DATE: Saturday, September 13, 1997          TAG: 9709130005

SECTION: LOCAL                   PAGE: B8   EDITION: FINAL 

TYPE: Editorial 

                                            LENGTH:   74 lines

INADEQUATE OVERSIGHT: EXXPENSIVE GUESSTIMATESVIRGINIA BEACH OFFICIALS HAVE SOME EXPLAINING TO DO ABOUT PROPERTY PURCHASES.

Virginia Beach City Council has tried mightily in recent years to cast itself as a guardian of tax dollars. The council has been highly critical of the way other agencies, especially its School Board, spend money.

As it turns out, this is a classic case of the pot calling the kettle black. News reports this week show the City Council scratching its collective head over a multimillion-dollar real estate purchase, which, it turns out, was based on a ``guesstimate'' by a local architectural firm.

City Council reportedly agreed late last year to allow the Community Services Board, which serves the mentally retarded, mentally ill and substance abusers, to spend $12 million to purchase and renovate an old hotel building and some adjacent property on Bonney Road. This location is to be the new headqurters of the agency.

Justification for the purchase was that ownership of a building would save the taxpayers more than a half-million dollars in rent each year. Better yet, the location was perfect: along transit lines and away from residential neighborhoods that traditionally oppose community services in their ``back yard.''

Unfortunately, once the purchase deal was closed it became clear that renovations would be far more costly than expected - the actual cost of the project would be closer to $19 million as opposed to the originally projected $12 million. The Community Services Board studied the problem and concluded that the best solution would be to demolish the existing structures and start all over again for a cost of roughly $17 million.

We do not argue with the appropriateness of the venture. The Community Services Board is a worthwhile enterprise. It is funded by the city, state and federal governments and through the fees it charges the people it serves.

But nine months after council voted to allow the purchase, it got a $7 million surprise.

Surprises like this shouldn't happen.

The Community Services Board is not asking the city to ante up any more money. It is seeking permission of the council to incur additional debt in order to go ahead with the needed work.

But it should never have come to this. The moment the Community Services Board decided it wanted to buy a new building, city staff should have taken over. They have the professionals with the know-how to screen prospective properties and conduct detailed engineering and architectural studies of buildings.

The city did not exercise proper oversight, though it ought to be a matter of course in any such purchase.

The lack of due diligence is astounding. Even first-time home buyers know that it is foolhardy to enter into a real estate purchase without a thorough engineering report on the condition of the home. Yet city officials allowed a multimillion-dollar transaction to go through without the same caution used when buying a $100,000 house.

Dennis I. Wool, executive director of the Community Services Board, told the newspaper earlier this week that a complete architectural review of the building before purchase would have tipped off the seller as to the identity of the purchaser.

Too bad. The city's business cannot be conducted in the dark. When tax dollars are being spent, officials have an obligation to safeguard against waste as surely as taxpayers would with their personal expenditures. If that means blowing the city's cover during purchase negotiations, so be it.

City Manager Jim Spore is investigating the CSB building purchase and will report back to council next week. In addition to an explanation of what went wrong, Spore must outline what measures will be taken in the future to guarantee that all real estate ventures entered into on behalf of the city are conducted in a thorough and professional manner.

Even if it is shown, as we expect it will be, that the properties were a sound investment, the process remains deeply flawed. There is no excuse for a surprise of this size months after the deal was made. The city has a duty to make fully informed decisions.

In the finger-pointing that is sure to follow, it is important to remember that City Council signed off on the deal. The buck stops with elected officials charged with being the stewards of public dollars.

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