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October 12, 2012

 

DiNapoli: Monroe County Public Safety Deal Costs Taxpayers Millions Extra

Monroe County is overpaying approximately $39 million for public safety services obtained through a local development corporation (LDC) created by the county, according to an audit released today by State Comptroller Thomas P. DiNapoli. Auditors found the county followed a seriously flawed process in securing the services and favored one company affiliated with a former employee and others with close ties to the county.

"This is a bad deal for Monroe County taxpayers," said DiNapoli. "Officials claim they were attempting to save money, instead they saddled taxpayers with unnecessary costs for the next two decades. Contrary to comments from County officials, I am not opposed to the proper use of LDCs. What I am opposed to is when officials use an LDC as a mechanism to skirt the oversight of the county legislature and fail to act in the best interest of taxpayers."

On January 1, 2010, the county entered into a 20-year contract with the newly formed Monroe Security and Safety Systems LDC, also known as M3S, to provide public safety and security systems and services. The $212 million contract will cost the county an average of $11.2 million per year. Soon afterwards, M3S reached an agreement to pass the terms of the contract on to Navitech Services Corporation – a firm operated by Monroe County's former chief financial officer.

Due to the unfavorable contract terms uncovered in the audit, DiNapoli's office estimates Monroe County will overspend approximately $39 million for public safety and security. Those added costs include:

  • The contract with M3S did not specifically address vendor discounts and, as a result, the county will overpay approximately $12.7 million for radios and related equipment.
  • The county inappropriately took on $5.5 million in debt to pay for replacement equipment and coverage enhancements that should have been incurred by the LDC.
  • Auditors found that approximately $20.6 million of the total cost of the contract could not be accounted for.

Auditors found the process followed by the county to obtain the services was not competitive and favored Navitech. The seven proposals received in response to the county's request for proposals (RFP) were not equally evaluated. Auditors also learned that Navitech had been provided an early draft of the RFP and provided with additional details unknown to the other vendors.

In addition, while the RFP called for a 10-year contract, the county changed the terms of the deal and entered into a 20-year contract but could provide no explanation to auditors for doubling the contract's length. County officials also circumvented the county's already established Capital Improvement Program and, by using an LDC, diminished oversight of the contract by the county legislature.

"LDCs are entities that, in too many cases, have been put to bad use as occurred here," said DiNapoli. "There must be more oversight and more accountability over LDCs."

The Comptroller's office has found an ongoing pattern of LDC abuse, with local governments improperly using LDCs to circumvent state laws or bypass oversight, driving up taxpayer costs. LDCs are private, not-for-profit corporations often created by a local government for economic development or other public purposes. They are generally not subject to the same requirements and laws as local governments.

Prior audits of how Monroe County officials have used LDCs have revealed a pattern of problems. DiNapoli has proposed a series of oversight reforms which would expand the Comptroller's audit authority to cover LDCs and other comparable entities and prevent the use of LDCs to finance local government operations.

Monroe County officials disagreed with the audit's findings. Their full response is included in the audit. Documents for the audit were obtained by subpoena because county officials did not cooperate with auditors.

For a copy of the report visit: http://www.osc.state.ny.us/localgov/audits/counties/2012/monroe_ldc.pdf

For a copy of the Comptroller's report on the use of LDCs visit: http://www.osc.state.ny.us/localgov/pubs/research/ldcreport.pdf


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