Thursday, April 24, 2014
BATH – The city's sale of a former hospital building was illegal because it violated the city charter, says a retired attorney who is helping to lead an effort to recall five Bath city councilors.
The city's sale of Mid Coast Center was illegal because it violated the city charter, says a retired attorney who is helping to lead an effort to recall five Bath city councilors.
Gabe Souza / Staff Photographer
In an email sent to the council Monday, Michael Wischkaemper of Bath cited Section 7.114 of the charter, which says that any sale of a city-owned property valued at more than $1,500 must go through a bidding process unless the buyer is an adjacent property owner.
Bath officials sold the former hospital, valued at $6.5 million by the city assessor's office, for $799,000 in April after receiving an offer from a Phippsburg-based developer, Robert Smith. The property was never listed for sale.
Critics of the sale, including Wischkaemper and Bath resident Larry Scott, say the property, now an office building, is worth at least $1 million.
Although he is involved in the effort to recall the councilors, Wischkaemper is more critical of City Manager Bill Giroux in his email. He accuses Giroux of violating the city charter in deciding how the property would be sold. The charter says the council is supposed to make such decisions.
"Council members keep saying you did nothing wrong, but the city manager did do something wrong," Wischkaemper's email says.
According to documents obtained by the Portland Press Herald through a Freedom of Access Act request, Bath officials hired Don Spann, a Topsham-based commercial real estate broker, on April 3 to act as Bath's broker for the property at 9 Park St., known as the Mid Coast Center.
The contract says the property's list price would be $799,999 and that Spann would receive a commission of 7 percent.
According to the contract, Spann's agreement to act as broker was not to begin until April 10. The buyer, Smith, signed a contract April 10 to buy the property for $799,000 – about $1,000 less than the price in Spann's broker agreement.
That day, Spann signed a waiver with the Maine Listings multiple listing service stating that he did not want the property listed for sale.
According to the Maine Listings waiver, listing a property with the service tends to bring a higher sale price because more than 670 agencies and 4,100 agents and brokers in the state get access to the listing.
Wischkaemper, Scott and others have questioned why Spann did not list the property on the multiple listing service or give other potential buyers a chance to beat Smith's offer.
They say the timing of the sale gives the appearance that Smith had advance knowledge that the property was to be sold and was working directly with Spann.
Wischkaemper said it's unlikely that Smith could have done all the necessary due diligence to buy a large commercial property in the five business days from April 3 to April 10.
"That makes me think that Smith had knowledge of the sale before April 3," he said. "You can't make an offer on a million-dollar property in five days."
In Maine, it is legal for a commercial real estate broker to represent the interests of the buyer and seller in a transaction. In Spann's broker contract, the city consented to Spann acting as a "dual agent," although Smith had his own broker representing him.
Neither Spann nor City Manager Giroux returned calls Tuesday seeking comment. Smith could not be reached for comment.
In a series of emails to the Press Herald, City Assessor Paul Mateosian defended city officials' actions and said the rapid sale to Smith was a boon to Bath residents.
"True, it was not listed in MLS, but that was because Mr. Spann informed the city that he had already located a buyer willing to pay the asking price," Mateosian said. "That is really the only thing unusual about the sale, and it happens once in a while that a property sells quickly."
Mateosian said the former hospital's square footage has been grossly overestimated, and it has only about 45,000 square feet of leasable space. As for the fair market value, he said, that is largely a matter of opinion.
"Let four different appraisers value a property and you are likely to get four different answers," Mateosian said.
He acknowledged that the city's failure to list the property may have given the appearance of a biased decision-making process. He said, however, that the process was impartial.
"That was our error and we have learned from it," Mateosian said. "In light of the criticism of the sale, the city has revised its policy for property disposition."
All of the city's actions leading up to the sale occurred before the City Council approved it on April 17.
No prior council vote was taken on how the property would be sold, or on whether it should be opened up to competitive bids.
In his email, Wischkaemper told the council that it had been deceived.
"You were not told the property had already been privately placed with a broker at a price you had not yet approved; you were not told that broker had sold the property without putting it to the public; you were not told a secret agreement not to put the property on the MLS was made with the buyer," he said.
Council Chairman Bernie Wyman said Wischkaemper and the other critics of the sale are making too much of it.
"They have blown everything so far out of proportion that people around here don't know what's right and what's wrong," Wyman said. "In my own mind, I don't think that we did anything wrong."
Wyman said the council has asked the state Attorney General's Office and the Maine Municipal Association for their opinions on the legality of the sale and how it should be investigated.
The council already has committed to hiring an independent investigator to examine the sale and interview all of the participants to produce a public report. It plans to discuss the investigation in more detail at Wednesday's meeting, scheduled for 6 p.m. at City Hall.
Wischkaemper said he and Scott will have a table outside City Hall with recall petitions for residents to sign. They are seeking recall elections for five councilors: Wyman, Carolyn Lockwood, Meadow Merrill, Sean Paulhus and Andrew Winglass.
Two other councilors who the critics oppose, Leverett "Tink" Mitchell and Mari Eosco, already are up for re-election in November.
The eighth councilor, David Sinclair, is not being targeted because he has criticized the city's handling of the sale and called for greater transparency.
J. Craig Anderson can be contacted at 791-6390 or at: