CT Construction Digest Thursday April 7, 2022
Some construction audits were performed years later, reviewed by Diamantis himself
Dave Altimari and Andrew Brown
It took the state 12 years — the same amount of time a student can pass from first grade to college — to conclude that the town of Manchester owed it nearly $5 million due to “ineligible costs” in a state-financed reconstruction of its middle school, Bennet Academy.
The good news for Manchester is that the auditors worked for the Office of School Construction Grants & Review, the same office that initially signed off on the spending. After an appeal to the office’s director, Kostantinos “Kosta” Diamantis, he agreed to waive the debt.
“Luckily, Kosta agreed with our argument,” said Kimberly Lord, the town’s finance director, who said the state’s initial finding didn’t take into account special legislation that altered the reimbursement rate.
The Manchester case, one of 80 reviewed by the Connecticut Mirror, exposes some of the issues now being reviewed by forensic audits commissioned by the administration of Gov. Ned Lamont: audits were woefully late, and the decision to waive some of the overpayments to towns essentially rested with one man — Diamantis.
The audits, obtained by CT Mirror through a Freedom of Information request, were completed between 2018-2020 and will be part of the forensic audit initiated by the state after the federal government launched an investigation of school construction grants overseen by Diamantis.
The federal investigation began last October, shortly before Diamantis was fired from his position as deputy secretary of the Office of Policy and Management and simultaneously retired from his job as head of OSCG&R. The Lamont administration then moved the school construction grant program, which was transferred to OPM when Diamantis was appointed deputy secretary, back to the Department of Administrative Services.
DAS Commissioner Michelle Gilman and Deputy Commissioner Noel Petra announced last month that the agency is hiring an outside firm to “audit the auditors” who were on Diamantis’ school grants team.
The CT Mirror’s review of the audits reveals a dysfunctional system for examining and managing billions of dollars in school construction projects.
The records show OSCG&R was years behind in auditing school projects, mainly because municipalities weren’t submitting the proper form, called an “ED049F,” to close out their construction projects and auditors weren’t properly tracking the projects.
The review also found 15 projects, including the Bennet Academy job, in which auditors determined the municipality owed the state money. While a few paid the bill, some municipalities got the costs waived and at least one town inquired how to pay back the state but never got a response from OSCG&R, the audits show.
Many of those audits were conducted at least a decade after projects were completed, requiring local officials to hunt for old records to prove they spent the state’s money correctly.
“We had to go back and try to retrace everything and we discovered there had been special legislation passed that altered what the reimbursement rate should have been,” said Lord.
The Manchester middle school cost about $14 million to build, but auditors determined the state should only cover about $9 million and that the rest were “ineligible costs.” Lord said the special legislation should have negated the auditors’ findings.
Nine months after getting the bill, Manchester officials presented their case to Diamantis.
In a January 2020 e-mail to Manchester officials, Michelle Dixon, an education consultant on Diamantis’ 15-member school construction grant team, wrote that the state would “grant an ineligible costs waiver that effectively reduces ineligible construction costs typically due projects of this type with Director (Diamantis’) approval.”
In an interview Tuesday, Diamantis said that, as director, he had the ability to issue an “ineligible cost waiver” during the audit process.
“I get recommendations from my team and if they agree we should waive a cost then I can do that,” Diamantis said.
While most of the audits were directed to the DAS commissioner, Diamantis and other members of his team, three audits were sent directly to Diamantis and not to the commissioner. One of those three was for the Birch Grove Primary School project in Tolland, which is part of the federal investigation into how OSCG&R and Diamantis, in particular, may have influenced school building contracts.
The federal grand jury has subpoenaed not only Tolland officials for documents related to their communication with Diamantis about that project, but also the general contractor, D’Amato Construction of Bristol, and the construction manager, Construction Advocacy Professionals (CAP) — both of which were hired through no-bid contracts.
Diamantis said the Birch Grove audit may have come directly to him because it was only for the portion of the project that was 100% funded by the state. There were other parts of the project that the state funded 89%, he said.
“That would have just been a desk audit because the project was fully funded so there really was nothing to audit or review,” Diamantis said.
In a written response last week to questions from the CT Mirror, DAS spokeswoman Lora Rae Anderson confirmed that when OSCG&R was moved to OPM, the audit unit reported directly to Diamantis. She said that “structure was changed when OSCG&R moved back to DAS in late October 2021.”
“The school construction audit division has a separate reporting chain through the DAS Business Office and not to the Director of OSCG&R,” Anderson said. “This change was meant to separate out the audit function from grants and plan review program.”
At a press conference in early March to discuss the agency’s legislative priorities, Petra said changing the auditing process was a clear priority when they began reviewing the program last October.
“One of the first things we did when OSCG&R came back to DAS was to remove the internal auditors from that team and put them at an arm’s length distance over in the business office,” Petra said. “And then we followed up with a meeting where I made it very clear to them that they no longer had any reporting to me or the director of OSCG&R at all.”
Petra added that he told audit team that “… if any problems come up, if there was any question that made them concerned or raised any concerns at all, they were to go directly to the commissioner.”
But Diamantis disputed that the auditors reported to him directly and said he welcomed the state’s forensic audit.
“When I got there we had projects that were still open from 1998 that the state had never bothered to close out and audit,” Diamantis said. “I made it clear to any town that wanted more money for a new school project that if you don’t complete the paperwork on your old ones first, there would be no more money. I think they’ll find a lot more projects got closed out after I got there.”
Mostly formulaic
The state received a federal grand jury subpoena seeking all emails, text messages and attachments involving Diamantis and a broad range of construction projects on Oct. 20, eight days before he was fired from his OPM position and retired from his job as school construction grants director.
A second request for documents containing certain “search” words made it clear federal authorities were investigating Diamantis’ oversight of the OSCG&R program and how it doled out state funding for school projects.
Diamantis’ team included at least four auditors and a supervisor, Robert Ficeto, who was copied on every audit, as were Diamantis and Dixon, the education consultant on the team, according to the Memorandum of Understanding created when Diamantis moved to OPM.
At the time the MOU was signed by then-DAS Commissioner Josh Geballe and then-Secretary of OPM Melissa McCaw, there were three vacancies on the audit team, which some municipal officials believe delayed the grants team from completing the audits on a more timely basis.
The audits were usually addressed to the DAS commissioner, which was initially Melody Currey but then shifted to Geballe after he assumed leadership of the agency in 2019.
However, a few were addressed directly to Diamantis. None were addressed to McCaw even though she oversaw Diamantis and the grant program until he was fired.
The audits are mostly formulaic - five- or six-page documents that list ineligible costs for every project - but in many cases give little detail as to their findings.
Some audits reference municipalities not giving contracts to the lowest bidder, but there is no indication of how the state responded, if at all, to that finding.
For example, a March 22, 2019 audit of the New Haven Amistad High School project noted that the Local Education Authority (LEA) didn’t utilize the lowest possible bidder without specifying who the contractor was or how much they were paid.
But a Feb. 1, 2019 audit of multiple Bridgeport school projects found that a $24,000 contract with an architectural firm was not properly bid and the state wouldn’t pay the bill.
About a quarter of the audits indicated that bid documents were missing, some of which exceeded the state’s $50,000 no-bid threshold. And more than half of the audits listed “unsubstantiated change orders,” meaning that state officials did not approve the change order and therefore the municipality must cover the costs.
Anderson, the DAS spokeswoman, said once a local school board certifies a project has been completed, it has one year to file a report with OSCG&R, kick-starting the audit process.
“Often, this report is incomplete and OSCG&R works with the district to get the required information,” Anderson said.
A preliminary audit is then completed by OSCG&R and sent to the municipality for review.
“The district has an opportunity to weigh in on the draft audit report and possibly provide additional information. Once the final audit report is complete, it is transmitted back to OSCG&R for either a release of the retainage or a collection of overpayment,” Anderson said.
No response
Overall, school construction auditors found 15 projects in which local officials owed the state money because they had used funding to pay for unauthorized expenses, such as employee salaries or insurance payments.
Manchester had two of those projects. The first was the middle school, for which state auditors initially determined the town owed nearly $5 million.
In the second case, a July 9, 2019 audit found that the city owed the state $148,000 for the Highland Park Elementary School project. After reviewing the state’s claims, Manchester officials agreed to refund the money but have been unable to do so, according to Lord, the city’s finance director.
Lord sent an email to the state on October 18, 2021 acknowledging the city owed the money and asking how they should pay it.
“Based upon the audit results, we owe the State $148,575. We have this booked as a liability in our financial software; we still owe you this money. Will the State send us an invoice eventually, or will this amount be automatically deducted from another State payment, such as ECS, or a progress payment on a current project?” Lord wrote in the e-mail shared with the Mirror.
No one from OSCG&R has ever responded, she said.
DAS did not respond to a question about this audit.
$4 million typo
Not all of the delays in completing audits are the fault of the OSCG&R team. In some cases, audits were delayed because local officials failed to submit proper documentation to the state when their project was completed.
Anderson said the school construction grant process requires the local Board of Education (BoE) to certify the project is complete before OSCG&R auditors start their work.
“This is a local process, and in some cases, that can take many years,” Anderson said. “For example, prior to 2011, there was no time limit on the submission of change orders which meant that a district may have received its Certificate of Occupancy without completing a review of all change orders. The review of change orders, however, is necessary for a BoE to certify the project as complete.”
The audit for the Rogers International School in Stamford wasn’t completed until 2019, a decade after the school was built. But Stamford Finance Director Karen Cammorata said the city was partially to blame because they didn’t submit the “ED049F” form until 2017.
Cammorata said it took the state two years to complete the audit, at which point they informed the city it owed the state $2 million.
City officials started hunting down documents and receipts to determine how that could be when they noticed the audit contained a typo.
The preliminary audit stated the city “owed” the state $2 million, instead of what it should have said, which is the city “is owed” $2 million. The missing word meant Stamford was actually owed $2 million, which the state paid.
“It’s a little bit on both sides. The municipality has to submit the documents in a timely fashion and then they have to do the audit and I think that they were short-handed for awhile,” Cammorata said, adding that state auditors said part of the reason for the delay was due to staff vacancies.
State officials have acknowledged the auditors on OSCG&R were not tracking projects in a timely manner and they are trying to address it with new legislation.
As part of a comprehensive school grant bill currently before the legislature’s Education Committee, DAS officials want to require each town or regional school district to submit a “notice of project completion within three years from the date of the issuance of a certificate of occupancy for the school building project by the town or regional school district.”
The bill also states that if the school district doesn’t meet the three-year timeline to submit the CO, “the commissioner shall deem such project completed and conduct an audit of such project.”
Downtown projects in New London, Norwich to receive state grant funding
Claire Bessette and Greg Smith
New London and Norwich each will receive multimillion-dollar grants to boost downtown development projects through a $45 million Connecticut Communities Challenge Grant program announced by Gov. Ned Lamont on Wednesday.
New London will receive $5.9 million to help renovate several buildings on State, Bank, Water and South Water streets, and Norwich will receive $2 million to assist a Baltic construction company to revitalize the derelict former YMCA property at a prominent Main Street gateway.
Under the Connecticut Communities Challenge Grant Program, 12 municipalities will receive funds to support projects designed to improve “livability and vibrancy” of cities and towns, a news release on the program stated. More than half the funding will go to financially distressed municipalities, Lamont’s office said in the news release issued following the governor's news conference in Middletown on Wednesday.
The state Department of Economic and Community Development will administer the funding, and additional grant announcements are expected, state officials said.
Leaders in New London and Norwich both said the funding will spark economic revitalization in key downtown areas and should help attract other improvements in those areas. They thanked city staff for their hard work in putting together the grant applications to secure the funding.
“Staff has worked tirelessly for months on a proposal, and they were successful beyond their expectations,” New London Mayor Michael Passero said. “We are thrilled. This is additional recognition that the city is strategically important to the economy of the region. The state is investing in New London as the economic (capital) of southeastern Connecticut just as it invests in the state’s other major cities.”
Felix Reyes, director of the city’s Office of Development and Planning, said the grant application was a team effort that included work from Economic Development Coordinator Elizabeth Nocera and Grants Coordinator Adriana Reyes.
Norwich City Manager John Salomone thanked several city staff members for their work on the grant for the former YMCA property, including Planning Director Deanna Rhodes, Norwich Community Development Corp. President Kevin Brown, Public Works Director Patrick McLaughlin and Mayor Peter Nystrom, who kept in communication with prospective developer Mattern Construction of Baltic.
Mattern submitted the lone bid to the city of Norwich for the YMCA property. The $2 million grant will contribute to the company’s plans to do a partial demolition and partial renovation to relocate the construction company’s headquarters on the property. Accompanying commercial space could be marketed for a brew pub, restaurant and/or coffee shop.
Company Vice President Eric Mattern said the company is awaiting word on a federal Environmental Protection Agency cleanup grant that also would assist the project.
“Today was a very good announcement that helps move that project forward,” Nystrom said.
The $5,985,460 coming to New London will fund a mix of public and private projects, including downtown lighting, sidewalk and traffic signal improvements and rehabilitation of murals on downtown buildings. It also will fund a new home for the city’s shuttle service.
The Garde Arts Center on State Street will have money toward an expansion project. David Preka, owner of Muddy Waters Café on Bank Street, will receive funds to develop a boutique hotel at 3-5 S. Water St. High Tide Capital's two ongoing historical renovation projects at 133 Bank St. and 223-229 State St. were included on the list of projects to be funded. There is also money for rehabilitation of a vacant storefront at 46 Bank St.
Private project partners, Reyes said, will provide at least a 25% match toward those projects.
“We’re extremely happy,” he said. “These are huge, huge projects in downtown. I am thankful for the state’s investment and continued partnership with the governor’s office and DECD. This announcement comes with great joy and a high level of emotion for me personally. It speaks to the promise of our beloved city and all the amazing people who call it home.”
Norwich City Manager Salomone said likewise, the YMCA project will add to a series of major proposed development projects “east to west” along Main Street. At the east gateway to downtown is the YMCA property. In the middle is the proposed development of the long-vacant Reid & Hughes Building into 17 apartments and retail space, and a major renovation is planned at a huge, two-building complex at 77-91 Main St. into apartments and retail space.
Lamont said the new Communities Challenge Grant program is meant to help the recipient cities partner with private developers to bring long-lasting improvements to downtowns.
“Investing in our communities is a key part of our plan to accelerate long-lasting and equitable economic development in Connecticut,” Lamont said in a news release. “This new grant program we launched will have wide-ranging impacts as we emerge stronger than ever from the (COVID-19) pandemic, creating new jobs, improving the vibrancy and quality of life in our neighborhoods, and making all corners of the state even more attractive for investment and opportunity.”
South Windsor’s Planning and Zoning Commission, on Wednesday, unanimously approved a year-long moratorium on acceptance of new applications for warehouses, distribution centers and freight terminals.
A day prior, industrial developer and investor Scannell Properties submitted a wetlands application for a 241,800-square-foot warehouse on 18.8 acres. The development site comes from an assemblage of properties including 67 and 68 Kennedy Road and 352 Sullivan Ave.
South Windsor resident Kathy Kerrigan submitted the moratorium proposal in January, claiming rising frustration among residents impacted by congestion, noise and other impacts that accompanied a wave of warehouse development in South Windsor.
The commission came close to approving the moratorium at its March 22 meeting. However, members opted to extend the hearing after the commission decided to include freight terminals in the ban and an attorney at the meeting raised concerns the proposal had not been available in the Town Clerk’s office.
Town Planner Michele M. Lipe, on Wednesday, said the text of the proposal had been available online and was filed with the clerk’s office. Lipe said she spoke with the town clerk, who said that staff are not always aware of where everything is filed. Lipe said she and the clerk promised to sort through the process to avoid future missteps.
Lipe said a vote on March 22 would not have stopped the Scannell application as the applicant was aware of the town’s contemplation of a moratorium and the process. Allowing a required 15-day delay for implementation from advertisement of new regulation will now see the moratorium begin April 22.
South Windsor, a town of about 27,000 residents, has added seven large distribution centers and warehouses since 2009, ranging from a 176,763-square-foot building for food-and-beverage distributor Vistar, to a 652,000-square-foot building for discount supermarket Aldi.
The moratorium is intended to allow the town a pause in development pressure while it adopts regulation allowing officials stronger controls.
Commission member Alan Cavagnaro suggested the commission establish an ad-hoc committee or subcommittee to propose changes to local regulation.
Having studied actions by other municipalities in Connecticut and beyond, Cavagnaro suggested increasing required buffer distances between residential and industrial lots; requiring health risk assessments for facilities attracting more than 125 truck trips daily; requiring traffic, sound and air quality health assessments for warehouses above a specified square footage; and requiring sufficient queuing capacity at facilities to avoid overflowing onto public roads.
Other commission members complained of a feeling of impotence under current regulations.
Commission member Kevin Foley said he feels applicants are assured by attorneys that proposals will move forward through a court action if denied by South Windsor boards.
“We have no teeth to bite into our decisions and it gets left in the hands of a judge,” Foley said.
Gov. Ned Lamont on Wednesday committed $45 million to 12 projects across the state intended to boost the liveability and vibrancy of their communities, including money for a mixed-use complex in Hartford, a publicly accessible marina on the campus of Goodwin University in East Hartford and new apartments in Windsor.
The funding represents the first round of the Connecticut Communities Challenge Grant program, which was unveiled in October to drive economic revitalization and create 3,000 new jobs, especially in distressed municipalities. The initiative is administered by the state Department of Economic and Community Development, which accepted applications for investments through mid-January.
The projects receiving funding include a three-way partnership between the city of Hartford, San Juan Center and Carabetta Development to build housing and retail space at 1355-1363 Main St. Developers plan to put up 43 mixed-income apartments, 7,358-square-feet of ground-floor retail space and public recreation areas in the project’s first phase and an additional 18 housing units and 1,200 square feet of retail space in its second phase.
The venture is the biggest grant recipient on the list, set to receive $6.3 million.
A total of $2 million will go to support the construction of a publicly accessible marina on the campus of Goodwin University in East Hartford, including transient boat slips and a water taxi. Future development is expected to include restaurants and lodging in the area, state officials said.
Windsor, together with a private developer, is looking to redevelop Windsor Center Plaza as a mixed-use space with 40 apartments and 5,560-square-feet of retail space. The effort will get a $2.5 million boost through the grant program.
“Investing in our communities is a key part of our plan to accelerate long-lasting and equitable economic development in Connecticut,” Lamont said in a statement. “This new grant program we launched will have wide-ranging impacts as we emerge stronger than ever from the pandemic, creating new jobs, improving the vibrancy and quality of life in our neighborhoods, and making all corners of the state even more attractive for investment and opportunity.”
Other selected projects include the conversion of a Killingly parking lot into public space ($1 million); construction of mixed-income housing in Mansfield ($4.85 million); repurposing of vacant or underused buildings into housing in Middletown ($4 million); and the realignment of streets in New Haven to encourage transit-oriented development ($5.35 million), among others.
New state grant to aid redevelopment near Hartford’s Dunkin’ Donuts Park, 11 other towns and cities
HARTFORD — A redevelopment project that seeks to connect downtown Hartford with city neighborhoods to the north has won a $6.3 million state grant, part of a new program aimed at boosting livability in towns and cities across the state.
The grant for the redevelopment of a long-blighted corner northwest of Hartford’s Dunkin Donuts Park was part of $45 million in funding announced Wednesday by Gov. Ned Lamont, the first round from the Connecticut Communities Challenge Grant Program.
“Investing in our communities is a key part of our plan to accelerate long-lasting and equitable economic development in Connecticut,” Lamont said. “This new grant program we launched will have wide-ranging impacts as we emerge stronger than ever from the pandemic, creating new jobs, improving the vibrancy and quality of life in our neighborhoods, and making all corners of the state even more attractive for investment and opportunity.”
In Hartford, the $6.3 million was considered crucial to redeveloping city-owned property at the corner of Main and Ann Uccello streets, plus two nearby historic buildings. The $17.5 million project seeks to create 43 apartments and more than 7,000 square feet of storefront space.
“These historic buildings at this critical intersection are a really important priority for the city,” Hartford Mayor Luke Bronin said. “This intersection is really key to our effort to knit our neighborhoods back together and extend the progress around the baseball park farther north to Clay-Arsenal, Albany Avenue and North Main Street.”
Hartford was one of 12 towns and cities to share in the first round of grant money from the program.
In the greater Hartford area, those grants also include:
$2 million to East Hartford to partner with Goodwin University to build a public marina with transient slip and a water taxi. Future phases include restaurants and lodging.
$4.5 million to Middletown for revitalizing vacant and underused buildings along Main and Union streets to create 30 residential units and 40,000 square feet of commercial space. The funds also will be used to upgrade heating and cooling systems at the YMCA property, helping to rehabilitate housing for low-income men.
$2.5 million to Windsor for the redeveloping Windsor Center Plaza into 40 apartments and 5,560 square feet of first-floor storefront space in four new buildings. The project is located 500 feet from the town’s train station.
The communities challenge program, administered by the state Department of Community and Economic Development is expected to award up to $100 million in grants over the next several years. A second round is planned for this fall.
The program requires that 50% of the funding will be invested in Connecticut’s distressed municipalities. The grants announced Wednesday will leverage about $74 million in non-state and other private investment.
The city of Hartford has selected the Hartford-based nonprofit and Meriden-based builder Carabetta Cos. as the preferred developer of the city-owned property at Main and Ann Uccello, which includes the blighted Arrowhead Cafe building.
The scope of the project has been expanded to include the nearby “Flat Iron” building and a housing cooperative, both historic structures.
“What this grant makes possible is to expand the scope of that work beyond just the Arrowhead building to a number of parcels in that area, including the Flat Iron building as well as streetscape improvements and pedestrian improvements in that area to enhance the connections between our neighborhoods,” Bronin said.
The plans also call for closing off a portion of Ann Uccello Street, already a dead-end where it meets Main, for a pedestrian plaza. The plaza would be tree-lined with outdoor seating with space for vendors or food trucks and, perhaps, a fountain.
The project will include a mix of affordable and market-rate housing, crucial to ensuring the new development will provide another housing option to people already living in neighborhoods to the north.
In addition to towns and cities in greater Hartford, these municipalities also received grants: Killingly, $1 million; Mansfield, $4.8 million; New Haven, $5.3 million; New London, $6 million; Norwalk, $6 million; Norwich, $2 million; Stamford, $2.5 million; and Winchester, $1.8 million.