Metro Center Issues:

FAILURES AND BAILOUTS

While “Failures and Bailouts” is not exactly a new phenomenon, it has become so pervasive that it is now an established part of our culture.

“Failures” refers to the failure of persons in authority to act responsibly and honestly in their management of assets the general public has entrusted to them. The most common perpetrators of these failures are persons in authority in banking, investment and insurance institutions, and, of course, persons entrusted with governmental authority.

“Bailouts” refers to the inevitable necessity for the general public to bear the burden of paying for the failures of these perpetrators in order to save ourselves from the threatening disasters that loom in their wake.

It is only natural that the general public is infuriated and frustrated by this phenomenon. We are furious because we are innocent yet doubly victimized by these perpetrators: first by their failure to act responsibly, then by our being forced to bailout the guilty parties. We are frustrated because we feel powerless to hold them accountable. In the past, we simply gave up. Grudgingly, we just paid and suffered the consequences. But, now that these failures have become so pervasive, we must find ways to impose accountability. We can begin by examining a current history of failures by our Town officials right here in Fairfield that will require our bailing them out at our expense.

Our Town officials, First Selectman Flatto and Town Attorney Saxl, have been staunch advocates of the Metro Center project since its inception in 2003, despite a history of failures that could have been avoided.

Initially, we were told that there were two reasons for a third train station: first, to satisfy ADA requirements for access by the disabled; and second the need for increased parking. Other towns along the tracks had solved these problems by building bridges or tunnels for such access and parking garages over existing parking areas to increase parking. Our officials dismissed these alternatives in favor of the Metro Center project. They claimed that enormous project would yield significant tax revenues for the Town. They also claimed that increased parking at the existing station would increase Fairfield Center traffic.

It was brought to the attention of our officials that Mr. Kurt Wittek, a principal of Blackrock Realty (BRR), the Metro Center developer, had a somewhat checkered past in his business activities that should cause concern for his ability to complete the project. That concern was dismissed as a thing of the past to now be ignored. The increased traffic argument ignored the fact that the proximity of the existing station to I-95 and the main roads leading to areas north of the center where most commuters lived, would likely present less of a traffic problem than the Metro Center. A completed Metro Center was estimated to increase the 1,500 parking places at the new train station to a total of 4,361 spaces. That number presented traffic problems that would require extensive infrastructure work on adjacent streets costing the Town more than $2,000,000. Nevertheless, the administration decided to enter into the tripartite Agreement with BRR and the State Department of Transportation (the DOT).

Two apparent failures by our officials now emerge from these facts: (1) the failure to adequately investigate whether the financial resources of BRR/Wittek would be sufficient to fund the private part of the project estimated to cost in excess of $300,000,000 (In fact, BRR’s funds for the project apparently have dried up at only the $20,000,000 mark as will be explained.); and, (2) the failure to thoroughly compare the cost of the alternatives that other towns had successfully pursued. Also, if after doing so, the Town had decided not to pursue the Metro Center, the DOT might not have pursued its involvement in a third train station at a cost in excess of $48,000,000 of taxpayer money.

After the Agreement became effective, the history of the Metro Center project became a series of more failures that culminated in the recent filing of a foreclosure action against BRR and Wittek by their mortgage holder Banknorth N.A. The following is a litany of the most serious of these failures by our Town officials. (Others will surely surface.)

A Failure to Enforce the Agreement. The tripartite Agreement provided for several preconditions that each party had to perform and the time limits for performing them. Under Section 6.5, if BRR failed to perform its preconditions within nine months of the effective date of the agreement, the Town could give notice that, unless BRR diligently pursued completion of its preconditions for ninety days, the Town could terminate its agreement with BRR.

One of BRR’s preconditions was to provide the Town with of a letter of credit in the amount of $500,000, to assure completion of the train depot and any excess remediation. If BRR did not build the depot, then the Town would have the right to draw on the letter of credit in order to build the depot and do the excess remediation. The time to file this letter of credit passed years ago but our Town officials have failed to require it from BRR to this day. Since it now appears certain that BRR will not build the depot, it will be necessary for the Town to build the depot at its expense.

Another of BRR’s preconditions was to remediate any condition arising from its demolition of a building on the parking land of the Town and to remediate conditions on the commuter waiting area land. However, our officials have also failed to enforce this obligation of BRR, and it will now be necessary for the Town to assume that expense.

BRR was also required to post additional letters of credit to assure it would do all the remediation required of it on the entire site. That remediation had been cited by our officials as another reason to support the Metro Center project. However, our officials have also failed to require BRR to file letters of credit covering all such remediation as required by the Agreement. Only a partial letter of credit covering a small portion of the site was provided by BRR. The major part of the site remains unremediated with no performance bond on file.


When our Conservation Department cited BRR for violations and BRR complained the Department was delaying the project, our officials failed to support the Department and, instead, accommodated BRR by removing the Department from the project and installing an outside consultant to be paid for by BRR. Since then, both our officials and the consultant have failed to require BRR to perform its obligations.

The Agreement provided that BRR was to give priority to its obligations for the “Public Project” and to perform them in a timely manner. These obligations included remediating the land under roadways, building the roadways, remediating the commuter waiting area land and sharing 50-50 with the Town for any excess parking land remediation. Our officials have failed to enforce these obligations and none of this work has been done and the Town will have to assume these obligations of BRR at its cost.

The reason for BRR’s failure to perform these obligations surfaced when Banknorth, N.A. brought a foreclosure action against BRR and Wittek for their default in making mortgage payments. BRR had apparently run out of financing.

A Failure of Transparency. Another characteristic of “failures and bailouts” is the practice of those responsible for the failure to withhold notice of their impending disaster from the public until the last moment, when they have totally lost control of the situation. This practice is a “failure of transparency.”

Messrs. Flatto and Saxl have failed to provide the transparency of government to which our citizens are entitled. They either knew or should have known of the events leading to the failure of BRR and the foreclosure action by Banknorth. The effect of those events on Town interests cannot be minimized. Yet, Mr. Flatto was far less than forthright when he gave his reaction to these events. He was quoted as saying that he remained “confident the [foreclosure] action will have no impact on the railroad station and commuter parking lot” and that he “know[s] that the commitments to keep the train station project on target by all three parties are solid.” No Impact!? Then why is Flatto now asking for an additional $28,000,000 in stimulus funds to spend on the project besides the Town’s original budget of only $10,000,000? Flatto also said “the original plans called for Blackrock Realty to obtain a state loan for the road construction, but the developer [BRR] may instead apply for federal economic stimulus funds ‘for the public parts of the project’. . .” Flatto’s remarks totally failed to describe the true impact of the foreclosure on Town interests by not to addressing the following questions:

1. How can we assume that BRR will cure its mortgage default in the amount of $20,123,239.92, when it cannot even file its $500,000 letter of credit?
2. How could Mr. Flatto “know” that BRR’s commitment to keep the train station project on target is “solid” in the face of BRR’s apparent insolvency?
3. Since it now appears obvious that BRR will never file the $500,000 letter of credit for the depot, how could Mr. Flatto claim these events have no impact on the project, when the Town will now have to pay to build the depot with Town funds?
4. If Mr. Flatto was in possession of facts that prove the foreclosure action will have no impact on the station project, why has he not divulged them to the public in a responsible manner rather than issuing his unsupported statements?
5. If Mr. Flatto was not in possession of such facts, why has he ignored the real possibility that the bank may acquire the Metro Center site, which includes the roadway land essential to the train station part of the project?
6. If BRR will no longer build its grandiose commercial project (offices, stores, hotels, etc.), what effect will that situation have on the $2,000,000 bond the Town has put up with the State Traffic Commission?

Rather than bring these issues to the attention of the public, Mr. Flatto continues to ignore them with more of his typical doubletalk as will be pointed out here. That is even worse than a mere failure of transparency because those issues are too obvious to be covered up. They will surface because they must, and he must be made accountable to answer them.


The Bailout.

Our Town officials have already taken steps to bail themselves out from all their failures as above described. Media reports have stated that the Town of Fairfield has asked for $65.5 million in stimulus funds, of which $28 million is to be allocated to the Metro Center project.

The gall of our Town officials in making this request without first providing the public with the facts that made it necessary is unmitigated, and it displays no sense of responsibility for their failures. Their unilateral decision to assign a federal grant as large as $28,000,000 to the train station project without prior input and approval from the Board of Finance and the RTM, reaches a level of arrogance that other bailout petitioners never had the effrontery to attempt. Our Town cannot tolerate such heavy-handed and irresponsible behavior on the part of these officials any longer. We must demand that they answer the following questions before proceeding any further in their attempts to bail themselves out from responsibility for the mess they have created.

1. When and where did these officials get the authority to designate an additional $28,000,000 for this project when the Board of Finance and the RTM only approved an Agreement calling for an investment of $10,000,000 by the Town.
2. Where did they get the authority to unilaterally decide the priorities for using any stimulus funds to which the Town may be entitled?
3. By making this request on the terms they set, have our officials foreclosed us from challenging the validity of this amount or from deciding on other uses for it in whole or in part?
4. If our officials had required BRR to complete its work on the public project in a timely manner as per the Agreement, wouldn’t the Town have been able to allocate this $28,000,000 in stimulus money to other Town projects? And, if there were no other projects that would qualify for the money, isn’t it true the Town would not have needed to ask for it and saved the taxpayers this huge sum money? The bottom line is that, in any case, the $28,000,000 is being wasted in these hard times because of the failure of our officials to enforce the Agreement.
5. How can Mr. Flatto applaud himself, as he recently did, for cutting programs to save a couple of million dollars when, at the same time, he fails to mention that we will be asked to waste $28,000,000 that we should never have needed to spend, except for his failures to enforce the Agreement?
6. Furthermore, on what basis did these officials arrive at the sum of $28,000,000, and exactly what do they intend to do with it?
7. If the Town will enter into a new agreement with some contractor to complete the public project, who will be in charge of enforcing that agreement? Given the abysmal failure of the past would it not be better to avoid a repetition of such failure by reinstalling the Conservation Department to oversight at no cost to the Town rather than have us pay Redniss & Meade?
8. If the $28,000,000 proves insufficient to complete the project, does Flatto have a plan to cover any shortfall, and, if so, what is it?
9. Has the State given any assurance to Mr. Flatto that, when it received its allotment of stimulus funds, the State would definitely give the Town the $28 million?
10. If there was no such assurance, and for some reason the $28 million was not forthcoming from the State, does the Town have a specific back-up plan for raising the money, and, if so, what is that plan?
11. If the State was no longer willing to make the loan to BRR for the roads, how could BRR possibly expect to receive any stimulus money? So why would Flatto present that as a possibility?
12. Most recently Mr. Flatto admits that BRR “was supposed to construct the road through the complex and the capping under the. . . commuter lot” but he fails to mention the train depot fiasco for obvious reasons. He claims that the stimulus funds were requested “to avoid further delays if private owner [BRR] is unable to perform their portion of the responsibilities on time” or “because the developer may not have readily available financing.” This convoluted explanation is another of his misleading statements that indicates either incompetence or an apparent attempt to cover-up his failures. If the Town is stepping in to take over BRR’s obligations just to avoid delays by BRR, how realistic is it to assume that BRR will ever resume work on the project? And even if it did, how and when would the Town expect to get the $28,000,000 back from BRR after it had done BRR’s work?
13. In the same recent article, Mr. Saxl, in answer to a question about the foreclosure, is quoted as saying “Wittek said to me he filed an answer and they were going to defend it.” How Wittek could defend a default of more than $20,000,000 without money is a mystery that demands explanation. If there were a real possibility that BRR could successfully defend the action, why would the Town not wait to find out before proceeding to spend our money? And, if there is no such possibility, why did Saxl mention it at all?

These are questions that lead to the most serious question of all:

What did Mr. Flatto and Mr. Saxl know about BRR’s financial condition and its effect on BRR’s ability to complete the project and when did they know it?

The people of Fairfield are entitled to a clear and unequivocal answer to that question as a first step in unraveling the many confusing and misleading statements they have been told.

Any competent Town official in authority would realize that the possibility of BRR returning to perform its obligations on the project is unrealistic and that, until some other solution appears, the most realistic possibility is that Banknorth will proceed with its action and acquire title to the Metro Center site including the roadway land needed by the Town. Under those circumstances, a competent official would take steps under section 6.5 of the Agreement to terminate the Town’s Agreement with BRR and prepare to explore ways to acquire the land it needs for the public project.

There is also the possibility that our officials would shop around for a new developer for what was the Metro Center site as an alternate means of bailing themselves out from responsibility. If that should happen, should we not be very concerned, based on past experience, about any such solution being entrusted to these Town officers? If we are not careful, might we not find ourselves with another history of failed promises and failed performance, leading to another disaster for us to bail out?

Conclusion: It should be clear from just a cursory examination that the Metro Center project has been out of the Town’s control from the very beginning. BRR was always being accommodated and never required to perform its obligations in a timely manner under the Agreement. The responsibility for that failure rests solely with Messrs. Flatto and Saxl, because they failed to enforce the Agreement.

Now we also find our officials out of control in their desperate attempts to bail themselves out from the consequences of their failure to control the progress of the project. In fact, they have added a new element to the phenomenon of “failures and bailouts.” Normally, a government conducts an investigation before it decides that it would be in the public interest to provide the bailout funds to the parties responsible for the failures. In this case, our officials have bypassed that process and unilaterally decided it is in the public interest to help themselves to the use of public funds to bail out their own failures and also to decide how much they will use. This abuse seems all too reminiscent of Flatto’s unilateral decision that it was in the public interest to remove the Conservation Department from the Metro Center project. When will Mr. Flatto stop this practice, if he’s not stopped now?

Based on this history, we can surely expect that Mr. Flatto will attempt to divert attention from his failures as we have described, by claiming to have heroically saved the day with stimulus funds that will not come out of Town funds. What he fails to understand is that those stimulus funds belong to the people of Fairfield just as much as Town deposits do. They are not some gift from the federal government. Stimulus funds are derived either from taxes we have paid or funds borrowed by the federal government on our behalf that we citizens will be forced to repay in the form of future taxes. It is our money you are dealing with, Mr. Flatto, and it should not be taken from us without our informed consent!

Enough is enough! It is now time for us to take control of the problems facing the train station project from these officials and demand that our elected representatives in the RTM appoint a bipartisan commission, to be chaired by some respected unaffiliated Fairfield citizen, to investigate all facets of this project and to recommend the most practical and least costly solutions for us to pursue. A failure by the RTM to undertake some such initiative will make it a party to covering up the biggest financial disaster in our Town’s history.

If wasting $28,000,000 of their money doesn’t wake up the people of Fairfield to the failures we described, then what will?

Edward Bateson Jeanne Konecny
Alexis Harrison Philip Meiman
Joy Shaw Pamela Ritter
Jane Talamini Les Schaffer

A group of concerned citizens of Fairfield composed of an equal number of Democrats and Republicans.