverse County community rocked by alleged financial scandal. Three current or former township officials face criminal charges for embezzlement or other alleged improprieties in office. East Bay officials early this year dumped their longtime auditors in favor of a new firm that's rooted out evidence of crimes, plus a long list of additional financial and record-keeping problems. Higher rates prompt questions Friend said she began asking questions about special assessment districts in February when the township raised its water rates. She said it appeared to her that rates were raised to cover bond payments for the districts. A draft of an audit by forensic auditors at Plante & Moran obtained by the Record-Eagle shows the township properly assessed just three of 13 water and sewer districts dating to 1983. "As a result of inaccurate assessments to the township taxpayers, the special assessment districts have had a significant shortfall in funding," auditors wrote. Special assessment districts are set up to pay for water and sewer main extensions. Property owners who benefit from extensions are assessed for the cost of the work. In nine of 13 projects examined by Plante & Moran, the amounts the township assessed taxpayers in those districts fell short of the cost of the project. Total shortfall was $646,707. The audit didn't examine why the assessments fell short, but experts cited two possible reasons: The township failed to levy assessments on development properties when they hooked up to a water and sewer system; or engineers overestimated the number of properties that eventually would tie in to the system. But interest costs create the bigger concern - and liability - to the township. Bonds were used to pay for all but two of the reviewed projects, and the township may be as much as $1.7 million short in covering interest payments on those bonds, the report said. Auditors said a large number of property owners paid off their assessments early to avoid interest. The township, though, remains obligated to make interest payments on the bonds. Co-mingled funds Auditors said it was difficult to track the activity and status of each assessment district because the township treasurer co-mingled all the funds into one account and did not individually track districts. Problems compounded because shortfalls were covered by payments from new special assessment districts. "They (special assessment districts) have got to be spread out in separate accounts," said John R. Axe, bond counsel for Grand Traverse County. "That's just prudent management. You don't need a professional to tell you that." With separate accounts, a township can track the revenue for individual districts and make small rate adjustments as needed. "If you wait until a couple of years go by, you may have to raise your rates a lot," he said. County officials, who issued the bonds for the township, said they'll be taking a close look at the audit. "While they're growing, there may not be a problem but they can't grow forever," said county administrator Dennis Aloia. The special assessment study was one of the last audits conducted by Plante & Moran for East Bay Township. The final reports will be presented to the township board Wednesday at 7 p.m. at township hall. Checks and assessments Auditors also tracked tax receipts and analyzed property tax records, credit card use, questionable checks and voided checks. Audits also found no new problems with credit card use that hadn't been reported by the Record-Eagle. Township clerk Janice Gee, 59, and former supervisor Joseph Bartko, 74, both face felony charges of misconduct in office for their handling of township credit cards. Treasurer Deborah Watson faces a misdemeanor charge for alleged negligence in office. Auditors discovered a significant number of questionable, "high-dollar" checks written in 1999, 2000 and 2001. They said more than a hundred such payments require further research. County Prosecutor Alan Schneider said he doesn't expect to assign a sheriff's deputy to investigate the checks. "You can spend a substantial amount of time looking into just one check, and there's a limit on what we can do," he said. Auditors also reviewed property tax assessments for 1,400 properties that had new construction from 2000 to 2004. It discovered discrepancies between the cost of the construction and the assessed value on 97 properties with an estimated tax loss for all taxing units of $102,412 in 2004. The audit also revealed 33 properties in the township that were assessed as vacant property but had a building present. One of those properties had a building on it since 1995. Gee's daughter, Tammi Simerson, was the township assessor until she was ousted this year. The township has contracted with Grand Traverse County's equalization department to have the entire township re-assessed during the next three years. See Related Stories: Gee will stand trial next month - December 10, 2005 Accountants missed many red flags - December 4, 2005 Other townships pondering changes - December 4, 2005 Bartko hears felony counts - November 29, 2005 Two more face charges in financial scandal - November 23, 2005 News Break: Ex-supervisor, current treasurer charged - November 22, 2005 Records show township paid planner from U.P. - November 13, 2005 Signature goal reached for recalls - November 9, 2005 East Bay Township probe widens - October 27, 2005 Bid for state's assistance in removing Gee falls short - October 12, 2005 East Bay recall petition drive thriving - October 11, 2005 Gee trial delayed as prosecution continues to build case - October 1, 2005 Audit: East Bay Township clerk took $62K - September 28, 2005 Residents demand answers from East Bay board - September 16, 2005 Audit may result in more charges - September 14, 2005 East Bay residents to circulate petitions - September 3, 2005 East Bay finances: 'Little stuff' totals thousands - August 28, 2005 Prosecutor says East Bay probe may widen - August 26, 2005 Former supervisor likely purchased personal items - August 21, 2005 East Bay Township clerk is back to work - August 21, 2005 More money may be missing in East Bay - August 16, 2005 Lile suggests shutting down East Bay government - July 22, 2005 East Bay Township supervisor expects 'real ugly' meeting - July 22, 2005 East Bay assessor to be paid as fate is determined - July 12, 2005 Errors pile up in review of East Bay records - July 10, 2005 Public backs East Bay probe leading to arrest of clerk - June 28, 2005 East Bay Township clerk charged with embezzlement - June 23, 2005 Township officials pushed for audit leading to Gee's arrest - June 23, 2005
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