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Does Dyster have secret or lax role in cost overruns at new courthouse?

Courthouse seen as topping $50 million as overruns are hidden from the media

December 09, 2008

By Frank Parlato Jr.

As Mayor Paul Dyster plans his midget downtown, costs are spiraling to new heights at the courthouse -- unbeknownst to the media. He seems strangely unconcerned.


ABOVE: Don't blame Ciminelli: It wasn't their design. In fact, the design went through dozens of hands and now no one wants to claim this ugly baby. In fairness, Ciminelli builds competently, efficiently and for a profit. Sorry, it's not their job to be watchdogs for the taxpayers.

But Dyster does fit snugly into the courthouse scenario -- a project he previously tried to distance himself from, calling it, in effect, former Mayor Vince Anello's baby.

He's only about half right.

As readers know, it was Anello's decision to build a new and rather -- for a poor city -- grandiose courthouse. Ironically, state officials estimated a no-frills courthouse would cost $12 million back in 2004.

But Anello devised and saddled the city with his bizarre plan, which was to hire a developer who would do it all: find the land, design a courthouse, then build and finance and lease it back to the city. A more conservative approach would be to find the land first, design the building, then hire the developer who, with complete plans, bid the lowest price. Then do the financing.

Each, in turn, at the best possible price.

But Anello's plan made the city effectively hostage, since the developer, once hired, controlled the whole process. Anello, however, thinking he could be mayor-developer extraordinaire, expanded the plan, adding police headquarters and a new city jail. He even added retail shops, but that was scuttled by the Council.

The history of Anello's fight with the Council and Ciminelli Construction has already been told in the Reporter.

In short, well-known Ciminelli Construction was chosen to develop the courthouse by a committee appointed by the mayor and the Council in February 2005. But Anello declared Ciminelli's bid void and awarded the project to Yorkshire Development of Albany. Yorkshire had no offices, and no one knew if they ever developed anything. The courthouse price was estimated then at $26 million.

In May, Anello's fortunes took a tumble. The Niagara Falls Reporter revealed Anello's receipt of $40,000 in "secret" loans from "Smokin' Joe" Anderson and that the FBI was investigating. Questions now arose over the mayor's fervent endorsement of unknown Yorkshire Development. In June, the Council hired Ciminelli over the mayor's threatened veto.

In November, the Council selected the 4-acre site on Main Street, and Ciminelli's estimate came in at $34 million. On April 3, 2006, after eight months of public squabbling between the mayor and Ciminelli, a contract was signed. By January 2007, while design and financing plans were being massaged, the price jumped to $42 million, caused, at least in part, by the delays.

By April 2007, Ciminelli proposed the city form a Local Development Company (LDC) made up of a volunteer board, to oversee construction, own the courthouse and lease it back to the city. Ciminelli would make its money up front, instead of having to finance the project as originally planned. And with the right people appointed on the LDC board, the LDC, called a watchdog for taxpayers, could be a lapdog for the developers.

By summer, with Anello failing to procure the necessary petition signatures, Councilman Lewis "Babe" Rotella and Paul Dyster squared off in the Democratic Primary for mayor.

Sources say that Dyster and campaign aides repeatedly and secretly met with Ciminelli representatives during the campaign.

Why? Polls showed that Dyster was the likely next mayor. Construction would be done, not during Anello's, but the next mayor's term. A hostile mayor might scrutinize the project unfairly. Change orders might not get approved.

Was there a secret deal made between Dyster and Ciminelli for mutual aid and anonymous help? A gentlemen's agreement? These kind of things happen in politics every day.

In September, Dyster won the primary, and in November he won the general election.

Shortly afterward, contracts, signed by Anello, the LDC and Ciminelli, stated the project "shall not exceed $44.6 million," except for "change orders" approved by the LDC. It had gone up another $2.6 million.

The city borrowed $45 million for the project, to be paid, supposedly, using revenue from the casino. However, there is a fatal flaw in the financing model: Seneca, whose compact ends in 10 years, is then no longer obligated to pay anything to the city. The courthouse mortgage is for 30 years. After 10 years, taxpayers pay the approximately $3 million annual bill.

Additionally, the casino revenue was supposed to be used for economic development, and a courthouse on land taken off the tax rolls and processing an endless stream of petty criminals, minor civil cases and scofflaws hardly qualifies.

Groundbreaking for the courthouse was Nov. 25, 2007, and the developers smiled for cameras, dug into dirt and even gave Anello a golden shovel.

But, significantly, construction did not start until January 2008, under Dyster's watch.

Within a month, change orders started to appear, the sheer volume prompting the resignation of all three LDC board members appointed by Anello. Change orders included moving police department radio gear, wiring the courthouse to the fire department and purchasing 911 equipment. One change order was caused by the police department measuring a garage door improperly. The change order cost was reportedly $24,000. Yet the change was only a change on the blueprints before construction began.

Nevertheless, with a virtually "board-less" LDC in place, under Dyster's watch, City Hall effectively relinquished control of an almost $50 million project to a developer.

"You're letting the fox into the chicken house," courthouse advisory board member Arthur Garabedian told the City Council in February, referring to Ciminelli and the lack of oversight. "There's no checks and balances on that job." Still, it was four months into construction before the Council realized they had no input. Dyster, responding, hired LiRo Engineers Inc., to be the city's project manager at $14,000 per month. LiRo was touted as having no connection to the project's principals. However, LiRo's engineer, David Jaros, is a friend of Dyster's.

Additionally, Dyster appointed, to replace the resigning, inactive LDC members, Laurie Davis, a former de facto Ciminelli lobbyist who pushed hard to get the courthouse contract for Ciminelli, and Thomas Pryce, an iron workers union business representative, whose workers framed the building and could, potentially, benefit from pleasing Ciminelli, the largest developer in Niagara Falls.

Curiously, also, while an LDC can have five members, Dyster appointed only two. Three is the usual minimum for a quorum.

In fairness to Pryce, who was elected chairman of the LDC board in July, he cautioned at least one more member is needed if the LDC is going to do its job properly.

Still, it was seven full months after construction before LiRo made its first report: The remediation of pollution where the courthouse sits would cost an extra $2.1 million. There were other costs, also, including fixtures and furniture. By July, the price was $47.5 million.

LiRo told the Council that Ciminelli would keep the price down by using cheaper materials, like changing the railings from stainless steel to wood and using inferior ceiling tiles.

"I'm sure we're slightly over budget right now," David Carr, an engineer for LiRo, told the Council. But confusion reigned behind the scenes.

City Controller Maria Brown balked and told the media she was under the impression the project was not going to exceed $45 million, which was the total amount the city bonded. Brown met with project officials to determine how the discrepancy occurred. One thing was certain, they were going to spend more than they borrowed. About that time Dyster said LiRo and Ciminelli were going into discussions to clarify the terms of the development contract and identify what constitutes proper exclusions.

After seven months ofÊconstruction, the mayor or LiRo or both supposedly did not know what was included and excluded in the contract.

"It's very complex," Carr told the Council. "We've had a number of meetings on what's included in the (contract)."

By October, the cost rose to $48.2 million.

Leonard DePrima, project manager from LiRo Engineers, cautioned that it might go higher, that the newest projection is only a "slice in time," and that the total cost could continue to charge upward.

But the city only borrowed $45 million. The gap between that and the final cost would have to be made up from casino cash or another bond. But DePrima reported, "When you're building a project of this size, costs are difficult to access. It's like a roller coaster ride."

Yes, we know.

Today, as dozens of new change orders and overruns are being withheld from the media, City Hall insiders say the courthouse construction costs will exceed $50 million.

With design, architectural, land and other soft costs excluded in that $50 million, it is believed the true total cost of the courthouse project will approach $60 million, or five times what it would have cost for a simple no-frills courthouse.

One is reluctant to blame Ciminelli. They aren't responsible for protecting taxpayers. Should Anello be blamed for his faulty developer-driven plan? Or Dyster, the fox, who seems strangely content to watch costs spiral out of control at the court/henhouse?

One thing is certain: None of these will pay for it.

In the end, the children of Niagara Falls, for the next 30 years, will have to pay for it. When Ciminelli built the conference center, the contract called for a $12 million project. With cost overruns it came to 19 million.

We are following suit here.

Meanwhile, there are rumors that Ciminelli has the inside track as the developer of choice for the proposed Niagara Experience Center, and that Dyster will secure for developer James Glynn control of the Experience Center, scaled down so the taxpayers will pay for all of it, including change orders and cost overruns.

Meanwhile, the new courthouse, bricked all in yellow, sits almost complete, ugly and institutional.

Stay tuned for more on the Dyster administration.

Coming soon: Francine Del Monte unraveled.


  Copyright © 2008 Frank Parlato Jr.