Taxpayers Foot $500K Bill for Penny Tax Group’s Coffee, Cars, Cleaning

January 22, 2016

Investigative Reports

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By RON AIKEN

Coffee

Among charges billed to county: $1,200 for monthly car allowance, premium coffee service

In most contracting scenarios a firm is hired to do a job for a certain price, it does the job and then submits a bill to the employing entity for the work performed plus any agreed-upon expenses.

Typically, those expenses encompass such things as additional travel required, mileage, printing/copying costs and the like – costs within the scope of work.

What firms generally do not bill for are things outside the scope of work such as, say, their own gourmet coffee and creamer, their cell phones, their vehicles, their office cleaning and exterminating, their garbage service, their recycling service, a monthly computer allowance, their printers, toner and paper, their rent, their internet service, their IT costs, their water, their sewer, their electricity, gas for their cars and Pepsi for the office fridge.

And yet, the three-firm team hired to run the Richland County’s “Penny tax for transportation” – ICA, M.B. Kahn and Brownstone – bills the county, every month, for all those items and more to the tune of $35,623.90 for November alone and $564,248 since Nov. 2014, according to invoices and documents obtained by The Nerve through a Freedom of Information Act request.

Making that $564,000 figure even harder to understand is that it is over and above the $501,666.67 the PDT gets paid per month as a flat fee for “program development,” over and above the $175,583.33 Brownstone alone billed the PDT in November for “program management” and over and above the $6.521 million the PDT has been paid to date in program management fees since Nov. 2014.

The best part for the PDT and many subcontractors? It’s all legal, thanks to a contract whose expense clause one expert couldn’t believe the county approved.

CARS, COFFEE, COMPUTERS AND MORE

As The Nerve previously has reported, the PDT already has approved subcontracts that have drawn adverse scrutiny, including two $300,000-plus deals with individuals who had no training to do the work they were hired to do – a local realtor and former USC cheerleader and a then-sitting Columbia city councilman – then billing the county through local engineering firm Davis & Floyd (which has $2.32 million in PDT contracts, according to documents obtained by The Nerve) to train them through a program that does not yet exist.

A careful review of monthly invoices submitted for repayment in November, 2015, obtained by The Nerve reveal several charges that invite scrutiny, such as:

  • $1,200/month vehicle allowance for four PDT executives – David Beaty and Clem Watson of ICA; Sonny Timmerman and Ross Tilton of M.B. Kahn and Jennifer Bragg of Davis & Floyd. That allowance does not include IRS-approved mileage reimbursement rates or gas ($594.08 submitted for November 2015)
  • $90/month “computer allowance” for 19 people, including executives with M.B. Kahn, ICA and Brownstone (with Dale Collier of Brownstone at $45/month)
  • $85/month cell phone allowance for 12 people (with Dale Collier of Brownstone at $42.50/month)
  • $3,872/month for IT services through Revere Consulting, Inc. (Richland County has its own IT department)
  • $25,000 for website development and $750 quarterly maintenance to Tim Burke (Richland County has its own website services)
  • $346.04 in November to Merus Coffee (including European Dark Roast and French Vanilla Creamer)
  • $88.17 in November for Pepsis, Mountain Dews and Diet Cokes
  • Two separate pest control bills, $252.47 (Mills Termite & Pest, “service visit”) and $75.77 for Modern Exterminating (“monthly visit”)

How is it that so many expenditures – $35,000 worth in the one month of invoices provided by the County through the Freedom of Information Act – are allowable in a contract to begin with? It’s all about the terms of the deal negotiated by county staff and approved by council on staff’s recommendation.

A BAD DEAL?

When it signed the contract with the county back in October 2014, the PDT got the terms it wanted, including the establishment of a premium, 21,700-square foot office not at an existing location of any of the three PDT firms nor at any county-owned building but instead at 201 Arbor Drive in Fontaine Business Park at a rate of $158,302.56 for the first year (increasing by $5,000 each year thereafter), according to a copy of the lease obtained by The Nerve. In the lease, the tenant is listed as Brownstone Construction Group, and the landlord is CB Richard Ellis (CBRE).

A contract attorney who reviewed the deal and asked not to be identified because he has work pending with local governments told The Nerve he was surprised at the terms of the contract in the sense that not only do the three firms get substantial program management fees ($6.02 million per year paid in 12 equal monthly installments, according to Section 8.2) that normally would account for overhead but the numerous expense categories and lack of financial limitations on them clearly demonstrate a significant additional financial responsibility to the taxpayer that’s not projected in the contract’s terms.

“You usually get one or the other in a contract; either your fee includes your overhead or you negotiate a cost-plus contract – not both,” he said.

Exhibit F of the agreement spells out 16 separate areas of allowable expenses including the vehicle allowances, office furniture and equipment and ongoing costs such as “printers, servers, appliances, computers, docking stations, digitizer boards, laptops, tablets, software, licenses, IT system administration services, etc.” as well as “utilities, regime fees, custodial, telephone, cellular telephones, cellular plans and internet service for PDT office.”

It also includes broad language covering “other costs incurred in the performance of the Work if and to the extent approved in advance in writing by the County.”

In the payment documents obtained by The Nerve, no submitted payments were denied.

FALLOUT CONTINUES

In the past week, Richland County Council chairman Torrey Rush has removed two members from the Transportation Ad Hoc Committee that oversees penny tax issues (Kelvin Washington, who is awaiting a trial date for failure to file tax returns for three years and who owes the S.C. Ethics Commission $75.100, and Norman Jackson).

Rush could not be reached for comment Thursday, but The Nerve did speak to council member Seth Rose, who was one of two members Rush chose to replace Washington and Jackson on the committee.

“As a new member of the council penny committee I am working extremely hard to raise and fix issues with the penny program,” Rose wrote in a response to questions about the expenses submitted by the PDT. “It is my hope that in the very near future the County will have a much better contract with the program development team and each penny collected will be spent both wisely and appropriately.

“I intend to address this issue and many others with my newly appointed service on this committee.”

In a three-page screed emailed to county council members earlier this week in protest of his removal from the committee, Jackson railed against Rush and other perceived enemies on council and lambasted the process that led to the hiring of the current PDT team. As The Nerve recapped here, that vote immediately was challenged legally and went against the advice of both staff and an independent council that had spent weeks vetting and ranking the various bidding teams.

“If you recall during negotiations members of the PDT was (sic) presenting illegal practices and I immediately pointed it out to legal forcing them to do right at least temporarily,” Jackson wrote. “Remember we were supposed to abide by the ranking system to keep us from being scrutinized and yet dispute (sic) warning from legal counsel we changes (sic) the ordinance for a onetime (sic) change to legally appoint a PDT through interviews and no expert opinion choosing a team that was not the best team.”

“After each third reading votes (sic) I warned that changing the Penny Tax program from what we promised the public and what could jeopardize the integrity of this council that if this comes back to bite us that I will say “I told you so” well I told you so.”

A Richland County employee with knowledge of financial procedures who spoke to The Nerve on condition of anonymity said the internal frustration surrounding the PDT’s monthly expenditures is tremendous.

“It all gets approved and no one understands why,” the source said. “We look at (the invoices) and people just shake their heads. It’s truly unbelievable what the taxpayers are paying for.

“We’ve paid for copies of blueprints before on projects, for mileage, but never allowances for cars and cell phones and computers. These are big firms with projects all over the place; you’d think they had those before they got the penny contract.

“And paying for coffee and creamer and Cokes for a contractor? How does that fix potholes?”

Messages left via phone and email for Richland County Transportation director Rob Perry, who approves all PDT expenditures, were not returned Thursday afternoon. David Beaty of ICA, the PDT’s program manager, has not returned repeated messages left via cell phone and email from The Nerve.

Reach Aiken at 803-254-4411. Email him at ron@thenerve.org. Follow him on Twitter @RonAiken and @TheNerveSC. Have The Nerve delivered to your inbox as stories post by clicking here.