ROCKPORT — A notice from the Rockport Library Foundation, the nonprofit engaged in raising funds to help build a new municipal library, sent the Rockport’s Select Board scrambling Tuesday afternoon, enough that it scheduled an emergency meeting just several hours later to:

1. Discuss Rockport Public Library Project Cash Flow Situation; and
2. Discuss Rockport Library Foundation’s relationship to the town.

Public notice of the 5 p.m. meeting was circulated just before 4 p.m., and the meeting was not streamed live, as board meetings normally are. At the meeting, which lasted a little more than an hour, town leaders did not mince words in expressing frustration for the lack of a financial agreement between the nonprofit and the town as to how bills for the library’s construction were to get paid.

The Rockport Library Foundation was organized last autumn as a 501(c)(3) nonprofit, “to raise private, tax-deductible contributions, which in combination with voter-approved bond funds, will be used to construct a new library building in the heart of the town,” according to its mission.

Its board of directors consists of Rockport citizens, including Ann Filley, John Viehman, Joan Welsh, Bill Leone, Cate Monroe and Denise Munger.

Foundation board members were present at the meeting, and assured the Rockport Select Board that they were working in concert with the town for one purpose: to get a new library constructed at 1 Limerock Street, at the site of the former library, since torn down.

They asked, however, for stability and continuity with the project as it unfolds so that they can continue fundraising for library construction costs.

Meanwhile, the Town of Rockport is awaiting for revenue from its own $1.5 million bond to flow into municipal coffers to be used for the library and parking construction. That is to occur after April 18, when library construction bids have been returned to the town.

Last week, the board approved circulating invitations to bid for the project. Included with the bid package were parking plans along Limerock Street. Bids are due back April 18.

The cash flow conversation of March 19 precedes another meeting set for Monday, March 25, of the Select Board. At that point, the board is to discuss parking options for the new library, itself an issue that has emerged controversial as alternative parking plans get presented.

The root of the March 19 issue, however, concerned a $125,000 invoice that was recently sent to the Foundation from the town. The invoice contained no documentation about what the charges represented, and which contractors were to be paid for what purposes.

While the town has paid the bills, the Select Board wants reimbursement from private fundraising to commence to help taxpayers share library construction costs. 

On Monday, March 18, Foundation director Ann Filley responded with an email Rockport Town Manager Rick Bates asking for clarification about the bill. She wrote:

Rick,

The board members of the foundation have stated that to proceed with the invoice that we received from Megan [Brackett, Rockport’s finance director] for library building costs, the following criteria is necessary:

The town's invoice must contain a listing of individual invoices for services so that we can properly identify which building expenses the foundation is reimbursing the town for.

We are also going to delay payment until the April 22nd date, to make sure that bids are in, decisions are made and we are very comfortable that the town is proceeding with the building.

Please do not hesitate to contact me with questions or concerns.

After receiving that email, Bates sent it to the Rockport Select Board at 1 p.m. He wrote:

I am forwarding the email below, along to the Board, so that you are aware.  As you can see by the email below, the Foundation is holding payment for the first invoice we have submitted.  This is not what we expected, but is understandable, from their point of view.  

We have been paying bills that have come due, that are directly related to the construction of the building, with the idea that the Foundation would be reimbursing us, for these initial costs.  Attached is a copy of the first invoice.  While we have to do a better job of documenting these costs, for them to pay it but, understandably,  they do not want to pay for building costs for a building that has yet to be started. 

As you can see from Ann’s email, that once the bids are in and we know we are moving forward, they will pay us.  Until that time, they are going to withhold payment. 

There was always an element of risk here, as we have been spending money (at this point ($125K ), knowing that the bond passed and the building will move forward.  What happens if for some reason we don’t build the building?  That risk has always been there.  There was also the risk of having not moved forward, over the past few months and getting the bid documents prepared.  These risks included, the delay in getting out the bids in early spring and therefore starting the construction later in the year.  This would would result in winter construction costs and inflationary pressures, both greatly  increasing the cost of the project.  This was discussed by the design team at length, and the decision was to move forward and get it done.

Previously, we were using money that was given to the town from the Library Committee to get us to the bond vote.  After the bond passed last November, we have been moving forward with all haste, to get the bid document prepared and out.  This is pretty common and in some cases, we would float a bond anticipation note, to pay these bills, before the bond is received. 

These bills are relative to the design, engineering, owner’s representative costs,  demolition of the building, and preliminary site work.  All expected, normal project costs.  There are a lot of things hanging in the balance here thatneed to be done, in order to move this forward and get the project out to bid in time for a Summer/Fall construction.  If you remember Ken’s cash flow spreadsheet, the foundation has money in the early stages of this project, before we receive the bond proceeds, then we will be spending the bond proceeds.

At this point, we are at risk, if the building does not move forward.  It is a very small risk, but a risk none the less.   We do not expect any more significant bills to come in between now and the 22nd and will hold them until that point.  The risk is, that if for some unforeseen reason, we don’t build the building, don’t trigger the bond,  we are obligated to pay these bills, that are unbudgeted.  The foundation suffers from similar risks, if they start paying bills and we don’t build the building, never mind if they have to return cash to donors who have taken a tax deduction for a donation.  No matter how you slice it, not building at this point, would be a huge issue all around.

In conversations with Megan this morning, she is very concerned about this issue and we agreed, that I would be sure that you were aware of this fact and the risk we have in the long run, no matter how small it is.   The worst thing is for everyone to not be aware of this. 

This will clear up, once the bids come back and we proceed with the project after the 22nd.

Board members, however, decided in a chain of subsequent emails between 1:45 and 3:45 p.m. on March 19 that they wanted to meet immediately to talk about the project’s cash flow, even if it meant scheduling an emergency meeting.

“The time for the Board to have been aware of this was before the funds were spent, not after,” wrote Select Board member Debra Hall, at 1:53 p.m. “This is not how we need to do business. I suggest we have a meeting pronto — today.”

Board member Jeff Hamilton replied that he was available to meet, as did board member Mark Kelley.

Board Chairman Ken McKinley advised:

There are a couple obstacles to having a meeting today. First, the amount of public/press notice (required) would be minimal. Second, the budget committee meets at 5:30.

Also, Rick has been in touch with a couple of foundation board members, and they have expressed a willingness to sit down with the board and discuss the situation, but they cannot make a 5PM meeting today.

I would suggest that we try to schedule a meeting tomorrow or Thursday when we can have some representation from the foundation present, which would allow us to possibly work out a solution to this issue.

I am afraid that if we meet today that we will not be able to accomplish much, and waiting for a day would allow us a much better chance to have a productive meeting.

If this is agreeable to all, please let me know your availability tomorrow and Thursday.

But some board members wanted to meet March 19, and eventually, four Foundation directors also attended the meeting, as did a few citizens.

Board member Mark Kelley wrote in an email: “Budget mtgs at 6, food at 5:30 and an emergency meeting fits doesn’t it?” 

“Yes, I prefer today,” wrote Hall. “We might need a subsequent one with Foundation.”

At 3:22 p.m., board member Doug Cole wrote: “I think we are much more likely to work out a solution if we can meet when we can have some representation from the RPLF.”

Hall responded: “I believe that as a Board we need to understand where we are, what is in the pipline ad why this came as a surprise. Once we have answers to some questions then we are in a better position to approach the Foundation. You don’t negotiate with the other side until you know your position.”

A few minutes later, Cole responded: “I don't feel that we are negotiating. They are our partners in getting this community project done. This is not adversarial.”

Kelley responded: “Save this till 5 please NO EMAILS, and by ourselves.”

Cole responded: “It's a public meeting.”

Hall had added in another email: “I would prefer a Select Board meeting today. It does not have to be long and we can meet somewhere other than where the budget committee meets. I believe Mark is the only one attending that mtg and I am sure we can finish within 30 minutes or he can be a few minutes late to that mtg. We have done emergency mtgs before and this is warranted. That said, I am available tomorrow as well.”

She also warned the board in a separate email, after the email thread wandered away from scheduling and into substantive commentary:  “No more deliberation in email please. Please confirm 5 pm mtg at Town office. Three Board members have now requested it.”

The afternoon emails ended at 3:44 p.m., when Chairman McKinley wrote:

All -

The agenda for the meeting at 5 is attached.

The meeting will occur at the Parker Room at the Opera House. It will not be streamed. 

Bill Leone from the Foundation will be present, perhaps others. It is a public meeting.

Ken

The meeting

As it turned out, four members of the Foundation board — John Viehman, Ann Filley, Bill Leone and Denise Mungen –  were present at the 5 p.m. meeting that was held in the Geoffrey C. Parker Meeting Room.

There, Town Manager Bates acknowledged that the invoice to the Foundation should have shared more business details. He said it reflected engineering and design contracting fees, as well as a $32,000 cost associated with the old library’s demolition.

The invoice to the Foundation, Bates said, “admittedly needs more documentation.”

He said the town’s finance director: “fully understands more is necessary. She wouldn’t pay a bill based on that, either.”

When asked from which accounts the $125,000 is to draw from, Bates replied that would be the undesignated balance of the municipal budget.

He said it was unlikely the project would engender substantially more invoices over the next few weeks now that the bid invitations have circulated.

They perhaps may total $3,000 as the owner’s representative answers contractor questions and cross-checks drawings, Bates and Cole estimated.

“We will incur additional expenses but won’t be invoiced within the next month,” said McKinley.

“We have a $125,000 hole in the budget, now,” said Hall.

“The thinking is that the money would be coming in from the Foundation,” said Bates.

“Is there agreement with foundation,” asked Hamilton.

There is no such agreement, said Bates.

Hall expressed frustration that taxpayer’s were taking on financial risk.

Hall referenced the Foundation’s letter. She said: “We are also going to delay payment until the April 22nd date, to make sure that bids are in, decisions are made and we are very comfortable that the town is proceeding with the building.”

She addressed her comment to the three Foundation members sitting in the front row at the meeting.

“If we issued this bond,” said Hall, “and we had a vote, you are not comfortable? I am going to ask, you’re comfortable that we are proceeding with the building? I mean, what more do we have to do? I’m really upset with the Foundation.”

“We have to talk a little about this, and try to move forward,” said McKinley. “We know there’s some risk involved. We’ve known it all along.”

“No, we haven't,” said Hall.

“Let me finish,” said McKinley. “There is risk involved, the bids may come in high, that we spend some money that not normally would have been spent, even if the Foundation were for paying the money. There’s always risk.”

“I agree with that,” said Hall.

McKinley continued: “I think we need to move forward, find out a way to share the risk. Right now, for the next four weeks, the risk is all on the taxpayers. If we can find out a way with the Foundation to share the risk; I understand the Foundation has some risk to share, as well, because they have donors who are making contributions and they want to make darn sure the project is going to proceed, so there is some risk on their part.”

Hamilton expressed disappointment that no memorandum of understanding or agreement existed between the Foundation and the town to spell out the terms of covering the building project costs. He, too, commented that some of the words used in the Foundation’s note, “were concerning.”

While they talked briefly about curtailing spending on the project, Hamilton suggested tasking the town manager with producing a risk identification plan.

Hall said she agreed with foregoing more library construction project expenditures.

“We should stop work,” she said. “I know we have to get this bid out. There should be no more incurring of any library spending.”

Kelley said he was unaware that more spending had occurred, other than the $32,000 for the old library’s demolition.

“Now I find out today that there is $125,000,” he said. “I find that a little troubling.”

“We all want the same thing,” said Cole. “I understand that emotions are running sort of high, and everybody wants to do the right thing, be fiscally responsible and show leadership. The Foundation is working with us as a partner and I think it behooves us to work together.”

Rockport citizen Jim Ruddy said: “It is a little unfortunate that the emergency meeting was not publicized to public. You are talking about some very important things and it is unfair to the taxpayers.”

He queried the board about the bridge bond that voters also approved in November (see sidebar), and asked why no agreement had been made between the Foundation and town.

“It seems like an informal discussion that someone may have had,” he said. “We voted as a town for a bond based on a contention that we were going to be paid back by the Foundation.”

Kelley then clarified that the money is to be paid from the Foundation’s fundraising but that the town had fronted the project $125,000.

“We are talking about a cash flow issue,” said McKinley.

A brief discussion about the bridge loan ensued and McKinley said the town could use the bridge loan to manage the cash flow.

“I don’t know whether we’ve done the paperwork on it yet,” he said. “The way that article was worded was that we could use it from time to time.”

Bates said that no matter if the town used a bridge loan: “We still have small risk. Until we build that building there is an element of risk that we are going to spend out money. The Library Committee made that investment early on knowing that until the voters voted, they could have been out $80,000, or more.”

McKinley then turned to the Foundation for comment.

Bill Leone, a Foundation board member, said: “This is all about procedure. No more than that. The Foundation received an invoice that had no detail, which triggered us to say we need more detail, need to have specific invoices and what they covered, and what part of the project they are covering.”

Being a nonprofit, the organization has certain requirements and, need complete details for any future audits, he said.

He said: “Going forward, what we need to have is an understanding of what you expect. We need copies of invoices from vendors. Those copies need to detail what the work is because this is two-part project. There is the library, and intersection and parking, which we are not responsible for.”

He continued: “There’s a lot of decisions that have seem to have been with the project that we are revisiting. There seems to be some controversy about the project. That concerns the Foundation and donors. We incur a responsibility to the donors to make sure that every dollar that we raise goes to building this library. We don’t want to provide funds if the project is not going to go forward. As much as you say you know the project is going to go forward, until we see that the budgeting and the various billing from your vendors.... we need to be certain that this project is going to happen. We are price-driven. We do have fiduciary responsibility.”

Leone said a program needs to be worked out for payments, “but we need to have details.”

“There’s no question you need details,” said Hall. “The bill should never have gone out the way it did. “This board knew nothing about this until this afternoon and we called for an emergency reason for obvious reasons. We never saw this bill, and the way in which it went out. We don’t see bills. Why would we have known it went out that way? It’s totally understandable that you need to have details. Totally understandable that it is not about intersection or parking, but what’s not understandable, and what you have not really responded to, is why you have picked this date of April 18, to say you are not going to pay anything until April 18. To say that it is not going to go forward.... I feel like I hear that the controversy over the parking is part of what’s involved. There’s going to be parking. What exactly it’s going to look like, we’re not sure, yet. But I am not going be held hostage as a select board member by the Foundation to this parking issue.”

Foundation board member John Viehman then spoke, saying: “I think there is a little inflation here of what the issue is. Maybe just bring temperature down a little bit. I don’t think it is helpful. Saying you are being held hostage. Come on. Really?”

“Then why are you saying you want to wait until the 18th,” asked Hall.

“OK, then why don’t we just agree to go get more detail,” said Viehman.

“OK, that’s fine,” said Hall. “We acknowledged that this bill should never have gone out the way it is. But as soon as Megan does get you that detail, then we don’t see why we are waiting until the 18th to know that this project is going forward.”

McKinley then asked the Foundation: “Once Megan gets detail that you guys require is there a way we could talk about the date?”

Leone suggested the town provide the Foundation with the detail, “submit that to us and we will take it up at our next meeting.”

The Foundation meets every Monday.

Bates at that point said the $125,000 in invoices had already been paid.

“We put them on the warrant and they get paid,” he said. (Warrants are weekly accountings of what a municipality pays. A select board member is responsible for signing them.)

A lot of them, said McKinley, are architects’ fees.

“Being one of the people who signs the warrants, if I had known perhaps a little more about this, I would not have been so quick to sign the warrant,” said Kelley.

Hamilton then defined the root cause of the issue, “is a lack of discussion” of an agreement as to how to process the bills with the Foundation.

McKinley then suggested it get done in the next week or two.

“From this point we have to move forward and if the Foundation is saying ‘let’s hammer out an agreement, we could even have perhaps for our meeting on Monday [March 25] an agenda item being an agreement,” he said. “If we can get it done that quickly.”

“If we’re not going to receive any funds until April 18, then we need to have a better understanding of what’s in the pipeline for expenses,” said Hall, restating her aversion for enlarging a hole in the municipal budget.

Hamilton then outlined the task, which involves the town manager to work on an agreement with the Foundation.

“We need to know that once the Foundation has acceptable documentation, we need to know when foundation expects to pay us,” said Hall. “I don’t want to be sitting here and find out that we are another $40,000 over budget over the next few weeks.”

“I think that is what Jeff said,” said McKinley. “We get the detail, we work out an agreement, what the relationship between the Foundation and town is going to include, the terms of the invoicing, and that answers a lot of these questions, and hopefully the Foundation will help share the risk.”

Kelley added a desire to have a “worst case scenario” if “some case things fall apart,” and  the town is left holding $125,000. What would be a plan, either from freezing spending to employee layoffs, asked Kelley. 

“I would like to have some idea of what he [the town manager] is planning to do, should things go to hell,” said Kelley.

“Let’s see where we go with the agreement,” said McKinley, referencing Monday evening. “That may answer a lot of the questions.”

“Is that a bad thing to ask for right now, to be ready,” said Kelley.

“I think it’s premature,” said Cole.

McKinley said that right now, he’d rather have the town manager spend energy on getting an agreement “hammered out, and seeing where it goes.”

The meeting then descended into more discussion about the lack of an initial agreement between the Foundation and the town.

“There should have been an agreement from day-one between the Foundation foundation and the town,” said Hall.

Leone responded: “The sole purpose of the Foundation is to raise money to build a library. That’s the only reason we exist. So I think that should ease your mind with regard to us using funds for something other than this project.”

Hall clarified and said there needs to be an overall agreement.

“We said that,” said McKinley.

Hall said: “I don’t mean this, just in terms of a payment. I mean an agreement, generally.”

“What other components would you want,” asked Foundation member Denise Munger.

“That it’s the intention of the Foundation to raise X amount of money to provide that to the town as part of this whole library,” said Hall. “It’s not just a handshake here. It needs to be documented. As we both know, Denise, as lawyers.”

Who has agreed to what are to be spelled out in the agreement, said Hamilton.

“The good news for me is that this discussion is happening now and not in June, not in July, not next September,” he said. “We will fix this. We just have to do it collaboratively, with the proper paperwork, going forward with a positive regard to good faith as to who is going to do what, and when. The devil is in the details of documentation that makes it very clear for all.”

Richard Anderson, a resident of Rockport, then asked the Foundation, “Under what conditions might you not pay an invoice?”

Viehman responded, “We got an invoice with no details for $125,000.”

He continued, “We are footing the bill for 60 percent of this library. We just got basically a blank invoice. That’s the issue.”

“That isn’t just the issue,” said Anderson.

Hall then said: “John, that would have been the issue if you said, ‘hey, this invoice is insufficient,’ because the response would have been, ‘you're absolutely 1,000 percent correct. That’s insufficient. Megan, go give them a sufficient invoice with all the attachments.’ It’s the part that says, ‘we’re going to wait until April 22 [18], until we’re comfortable with this library thing.”

Anderson then said, “there is another condition, an important condition.”

The meeting then descended more into arguments with many voices speaking over each other, until Kelley said, “I think Ken ought to be running the meeting.”

McKinley then said: “We have agreed that once the details have been provided, and agreement between the town and the Foundation, there may be some softening in that date. I think that’s what I heard from body language, from the lady sitting in the front row. We have to let Rick do his work, and let that agreement happen. We will see where it goes.”

Hamilton asked, “Are there any other non-agreements agreements that need to get taken care of that’s associated with the project?”

“Not that I’m aware of,” said Bates.

Bates then said, to answer Anderson’s question and for example, if the town submitted an invoice for the intersection work to the Foundation, “they’re going to kick that back and say ‘no, that isn’t part of the building. We’re not going to pay that.’”

McKinley said, “that will be defined in the agreement.”

Later in the evening, after the meeting, board member Hall wrote in an email to Bates and Brackett:

-----Original Message-----
From: Debra J. Hall <debrahallgr@gmail.com>
Sent: Tuesday, March 19, 2019 6:15 PM
To: Richard C. Bates <RBates@town.rockport.me.us>; Megan Brackett <MBrackett@town.rockport.me.us>
Cc: Debra Hall <dhall@town.rockport.me.us>
Subject: Anticipated Costs

Rick
Further to my comments at the meeting and the Select Board’s direction, not only does Megan need to get a detailed invoice, with copies of invoices the Town has paid, to the Foundation ASAP (I think no later than Thursday was mentioned), we need to have an estimate of how much is currently in the pipeline — since those invoices — and how much anticipated work is to be done between now and April 22nd (though they now claim they intended the date of April 18th). It was suggested that there might be between $5,000 and $10,000 (Doug and Ken) but I don’t have any confidence in those numbers. We should be looking at the major players from whom the invoices are received, e.g. Phi, G&D, Stephen Smith and whoever else is associated with the library work —  to see what more we expect to “be in the hole by” come April 18th. We need to decide at the meting on Monday whether we will stop work, or simply cease paying invoices, etc. until payments start flowing from the Foundation. This is a simple function of calling those vendors and asking them what is currently in the pipeline and what they expect to bill in the interim.

Reach Editorial Director Lynda Clancy at lyndaclancy@penbaypilot.com; 207-706-6657