Recently, the Community Gazette published our review of the growth of tax rates over the past 10 years for Bethel and 8 neighboring communities.
At the same time, Board of Finance member Cynthia McCorkindale was putting together an initial review of one budget area, namely, lease contracts at municipal facilities, including fire stations, the new police station and Bethel schools. What she uncovered was an apparent pattern of high-priced equipment leases tied to service contracts at higher than average monthy rates. In addition, these leases mandate that the consumables be purchased from the equipment supplier, also apparently at inflated volumes and cost.
A second pattern emerged, with few exceptions, of leases being awarded across multiple town departments to BASE Technologies, a company whose President, Michael Boyle is also the Bethel Economic Development Commission Chair.
Board of Finance member McCorkindale believes this could be the tip of an iceberg of financial insider dealings that inflate the Town budget by hundreds of thousands of dollars or more, and has begun a more detailed review of the town budget.
During a period of significant tax growth at a rate that outpaced neighboring communities, with many calls to slow or reduce the costs contributing to increased taxes, Town departments were apparently awarding potentially excessive contracts across multiple departments to a firm operated by a well positioned "insider".
McCorkindale began looking into a number of budget items as part of an ongoing review of Town spending that she undertook after the last budget vote.
One area of focus was on the recurring copier leases in multiple departments. "I noticed that most of the copiers are leased, and because in most instances leases are more expensive than a purchase, I wanted a better understanding of what was being leased and the terms it was being leased for," she explained.
She further said, "The more documents I reviewed the more troubled I became. As more and more irregularities came to light, I became increasingly concerned. And not just about the over-spec'd equipment driving up the costs, the inflated costs on top of that tied into exclusive consummable purchases, but also the deeply troubling security implications."
The security implications McCorkindale mentions are the remote managment systems that allow Base to access and monitor various aspects of each copier/printer and other devices on that network.
McCorkindale continued, "Why does an outside, third party vendor have near complete, 24 hour access to everything printed, scanned or copied as well as access to other connected devices, such as computers and laptops, in our municipal, school, fire and police departments? How is that appropriate in any possible scenario?"
When asked about the use of leases, McCorkindale said, "My understanding is that if a department needs a high cost item, for example a car, and they want to purchase it, they come before the Board of Finance. However, if they choose to lease it, a lease does not require Board of Finance approval. I assume that would also apply to significant equipment such as a copier/printer, as has been done town-wide with these copier/printer leases."
The South Street Fire Station is a very small example.
The South Street Fire Station was outfitted with a model 3540 copier/printer, a unit that only does black and white copies. The 5-year lease includes the equipment and cost for toner, which must be purchased from BASE, based on a minimum number of copies over the 5-year lease. Think of it as if you leased a car and the lease had a base price and then a charge for a minimum number of miles added whether you drive them or not. The South Street copier/printer lease costs $7,985 over 5 years. $6,500 of that is the equipment cost. The exact same machine can be purchased, new, on Amazon for $1,450. A copier/printer with the same capabilities can be purchased at Staples for $149, a savings of $6,351. The ink savings would be another $700 versus the mandated toner purchase, saving the Town of Bethel over $7,000 on just one copier/printer.
Board of Finance member McCorkindale provided examples of dozens of similar leased machines in multiple departments.
A review of one lease contract for the Bethel Schools included 28 machines, the majority of which are outfitted with industrial grade finishing accessories to collate, hole punch and staple, each capable of processing 4,000 copies at a time. The 28 machines have a combined capacity to produce over 6 million copies per month.
The 5-year lease for the 28 school copier/printers is for over $598,000, and includes a minimum built-in consumable expense based on a volume of 8.2 million copies a year - a mandated minumum used in the price calculation of just under 2,700 copies per student per year.
An alternate approach where the copier/printers would be purchased instead of leased, with each school having a single collating/stapling machine rather than 28 of them, would cost just under $88,000, a savings of over $500,000.
The Request for Proposal (RFP) for the Schools outlines the criteria for evaluating the bids for the copier/printer lease contract. The evaluation criteria indicates that price accounts for just 40% of the bid selection, with other non-cost criteria such as vendor experience and the bidder's summary of their proposal providing 60% of the selection decision.
Bob Kozlowski, Town Comptroller, was contacted to explain the reliance on leased equipment instead of significantly lower cost purchases. He has not replied as of press time.
The Director of Fiscal Services for the Town school district was also contacted. She indicated that she was away and will respond after she has returned and can review the contracts in more detail.
Mr. Boyle, Bethel Economic Development Commission Chair and President of BASE Technologies was asked to comment on the leases, and did not provide comment as of press time.
The Community Gazette will update this story as more information is provided.