THE BETTER FLIP…OR THE BETTER FLOP?

In December 2017, Andrew Cass from the News Herald wrote an article announcing that Mark Rantala, Executive Director for the Lake County Ohio Port & Economic Development Authority, would be “doing his best Bob Vila impersonation in 2018” by undertaking the ‘Better Flip’ initiative. While the intent of the ‘Better Flip’ initiative is a noble one (making homes on the county’s west end more attractive to prospective millennial homeowners), the road to hell is paved with good intentions. See News Herald article produced in its entirety at the Port Authority website: https://lcport.org/news/willowick-home-demonstrate-port-authority%E2%80%99s-%E2%80%98better-flip%E2%80%99.

As a side note, the Lake County Land Bank tried their hand at flipping houses and failed miserably – costing taxpayers money.   We requested the Minutes of the Port Authority for the years 2017 and 2018 to see if we could find out more information about the ‘Better Flip’.

The initial plan was for the Lake County Land Bank to donate the house, and Mr. Rantala would completely manage the project. The entire step-by-step renovation process was to be documented via video and ultimately used as part of the marketing plan for the sale of the house by auction. It was generally believed that the proceeds of the house sale would cover the expense of the renovation. A summer intern was hired at the cost of $6,500 expressly to memorialize the renovation (a PDF of the job description has since been taken down from the CSU website but here is a PDF of the 2018 salary and benefits information the Port Authority provided to us.      port authority 2018 budget

Additionally, a website and a series of “how-to-videos” posted to the ‘Better Flip’ YouTube Channel (https://www.youtube.com/channel/UCu4H3gPqLNgMbaQUC1oWadg) was intended to help guide homeowners and prospective homeowners through the process of updating similar houses. Expensive video camera equipment was purchased for this project as well.  Sadly, there are only two (2) videos posted to the YouTube Channel. It is anyone’s guess why there is a lack of video documentation; but since this project has gone horribly wrong from the start, it is safe to say that this part of the marketing plan has been an abysmal failure. At the very least, the Port Authority could have documented what NOT to do. How embarrassing for a Port Authority board that has some high-powered construction experts that should have ensured this debacle would not occur.

Speaking of the Port Authority board, at its December 2017 board meeting Chairman Art Lindrose (President and Principal at Bolton Pratt, a Cleveland General Contractor) reported that he and several of the Port Authority staff walked through the proposed flip house and stated that it would be an interesting project for the port. Chairman Lindrose said he and Board Member, Bill Martin (President of Barrington Homes in Concord, OH), would collaborate on the project to put together a budget which would spell out what it would take to bring the flip house to the point of resale to a millennial…should the Board choose to take the project on. Later in that same board meeting, however, the Port Authority board voted unanimously to approve a resolution allowing the donation of the flip house. So, without even determining the estimated project cost the board decided to proceed, seemingly unconcerned about the cost to the taxpayers.   Here is a link to the 12/20/17 Port Meeting.  (Note on page 2 –  the “Chairman’s Report”)  2017-12-20 minutes

At its March 2018 meeting, the Port Authority held a working session regarding the ‘Better Flip’ project prior to their regular board meeting. There was much discussion; however, ultimately the Board unanimously approved a resolution authorizing $150,000 to be used for renovation work at the Willowick home at 557 E. 305th Street, which was donated to the port from the Lake County Land Bank.    2018-03-28 minutes

Initially, construction was to begin in April 2018 with the project to be completed by early July, at which time three months of open houses would begin prior to the proposed auction of the home. At the time the Port Authority board approved the $150,000 ‘Better Flip’ initiative, the start date for construction had already been delayed until May (http://www.news-herald.com/general-news/20180407/better-flip-project-in-willowick-may-start-date-eyed).

Almost immediately, the project was plagued with problems. It was discovered that there were significant foundation and sewer issues. These issues had to be addressed before the project could move forward, which put the entire project way behind schedule. It raises these questions in our mind:

1. How is it that this was not discovered prior to the Port Authority accepting the house from the Land Bank?
2. Why did the construction experts on the Board not see the basic structural flaws in the basement or the sewer issues?
3. What kind of due diligence was done up front?

Unfortunately, by the time the project really began to get underway, the summer intern was off to college. No website had been set up, no step-by-step videos had been made, and the money allocated to the project was being depleted quickly.

In October of 2018, a member of LFC attended the Port Authority board meeting. At that board meeting, the Port Authority board unanimously approved an amended budget for the ‘Better Flip’ initiative allocating another $60,000 for the project. Let’s do the math shall we? The board initially approved a budget for the project in the amount of $150,000 back in March of 2018. In October, they approve another $60,000 for the project so we are now at $210,000.    2018-10-24 minutes – lcopeda

Two members of LFC recently attended the Port Authority board meeting held on January 23, 2019. Commissioners Hamercheck and Young were in attendance. During the public comments section of the meeting, LFC asked for a financial accounting of the Port Authority’s project known as the ‘Better Flip’, since we have heard there are ongoing problems with the project. Mr. Rantala jumped all over that comment and said that “the project is going very well.”  He confirmed that he had received correspondence from our group and was in the process of getting the information.

During the discussion period of the ‘Better Flip’ agenda item, Commissioner Hamercheck pointedly asked Mr. Rantala if it is true that the ‘Better Flip’ project costs were likely going to be in the range of $250,000 – $260,000.  At that comment, Rantala let out a significant laugh and said that is not true (don’t forget that $150K + $60K = $210K already).

Rantala acknowledged that there were some problems with the home’s foundation. Again we ask, why was this foundation problem not known BEFORE the home was accepted by the Port Authority? Mr. Rantala said the project costs will assuredly be more than the Port Authority can realize in its ultimate sale, but the shortfall will be considered “marketing” costs for the project. (LFC Comment: Really? That statement is just too ridiculous to comment on…we are literally speechless here and that just doesn’t happen very often. We are giving Rantala 1 Pinocchio for that nonsense, since initially they thought the expenses of renovation would be totally covered with the sale proceeds.)

Rantala continued to explain the need for the project with a rather strange analogy of what he referred to as the “missing tooth” problem, and then the negative impact of rental property on a neighborhood.

He did admit that they spent more money on this ‘Better Flip’ project than a normal contractor would spend on a home designed to be cleaned up for sale. The idea was to provide millennials and others with a visual idea of what could be done with these homes that are more than fifty years old by showing what could be done by adding a front and back porch, larger first floor bedrooms, and bringing laundry up from the basement to the first floor. That sounds more like aging in place to us, which isn’t a bad thing. We do understand that there is an open floor plan and a master bedroom suite with bath and walk-in closet…on the first floor. The master bedroom is the only bedroom on the first floor. As one board member put it during the intense discussion in March 2018 before the project was ultimately funded, “Mothers want to be on the same floor as their children.” Remember, the ‘Better Flip’ project was all about millennials.

In our humble opinion, there is no way the Port Authority can recoup the full costs for the renovation. Let’s just say that the house will fetch $150K at auction (highly unlikely). The project is still $60,000 over budget and way behind schedule. We will await with great anticipation the detailed accounting we requested from Mr. Rantala at the meeting. Certainly, the detailed accounting should include expenses associated with the project such as the summer intern that was to help market the project and the expensive video camera equipment he was to use for said marketing purposes.

Without even having the benefit of the detailed accounting, which will hopefully be forthcoming very soon, it is our opinion that this project is an EPIC FAIL. Two thumbs way, way down! Additionally, given the fact that the Port Authority is dependent on the County Commissioners to fund the lion’s share of their operating budget as well as the operating budget of the Lost Nation Airport, we are encouraged that the Commissioners are looking into this unmitigated disaster as they begin their budgeting process in the near term. Do the Commissioners think that this was a good use of taxpayer dollars? We don’t.

And what about all that expertise of Board Members Art Lindrose and Bill Martin? They are builders for heaven’s sake! Where were they when the ‘Better Flip’ initiative was going south literally almost out of the gate? Is the Port Authority board even managing the Executive Director at all? Has this Port Authority board abdicated their fiduciary responsibility to the Lake County taxpayer? Additionally, Mark Rantala is supposed to be somewhat of a real estate guru. With all that intelligence and expertise in real estate and construction, how could this project have gone so wrong? Words like “malfeasance” come to mind.

Is it possible that there might have been something just a tad more important that the Port Authority board could have spent between $210,000-$250,000 on? We understand that T-Hangars are in high demand…apparently there is a waiting list for these things. T-Hangars are small, private hangars for the purpose of storing aircraft. Think of it as a garage for a small, privately owned airplane. Back in 2016, The Ohio State University began construction of T-Hangars for their airport (Don Scott Field), which will lease for between $325-$500 per month (https://osuairport.org/news/2016/06/new-t-hangar-construction).

It is our understanding that T-Hangars are part of the Lost Nation Airport Master Plan, which is currently in process. However, private developers are not interested in building T-Hangars until there is sufficient infrastructure in place at the airport. T-Hangars are one of the ways that the airport can move toward becoming self-sustaining (remember the Commissioners, which means ultimately the tax payer, are funding quite a bit of the Lost Nation Airport budget). Oh, by the way, we understand that the Commissioners (and by extension you the tax payer) are on the hook to fund that airport no matter what for the next 25 years…FAA rules and all that. Do you suppose that the needed infrastructure to bring in development of T-Hangars could have been put in place at the airport for say between $210,000 and $250,000? Or how about buying that piece of property in the runway protection zone that was budgeted for in 2015?

Additionally, as we told you in our article entitled “Port Authority & Visitors Bureau…Joined by a Coastal Manager & the ORC,” the Port Authority does not have enough money to fund the salary and benefits of the Director of Coastal Development. Funding of that position is accomplished using funds from the 1% lodging tax Tourism Reserve Fund, through the Visitors Bureau as a pass-thru entity, which we believe is a bit murky at the very least.

Lake County does have a Coastal Plan, and the $210,000 – $250,000 being spent on the ‘Better FLOP’ initiative would have gone a LONG, LONG, LONG way in funding the Director of Coastal Development position. We understand that the Visitors Bureau has NOT funded the Director of Coastal Development position for 2019. If he’s on the job without pay…wow that is some SERIOUS dedication to Lake County and we thank him profusely for it! Our guess, however, is that he is getting a paycheck and contributions to his OPERS account. So how is the Port Authority paying the salary and benefits for the Director of Coastal Development if they do not actually have the funds for this position? The saying usually goes, “Robbing Peter to pay Paul.” Okay so what Port Authority fund that is dedicated to something else in the budget are they robbing to pay Peter?”

We have given you two examples of where the money spent on the ‘Better Flop’ would have been better spent on either the Lost Nation Airport to bring much needed infrastructure necessary for development of T-Hangars as stipulated in the Master Plan OR funding the Director of Coastal Development’s salary and benefits so that he may focus on implementation of the Lake County Coastal Plan. What in the heck was the Port Authority board thinking? Were they thinking? After all, they are the ones that set the policy. Every action taken by the Port Authority, as well as allocation of Port Authority funds, is approved by resolution…and every bit of the ‘Better Flip’ spending has been approved unanimously by the Port Authority board.

We believe that the Commissioners should take a VERY SERIOUS look into what is transpiring at the Lake County Ohio Port & Economic Development Authority. Who is minding the board? It would appear no one is until recently. This is typical throughout most county governments by the way (see Who’s Minding the Boards…Answer – No One!). We thank Commissioners Hamercheck and Young for attending this recent Port Authority board meeting. Is it time that the Commissioners hold the Port Authority and its board to account for their out of control spending?  It’s way past time.

The Port Authority spent a great deal of money with Silverlode Consulting to craft a Strategic Plan. Perhaps the Port Authority should focus more on executing that strategic plan through productive collaboration with the appropriate representatives of the various Lake County communities (the mayors and the economic development folks) the Port Authority serves OR spending their money on getting that airport to the point of being self-sustaining rather than using what limited resources they have in their budget (which, again, is mostly funded by the Lake County Commissioners and ultimately the tax payer) to undertake ‘The Better Flop initiative’.

[LFC Comment: If we were grading this project we would give it an “A” for innovation, but an “F” for business model and implementation. We are betting that when it is all said and done, the members of the Port Authority board that voted for this thing may wish they could go “Back to the Future for a do-over.”

 Please note that new board members Biljana Lovrinovic, James Struna, and Wally Siegel had not yet been appointed to the Port Authority board at the time the Better Flip initiative was undertaken. However, Ms. Lovrinovic and Mr. Struna did vote to approve additional funding for the project back in October 2018. Mr. Siegel was just recently appointed to the Port Authority board to replace Chris Madison, Partner at Cohen and Co., a very prestigious CPA firm in downtown Cleveland, who recently retired from the Port Authority board.]

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