Controversy continues to haunt Cape Coral’s $1 billion utilities expansion program more than a year after auditor Michael Kessler’s controversial report kicked off heated debates.

But the controversy has resulted in changes over the past year, the most notable being an almost $9,000 drop in assessment payments for individual property owners.
That 80-page report also triggered a federal investigation, additional audits, a work stoppage, and utility work improvements.

But Cape Coral residents reacted the strongest. They complained about the high payments to city leaders at town hall meetings and on forums posted on news-press.com. Many said the high payments were driving them out of town.
“Kessler was one block in a building that probably helped bring prices down,” city Councilman Tim Day said. “It does look like we got gouged. It’s up to elected officials to take care of gouging and they didn’t.”

Whether it was the the residents’ anger, a drop in material costs or more companies bidding for the work, the price is coming down.

The Southwest 5 price is $13,690, a drop of more than $4,000 from the Southwest 4’s $17,992 cost. Southwest 4 residents had their payment lowered from $22,000, although $1,600 of the reduction was shifted to impact fees, a one-time charge used to pay for roads and other infrastructure needed because of growth.

The Kessler report

Kessler’s report erupted during an already heated utilities debate. The audit and debate contributed to the defeat this spring of a $110 million public safety building bond referendum, contributed to growing lack of confidence in city leadership and influenced those who are running in November for five city council seats.

But the bond referendum, which was rejected by 78 percent of the voters, was a significant sign people were upset.

“In the 15 years doing public polling, I have never seen the electorate move proverbial needles off the chart as we did when we talked to people about utilities,” Stockton Reeves, of Insight Orlando, told a City Council advisory committee reviewing the bond issue’s failure. The company was hired by the city to conduct research for the issue.

“This was more a message against government than it was the public safety building,” Councilwoman Dolores Bertolini said back in April about the vote.

Kessler’s report raised suspicions of excessive profits on the part of contractors and touched off a federal investigation of the bidding practices involved. Kessler also said city oversight was lacking for a program that will continue until 2018.

“We would really like to know what the FBI uncovered, but we’re not optimistic about the real story ever seeing the light of day,” said Southwest 1 resident Chris Bergman. There have been no arrests, charges or indictments.

Kessler’s report gave critics ammunition to add to what they found in two previous audits that called for improvements in the contract process.

One of those audits led to a change in state law requested by the city. The change made it easier for the city to comply with the state’s Consultants Competitive Negotiations Act. The city was criticized for changing the law instead of changing its procedures to ensure compliance.

MWH Americas was in charge of hiring the contractors. MWH had the firm of PricewaterhouseCoopers review Kessler’s suspicions and found no evidence of bid rigging.

Report disparaged

City and MWH officials scorched Kessler’s report, claiming it lacked specifics and was full of unsubstantiated statements.

The city hired Kessler in January 2006 for $130,000 to review the Southwest 1, 2, and 3 projects. Kessler said he did more work than he was paid to do.

City Manager Terry Stewart, one of Kessler’s sternest critics, refuses to call Kessler’s report an audit.

“It’s a report proven to be without substance,” Stewart said. “Notice that I said report and not audit.”

If Kessler got any sympathy on the City Council, it was from Tim Day.

Trying to get the public more involved in the bid openings was a positive Kessler impact, Day said. More companies have supplied bids, helping lower the assessment price.

The report put more pressure on the city to respond to complaints, said Southwest 4 resident John Sullivan, who started the Cape Coral Minutemen to get lower assessments.

“I think the administration is more aware of the pressure building up here. They have backed down some but are still on the wrong track and the utilities must be delivered in a more efficient manner. This is the gist of the two audits and confirmed by the Kessler report,” Sullivan said.

UTILITIES EXPANSION TIMELINE
•Aug. 30, 2004: MWH Americas wins five-year contract to manage second phase of city’s utilities extension program.
•Dec. 14, 2004: City Council votes to ask the state auditor to review utilities operations.
•March 2005: Legislature approves the audit.
•Aug. 16, 2005: Auditor Rich Townsend urges the city to take more responsibility for monitoring contracts and more risk for making good on poor work.
•Jan. 23, 2006: Auditor Michael Kessler is hired by city for $130,000 to review Southwest 1, 2 and 3 utility expansion projects.
•April 25, 2006: Kessler tells City Auditor Dona Newman he talked with the Justice Department about “several red flags” he found.
•April 27: Newman gives Kessler verbal permission to share the information with U.S. Justice Department.
•May 1, 2006: Kessler reports Justice Department had opened a case file.
•May 25, 2006: State auditor reports city did not comply with state’s Consultants Competitive Negotiations Act.
•June 2006: Two lawsuits are filed against the city over Southwest 4 assessments.
•July 15, 2006: 150 people sign a petition to protest the cost of the Southwest 4 project.
•July 17, 2006: news-press.com publishes Kessler’s 80-page audit report; MWH responds with 79-page report of its own. Kessler reports possible bid rigging, inflated profit margins among the contractors, lack of cooperation in obtaining information among city staff and contractor Montgomery Watson and Harza, and poor record-keeping by the city.
•July 18, 2006: Council suspends Southwest 4 project for two weeks while reviewing Kessler’s report.
•July 24, 2006: Kessler reports to council, but leaves abruptly to catch a plane, saying he did not have time to answer council questions.
•Aug. 13, 2006 City officials meet with Jim Dwyer of the state auditor’s office to discuss his findings after reviewing the utilities operations for Oct. 1, 2000, to •March 31, 2005. Council discusses asking for a state attorney general’s opinion on the audit finding that Cape Coral did not comply with state’s Consultant’s Competitive Negotiations Act.
•Aug. 21, 2006 MWH responds with PricewaterhouseCoopers report refuting suspicions of bid-rigging.
•Sept. 8, 2006: Resignation becomes effective for Assistant City Auditor Alan Bray, who claimed he was made a scapegoat for problems Kessler had getting records.
•Nov. 6, 2006: Council votes to reduce SW4 assessments. Costs shifted to impact fees, water and irrigation pipes moved close to street to cut restoration costs, contingency budget slashed from 5 percent to 2.5 percent of construction budget.
•November 2006: A third lawsuit involving SW4 assessments is filed against city.
•Feb. 27, 2007: State Attorney General Bill McCollum agrees with state audit, saying Cape Coral did not comply with state law when it negotiated guaranteed maximum prices in phases of multi-phased projects rather than getting the price up front before work begins.
•April 2007: State law changed to allow prices and completion dates to be negotiated in phases or up front.
•May 8, 2007: Florida’s 2nd District Court of Appeal denies Watchdogs’ request for another hearing, bringing the grass-roots group’s lawsuit against the utilities extension program to an end. The group first filed the suit in 2003.

Author - Don Ruane