Wednesday, December 22, 2010

City, citizens face off over accounting

Ketchum agrees to footnote about URA loan

Express Staff Writer

Ketchum City Administrator Gary Marks presents a report to the City Council on Thursday, Dec. 16, in response to two Idaho Mountain Express stories from Dec. 8 and 15. Photo by David N. Seelig

Ketchum City Administrator Gary Marks leafed through check after check during a City Council meeting last week to show the council and public how each and every cent of $1.49 million in question was transferred from the city's affordable-housing fund to buy a pair of properties three years ago.

"There's been a clear trail of where the money has been spent here—that's not an issue," said Sun Valley resident Jim Donoval, a former certified public accountant and one of the topic's key critics, following Marks' presentation at the meeting on Thursday, Dec. 16.

Marks' presentation was done in response to two Idaho Mountain Express stories about the questionable accounting of this spending, published on Dec. 8 and Dec. 15. The two properties are the land at the corner of First Street and Washington Avenue and the land containing the visitor center on Sun Valley Road and the Ketchum Town Square.

About six months after the purchases, Donoval was one of the first people to question why the properties were bought with money restricted for development of affordable housing. He acknowledges that the recessed economy has stalled funding for affordable-housing development, as the City Council and Marks have argued. However, Donoval has repeatedly asserted that the annual financial statements of the Ketchum Urban Renewal Agency—which is separate from the city and owns the two properties—need to clearly state that if affordable housing is not provided at least equal to the $1.49 million spent, the URA must reimburse the city's affordable-housing fund. City Attorney Stephanie Bonney has confirmed that use of the money is limited because developers paid it to the city in lieu of actually providing affordable housing, as the city requires.

City Accountant Dennis Brown told the council Thursday that adding the footnote that Donoval and others are requesting would be "easily done," with the URA board's approval. The URA board, though legally separate from the city, consists of the mayor and all four City Council members, plus two community members added this winter. Despite the ease of inserting such a footnote, the URA board has resisted Donoval's pleas to include it in its annual financial reports from now up until 2035, if housing isn't provided by then. State law mandates that the URA be dissolved in 2035. The footnote would ensure that if housing isn't provided by 2035, the URA board, destined to be different members by then, would know it has an obligation to repay the city $1.49 million.

In the mere three years since these properties were bought, only Mayor Randy Hall and Councilman Baird Gourlay remain from the URA board and city leadership that then existed. Marks, in charge of all finances for the city and URA, also came afterward.

"I find it insulting that the paper wrote these things about us," said Councilman Baird Gourlay about the Dec. 8 and 15 newspaper stories, adding that the "intention" of creating the URA was to provide affordable housing. "That's what we've been about."

However, Donoval and resident Phyllis Shafran aren't questioning the URA board's "intentions" so much as its actions. They ask what if the URA doesn't follow through and provide this $1.49 million worth of affordable housing in a couple of years, 10 years or the maximum 25 years? Who's to say those in charge will remember or even know of the loan taken long before their terms, unless a reminder is staring them straight in the face, clearly spelled out in every annual financial report?


"Why is it so hard to put a footnote on it?" Shafran asked the council on Thursday. "That's all I want, so that in 2035 when we're all gone and dead, someone will say, 'What happened to that million four.' That's all I ask for."

The possibility that this money could fall through the cracks, which grow with time, isn't a stretch. Up until a Dec. 9 meeting with an Express reporter, Marks was only aware of $1.39 million spent to buy the properties. The paper informed him on Dec. 9 that the total was actually $1.46 million. Marks said he would look into the difference and found that his predecessor, Ron LeBlanc, used additional affordable-housing money for interest payments to buy the Washington Avenue property. In his research leading up to his Dec. 16 presentation, Marks discovered that the total came to $1,495,830 for the two properties, about $106,000 more than he thought at the time of the Express interview.

Donoval asserts that this confusion existed from the beginning because of the city's inability to transparently show the transactions at the time they occurred three years ago. Even though the City Council approved resolutions in 2007 to use city money to buy the two properties, the resolutions didn't say anywhere that the money was being taken from the affordable-housing fund, just that city money was being used.

The URA's 2009-10 financial report, recently released, has included Donoval's requested footnote for the first time, but he asserts that the part that matters still isn't included—the dollar amount owed.

The footnote reads that the URA used "funds restricted for programs, including but not limited to the purchase of land and/or buildings, which provide for affordable community housing within the boundaries of Ketchum. These funds are restricted for affordable housing in the financial statements."

The 2009-10 financial report also restricts money for "affordable housing" for the first time, but only $489,167, which City Accountant Brown said is the amount left over after the URA's debt obligations.

Donoval points out that the $489,167 figure doesn't provide any indication as to how much the URA owes the city—$1.49 million.

"It does not show that, and to me, that's a problem when it comes to public accounting," he said.

Marks recommended to the council that this footnote be added, including the $1.49 million owed.

"We need to address this issue once and for all," Marks said. "We need to do whatever needs to be done."

Councilman Larry Helzel agreed.

"I think what the public is asking for here is transparency," Helzel said. "I don't think they are claiming that the money was spent for improper purposes or anything like that."

However, the council can't make a decision for the URA when in session as the council. Donoval said in an interview that that's the root of the problem—that the council and mayor serve as both the city leaders and URA board. He contended that they're incapable of acting in the best interests of both the city and URA when those interests conflict, such as the URA's borrowing affordable-housing money from the city. He said the same goes for the city administrator and attorney, who also act as the URA's administrator and attorney.

Trevon Milliard:

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