Report finds right-to-know flaws, but 'no corruption' in Bath property sale

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BATH — A former Maine Superior Court judge has concluded that while the city should have been more transparent about a property sale, there was no corruption involved.

The city bought the Mid Coast Center for Higher Education, a former hospital, more than a decade ago for $1 and agreed to sell it to Robert Smith of Phippsburg for $799,000 in May. The council unanimously approved the sale on April 17.

The building had an assessed value of $6.5 million, according to the city’s online database. Paul Mateosian, the assessor and assistant city manager, called that a “cost-approach number,” based on what it would cost to build a hospital that size, minus depreciation. He said the appraisal did not reflect market value.

Some residents, including Michael Wischkaemper and Larry Scott, criticized the sale, claiming the city failed to practice due diligence in setting a price, and did not sell the building in an appropriate way. They also said councilors were unresponsive to questions they later submitted about the sale.

The critics threatened a recall campaign against some councilors, until the council agreed to review the process, and selected retired Justice Robert Crowley to conduct the study of the sale.

In his Dec. 27 report, Crowley said the city’s Municipal Code and Freedom of Access Act both require a public process for the sale of city-owned property, as long as such a process does not compromise the city’s bargaining or competitive position.

He said there were violations of the state Freedom of Access Act when City Manager Bill Giroux did not provide notice that the council would discuss the property sale during an April 8 budget meeting, and when  the council did not create a record of the meeting that was available to the public.

“No members of the public attended that meeting,” Crowley said, “(and) it is possible that the public would have attended had proper notice been given.”

Crowley also noted that the council “disappointingly … never undertook any real deliberations or discussions in executive session or otherwise regarding the valuation of MCHE,” nor the advisability of the recommended listing price or the “propriety” of keeping the property off the Maine Listing Service, despite the panel’s “clear obligation” to do so under the city’s code.

“In this case, the decision to sell and the resulting listing and sale were undertaken and accomplished with lightning speed,” Crowley said. “Many members of the Council and staff were astonished that the sale occurred so quickly. They had expected that the MCHE would remain unsold for an extended period. Accordingly, they expected the public to be made aware of the effort to sell and the details of the listing through the marketing of the property over a prolonged period.”

Had the property not sold so quickly, or if the sale process had been more transparent, most of the issues surrounding the sale would have been resolved, Crowley said.

Smith put the property up for sale again in October for $1.65 million; it remains unsold.

“Only time will tell whether $799,000 was a fair price at which to sell MCHE,” Crowley concluded.

Although the city councilors are not real estate professionals, and the recommended sale price came largely from recommendations by Mateosian and real estate broker Don Spann, the council’s due diligence in evaluating that price was “lacking,” Crowley said.

But, while it is clear mistakes were made, “they were honest, human mistakes,” he said. “There was no corruption.”

Whether a more deliberate and open process would have resulted in a better or worse outcome, he said, “the people had a right to know. The requirement of an open process exists for a reason: This was the people’s property. This was the people’s business.”

Wischkaemper said in an email Dec. 28 that the city “should have identified the property in the notices of executive session; they did not. The Council should have given substantive consideration to the price; they did not. The Council should have told the public the sale was occurring; they did not. The Manager should have told Council he had made the secret agreement not to list; he did not.

“Someone took an action, we asked a question, and now we’re here,” Scott said Dec. 28. “Anywhere along the line, someone could have said, ‘hey, let me answer that question,’ and it would have diffused the whole thing.”

“I think that those who did or didn’t do what they should or shouldn’t have done now know that people at least watch,” although it did not effectively change much, he admitted.

Councilor David Sinclair, who answered questions put to him about the sale and suggested his fellow councilors do the same, said Dec. 28 that he thinks the report “favors the approach of sharing more information rather than clamming up. Even if clamming up is technically, legally sound, it’s often not the right course to follow.”

Council Chairwoman Mari Eosco said the report reflects what councilors have been saying all along.

“Mistakes were made, and … we have learned from our mistakes,” she said, . “Hindsight is 20/20, and I hope this satisfies people who’ve … been questioning us.”

Eosco pointed out that the City Council recently adopted a new policy governing the sale of city-owned property. It states that its purpose is, in part, “to provide a procedure that will be open to public scrutiny except in those cases where public disclosure of information relating to the disposition of the property would prejudice the competition or bargaining position of the City.”

The policy adds that the procedure is intended “to provide for public notification of any sale in all cases where premature disclosure of information is not prejudicial to the city and to determine the appropriate method of disposing of the property in order to realize the best return on the sale.”

Giroux said in July that “although we followed the ordinance, we could have definitely been more public about it and done better. We want to do that in the future. We think this new policy will guide us … to avoid these kind of questions in the future.”

Alex Lear can be reached at 781-3661 ext. 113 or Follow him on Twitter: @learics.

A Maine native and Colby College graduate, Alex has been covering coastal communities since 2001, and currently handles Bath, Topsham, Cumberland, and North Yarmouth. He and his wife, Lauren, live in the Portland area, and Alex recently released his third album of original music.