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Block grant cost overruns add up
City officials say they’re being more cautious on projects

Thursday, February 27, 2014

By MICKEY POWELL - Bulletin Staff Writer

Cost overruns from past Community Development Block Grant projects are causing Martinsville officials to be cautious as they pursue another one.

According to officials, independent accountants who audited the city’s past fiscal year concluded that as part of block grant projects done in the past 15-20 years, the city spent about $592,000 more on improvements to houses and other properties than the state provided reimbursements.

Assistant City Manager/Director of Community Development Wayne Knox said that for maybe three or four properties per project, rehabilitation costs exceeded original construction estimates. In some cases, he said, homes that were to be rehabbed ended up having to be replaced.

That basically doubled the costs for dealing with those homes, he said.

The properties were under contracts for rehab as part of grant projects, so the work had to proceed. Martinsville could not be reimbursed for more than state rules would allow, so the city had to pay the extra costs, officials said.

Knox said officials were aware of cost overruns for rehabbed properties over the years but did not

realize they amounted to so much.

City Manager Leon Towarnicki said Wednesday, though, that the auditors’ estimate may be excessive.

“There could have been some” in-kind work that the city did for projects, such as paving streets or installing sewer lines, for which the values of the work were incorrectly recorded in city financial records, Towarnicki said.

Any such mistake essentially would be a bookkeeping error, Knox said.

City Finance Director Linda Conover is looking into the matter to find out exactly what happened, Towarnicki said. Conover could not be reached for comment on Wednesday.

Martinsville City Council thinks the issue “needs to be reconciled” to keep the city from spending more on future block grant projects than it expects, said Mayor Kim Adkins.

Knox said efforts already are being made to do that. For instance, he said, several years ago the city quit “front-funding” contractors — paying them for construction before it was done.

At a council meeting Tuesday night, Councilwoman Sharon Brooks Hodge expressed concern about starting a Northside neighborhood revitalization project before city officials find out more about the cost overruns.

However, Adkins said Wednesday that she believes the matter “shouldn’t deter the city from moving forward in leveraging” future block grants.

The city plans to apply for an estimated $880,000 block grant to refurbish the neighborhood surrounding Franklin and Dillard streets and Warren Court. Officials have said they hope to upgrade at least 30 of 44 homes there.

Nobody spoke during a required public hearing on the project at Tuesday night’s council meeting.

Another hearing is set for March 25. At that time, exact plans for the project will be announced, Knox said.

The application will be submitted to the Virginia Department of Housing and Community Development on the following day, which is the deadline.

“Even if we’re approved for” the grant, Knox told council members, “we don’t have to accept it” if they do not feel comfortable doing so.

Robinson Farmer Cox Associates LLC, a Charlottesville accounting firm, presented the fiscal 2013 audit report during Tuesday’s council meeting.

The report showed that at the end of the fiscal year, the city’s unassigned general fund balance — money that can be used to pay unanticipated future expenses — totaled $4,532,181. That equaled almost 15 percent of general fund expenditures.

The unassigned balance was up from about $3 million at the end of the previous fiscal year, which represented about 10 percent of general fund expenditures then, officials said.

Based on those numbers, Adkins assessed that “the financial health of the city has improved.”

Towarnicki said his perception was that “we treaded water.”


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