Unsealed: Bidding irregularities in Haddam state-funded project

In August of 2023, Haddam, a small town just a few miles down Route 9 from the City of Middletown, announced that it had received a $4.55 million grant from the Department of Economic and Community Development (DECD) to turn its shuttered Haddam Elementary School into affordable senior housing, a community center, and town offices.

Haddam received the largest grant of the eight communities included in the third round of the Connecticut Communities Challenge Grant , a program started in 2021 by the DECD to “improve livability, vibrancy, convenience, and equity,” of communities in Connecticut, with a goal of sending half the funds to distressed municipalities and creating 3,000 jobs. The grant, however, was a matching grant, meaning the town itself would have to somehow fund the rest of the estimated $9 million project, or partner with a developer.

The DECD encouraged public-private partnerships for Challenge grant applications, and Haddam had teamed up with Elm Tree Communities, run by former Mohegan Sun CEO turned developer Jeff Hartman, who had already completed a 50-unit development in town, called Blueway Commons. However, in a write up for Haddam-Killingworth News , First Selectman Bob McGarry said the partnership was noncommittal, and the town would put out a request for proposals for developers to submit bids.

“In order for our grant proposals to be competitive, we had to demonstrate their commercial viability. In other words, we needed a private partner (developer) interested in the project,” McGarry wrote. “No commitments were made at these meetings; we made it clear if we got the grant, we’d have to formally advertise for proposals from interested developers.”

That formal notice for developers to bid on the project, however, has led to controversy and raised questions.

On September 8, 2023, Haddam Town Planner Bill Warner posted an official Request for Qualifications (RFQ) to the town’s website and the state’s contracting portal. That RFQ requested sealed packages that included six paper copies and one electronic copy of the developer’s proposal by 2 p.m. on October 10, 2023, and noted that “each proposer is responsible for checking the Town’s website to determine if the Town has issued any addenda and/or additional supplemental documents, need to complete its proposal.”

Three companies submitted packages to the town: Elm Tree Communities and Norwalk-based Heritage Housing, Inc. both submitted their bids on or by October 10 per the posted RFQ guidelines. Middletown-based Rak Realty submitted their bid a week later, on October 17. Despite the late submittal, Rak was ultimately chosen to complete the project.

In the world of competitive bidding on state projects, the deadline is everything; a late bid is not to be accepted, according to the Connecticut Department of Administrative Services Selection and Bidding Manual , which states “There will be no exceptions.” Bids are typically opened in a public forum at the same time to maintain secrecy and prevent any allegations of favoritism, particularly when it involves millions of taxpayer dollars. The rules exist for good reason.

For municipal projects, however, it can be a different story. Essentially, Connecticut’s 169 fiefdoms can conduct bidding and procurement any way they like, provided it conforms with the town’s own rules and regulations and the official notice; but when the project involves state money covering half the cost, the rules can change .

Inside Investigator reached out to the DECD, where officials confirmed that recipients of the Communities Challenge grants must adhere to state statutes and regulations governing bidding and procurement. According to a 2019 guideline for bidding and construction services through state programs, “any client modification or change to the bidding or selection process must be pre-approved by DECD.”

If a town is going to change the date to receive a sealed bid, they must notify all bidders and make an amendment to the RFP: one of those things reportedly happened in Haddam, according to a purported email chain and comments supplied by Town Planner Bill Warner, the other definitely did not as the original RFQ remains without an amendment and with the due date of October 10 listed three times.

Concerns and criticism of the deal with Rak Realty made their way onto town Facebook groups, which town officials initially ignored. However, when the discrepancy in bid submission deadlines was posted, McGarry responded on social media, saying that Rak Realty’s late bid was due to an error on the town’s part and that they accepted the bid as a courtesy – one which they extended to the other bidders as well.

“We posted a Request for Proposal (RFP) for Senior Affordable Housing at HES on our website with a response deadline of October 10 ^th . As is common practice we notified the two vendors who had expressed interest in the project, Elm Tree Communities and Rak Realty, that the RFP was posted. That notification incorrectly stated the response deadline was October 17 ^th . We didn’t discover the error until October 9 ^th ,” McGarry wrote. “We notified the 3 companies that responded we would honor the October 17 ^th deadline. 2 companies decided not to take advantage of the extended timeline, 1 did. All three proposals were opened on October 17 ^th . No proposal was opened before then.”

In response to multiple questions sent by Inside Investigator , Warner copied and pasted several emails to a document that purportedly shows communications between Stephen Rak of Rak Realty and Warner dated October 9 and 10.

On October 9, Rak reached out to Warner with a few follow-up questions, including a request for Warner to “confirm the turn in date.” Warner responded that the due date was October 10.

“That’s what I was afraid of,” Rak responded. The RFQ you had sent me showed the 17 ^th different from what’s on the town website will there be any leeway with this?”

Warner responds 42 minutes later: “Yes we will keep it open till the 17 ^th . You and the other haddam developer got the same rfq stating the 17 ^th .”

Warner then emails Jamieson Miner of Elm Tree Communities on the 10 ^th at 9:57 a.m., writing, “The RFQ I emailed to you and others had a due date of the 17 ^th , so we are honoring that date if you would like more time.”

Miner responded that they already had their proposal finalized and would submit it that day. For Heritage Housing, however, the point was moot; according to Warner’s responses, their bid was received via email on October 6.

“I did tell the other developer who received the RFQ with the 17 ^th date that we were honoring the 17 ^th deadline,” Warner wrote in his response to Inside Investigator . “I may have mentioned it in passing to the other developer when they dropped off the hard copies but I do not recall.”

Reached for comment, David McCarthy, president of Heritage Housing, says he could find no written notice that the submission deadline had been extended. He also indicated that Heritage Housing’s bid was submitted “before the deadline and it was confirmed received on October 10, 2023, at 1:21 p.m.,” not on October 6 ^th as Warner indicated.

The responses and purported email thread also raise more questions than answers: for one, why were two different RFQs being circulated?

McGarry stated that Elm Tree Communities and Rak Realty were “notified” of the RFQ. It would be perfectly reasonable to email a link to the RFQ post to interested parties, but highly unusual to post one RFQ and then circulate a second. Regardless, Elm Tree Communities submitted their proposal on time, while Rak waited till the day before to check on the due date.

Requests for qualifications and proposals are typically posted to the town’s website and, in the case of the Communities Challenge grant, posted to the state’s bidding portal, so they are made public. According to a May 1 post to social media by the Town of Haddam, the RFP was posted to the state’s contracting portal, sent to thousands of companies, and opened by 46 companies, all of whom saw the submission date of October 10.

“There was more than one written RFQ document and deadline out there. We simply honored both,” Warner said. “This language in the RFQ gave us the leeway to proceed as we did.”

According to the RFQ, the town could basically do anything it wanted when it came to the bids: “The Town of Haddam reserves the right to reject any and all responses to this RFQ, to advertise for new RFQ responses, or to accept any RFQ response deemed to be in the best interest of the town.”

Secondly, according to Haddam’s RFQ, proposals were to be delivered in sealed envelopes that contained six hard copies and one electronic copy. Typically, such bids are opened publicly at the same time and, according to McGarry’s statement, no proposals were opened before October 17 ^th .

However, Elm Tree Communities hard copy proposal is stamped as having been received on October 10 – meaning its envelope was opened, or, according to Warner, the bids were never sealed at all.

“I don’t believe the hard copies were sealed when delivered,” Warner wrote. “Proposals were also emailed in pdf format, unsealed. Rak did not have access to the other proposals.”

McCarthy of Heritage Housing wrote in an email that the hard copies of their bid was sent via UPS: “I assume it was sealed upon receipt,” McCarthy said.

Bidding for public projects worth millions of dollars is a formal and competitive affair with strict rules to ensure secrecy and fairness and avoid any hints of favoritism. What occurred in Haddam is unusual and, according to the purported email exchange and Warner’s own comments, appeared very casual, not adhering to bidding rules, regulations, and formalities.

It’s also not the only time Haddam has had some bidding issues that raised questions of fairness and openness in the recent past.

In October of 2022, Tighe & Bond lodged some concerns with DECD when Haddam passed them over for a contract to remediate Scovil Hoe , a former state Department of Transportation (DOT) garage practically across the street from HES, that the town hopes to convert into shops and restaurants, again with a DECD grant.

According to emails to both DECD and Warner , Tighe & Bond said they had already done some work on the area and were the “incumbent contractor.” Not only that, but they came in as the lowest qualified bidder.

“As discussed, Tighe & Bond just wants to make sure DECD was consulted on the Town’s intention to award the contract to VHB,” wrote James T. Olson in an October 4, 2022, email to DECD. “Tighe & Bond was the lowest reasonable bidder at $199,000 which is $73,843 less than VHB’s bid of $272,843. Tighe & Bond has detailed technical knowledge of the site and is the incumbent. Several of our LEP’s and senior staff have collaborated on the project. We just want to make sure this is a fair and open process and DECD was consulted by the Town.”

“We are very comfortable with our decision-making process,” Warner responded when questioned by DECD. “Proposals were submitted, interviews were held, and a decision was made. In all my years, (30 plus) this is the first time a consulting firm has challenged a decision.”

While town officials may have tried to initially dismiss the bidding and contract concerns around HES as a product of social media, the information was, in fact, found and publicized by the former managing editor of the Shoreline Newspaper Group and reporter for the Hartford Courant, Erik Hesselberg – a Haddam resident who went to school at Haddam Elementary School.

Hesselberg said he became involved when it appeared town officials were ignoring the will of Haddam residents, who he says wanted to maintain the school for community use, rather than sell it off to a private developer.

“I and others got very frustrated when we felt that our first selectman, Bob McGarry, and our town planner, Bill Warner, were not listening to the voice of the people that were loud and clear to keep the school. They seem to have their own agenda,” Hesselberg said in an interview. “I thought at least I could maybe cover this, what they were doing, and try to bring it to a larger audience.”

Regional School District 17 (RSD17) closed the elementary school in 2019 due to declining enrollment and in January of 2019, Rak Realty offered to purchase the 9-acre property for $450,000 under a Request for Proposals issued by the Board of Education. The property and building was assessed at $3.1 million at the time, but Rak Realty was the only entity interested in it — besides town residents , apparently.

Haddam citizens noted a 1970 clause that gave the town the right of first refusal when it came to property purchases, triggering a referendum in which residents voted overwhelmingly to purchase the property for the same $450,000. Of course, then COVID hit, which ground much of life and activities to a halt, and the property sat dormant until 2023 when McGarry and Warner informed the town they had applied for the Connecticut Communities Challenge Grant and began holding town meetings to decide the property’s future.

Hesselberg began filing Freedom of Information (FOI) requests with the town for documents and posting his findings to Facebook. Those posts gained hundreds of comments, and led to phone calls and texts from residents. Hesselberg wasn’t the only journalist – retired or otherwise – looking into the matter. He was also joined by Ed Schwing, former editor of the town’s civic newsletter, the Haddam Bulletin, and former member of the Haddam Board of Finance.

Hesselberg says over the course of his reporting via Facebook, town officials began trying to discredit him.

“They never challenged the facts, with facts. It was more like, ‘you can’t trust Facebook,’ and even accusing me of lying, which was really upsetting,” Hesselberg said. “Eventually, Bob McGarry started commenting on my posts and challenging them. But I don’t think he ever had a good argument.”

It was Erik and Ed who discovered that Rak Realty submitted their bid seven days after the posted RFQ submission deadline and after the other two bidders. Hesselberg and Schwing say the town should have only accepted the bids submitted on time or could have simply rebid the project because of the discrepancy.

“In my opinion the town should have stuck to the date, review the two proposals, and if they had not been adequate, reject them and rebid with maybe additional suggestions,” Schwing said in an email. “The problem with extensions made at the last minute, in fact on the date the bids were due, to favor one of the bidders even for good reasons, will always raise suspicion from the public.”

“It was not fair and competitive, if one party has a whole extra week to prepare, that’s just not fair, so I thought we would start again, but they didn’t,” Hesselberg said. “McGarry’s response doesn’t really make sense, it doesn’t explain why they cut an allowance for this one bidder, and my sense from examining this whole process is that the intent from the very beginning was to steer this toward a preferred developer.”

Connecticut is a small state; smaller still when working in a somewhat rarified field for a long time. While Warner has been serving as town planner for Haddam since 2019; he’s been in the business of municipal town planning and economic development for over thirty years. Clearly, if someone is going to know their way around the municipal development landscape in Connecticut, it would be him.

Warner came to Haddam from Farmington, where he’d spent five years as town planner, but before that had spent 25 years as Director of Planning, Conservation and Development for the City of Middletown, just up the road from Haddam. Rak Realty is a family-run property development company based in Middletown with a long-time presence in the city. Most of their thirty rental properties are in Middletown and, in the 1980s, Rak redeveloped two aging schools into apartments – years before Warner came to work for the city.

But the company was certainly a presence in Middletown, continuing to convert old buildings and homes into apartments, and Andrew Rak, one of the owners, served on Middletown’s Planning and Zoning Commission while Warner served as the city’s planning director and had an ex-officio seat on the commission.

Warner, however, says that his interactions with the Rak family have been minimal and that he certainly has no personal or financial relationship with any of them. Warner indicated that he met John Rak, who submitted the bid to purchase HES, “once or twice” in Middletown. He says he met Stephen Rak a “few years ago,” when the company completed a project in Haddam.

Warner also had some connection to Kimberly Parsons-Whitaker who, along with Senior Economic Development Advisor Allison Pincus, administered the Connecticut Communities Challenge grant.

Parsons-Whitaker previously worked as an associate director for the Connecticut Main Street Center (CMSC) a nonprofit focused on “revitalizing historic commercial districts,” and protecting downtown areas, and on which the DECD has a board seat. In 2014, CMSC awarded Warner their CL&P Award.

In February of 2020, Parson-Whitaker gave a presentation to the Haddam Economic Development Commission regarding creating downtown spaces and pitching CMSC’s services in helping towns. Although he wasn’t present at the meeting due to illness, according to meeting minutes, Parson-Whitaker praised Warner, saying the town was “very fortunate” to have him as town planner, and indicated she would be meeting with him.

According to minutes , Commission Chair Kate Anderson indicated “Mr. Warner wanted to thank CSMC for the letter of support for the charette grant.”

The “charette grant” – a charette being a town planning meeting involving all stakeholders – was a grant from the State Historic Preservation Office. Warner had applied for the grant to hire a consultant to hold one of these charettes to figure out what to do with Higganum Center, including the elementary school, according to HK News .

Warner said he’s met Parsons-Whitaker “on a handful of occasions,” because Middletown was involved with CMSC program, but denied any kind of personal or financial relationship.

Reached for comment, First Selectman McGarry said he “was aware of a pre-existing business relationship between Bill [Warner] and Rak Realty,” namely because Rak Realty is building a new apartment complex in a different area of Haddam, a project that began before the HES project. McGarry also points out that Warner, and other town officials, also had a pre-existing relationship with Elm Tree Communities, which had also built “a very successful apartment complex.”

“Our town planner is the head of the Land Use and Building Department,” McGarry wrote in an email. “He regularly interacts with commercial firms developing or interested in developing projects in town. It’s his job. It’s also his job to interact with any firms, groups, and agencies that could potentially help us reach the goals of our Plan of Conservation and Development.”

None of this, of course, is in any way illegal or indicative of a conflict of interest by any of the parties. It should also be pointed out that Haddam applied for the Community Challenge grant three times, before finally receiving the award the third time; the first two grant proposals were to move the senior center to that location and build some sidewalks, according to a timeline written by McGarry and published in HK News.

But it does make the messy issues surrounding Haddam’s RFQ process somewhat questionable in the minds of some town residents and underscores why bidding and procurement practices are so necessarily strict. By Warner and McGarry’s own admission, a second RFQ was sent privately to two contractors with whom town officials had pre-existing relationships.

“There are safeguards in place to prevent this kind of thing from happening,” Hesselberg said. “None of these procedures which occur for all state funded construction projects, none of these procedures were followed for HES.”

Rak Realty initially attempted to purchase the HES property in 2019 for $450,000. Although the price was well below the assessed value of the property, the Board of Education also faced a situation where no one else was making offers. The town, however, voted overwhelmingly in referendum to purchase the property instead.

What the townspeople expected to become of the property after purchase becomes a matter of debate: some argue the townspeople wanted the property retained for “civic use,” while others, including McGarry and Warner, say the vote was so the town could determine the property’s future, which included the potential to lease or sell the property.

There were two referendums on the future of HES: the first in 2019 to approve purchase of the school so the town could decide its future; the second coming in 2024 to approve the proposal agreed to by Rak Realty and the town.

In between were charrettes and town meetings in which residents gave ideas, and town officials tried to work toward some kind of conclusion, while the school was essentially being used for storage.

Schwing says following the initial 2019 referendum, the Haddam Bulletin followed up with a series of informal surveys, with 70 percent of respondents supporting “the idea that, as a centrally located town building, HES would not only preserve the center’s character, but it could also become an anchor for public activities and services, from new senior center to recreation facilities, town office, community meeting rooms and much more.”

“The town did not immediately follow up with the formation of an ad hoc committee to investigate the potential reuses with public input and all came to a halt when in 2020 of course Covid hit,” Schwing said. “Later in 2023 during multiple town seminars, meetings and on HES, a majority of town residents reiterated their desire to have the building serve the entire community, young and not so young alike, a true multi-generational town gathering place.”

Warner says the idea the town wanted to retain the property for civic use is incorrect, and that initially Haddam was in talks to lease the property to Adelbrook, a school specializing in educating children with severe autism and other disabilities. “That deal was well known to the public but fell through due to Covid,” Warner said.

McGarry points out that he wasn’t first selectman during the initial referendum on HES, but states, “I don’t recall any mention of owning the building forever or only using it for civic purposes.”

“Some voters may have voted for the referendum with those thoughts in mind, just as I know some voters thought we should buy the school because RSD17 would need it back,” McGarry said. “Regardless of their reason for voting five years ago to buy HES, they voted this year to approve leasing it to Rak Realty.”

The town did post minutes of an open house meeting held on June 8, 2023, in which selectwoman Kate Anderson remarks, “it appears as if the consensus is to retain the building for community use, potentially for town use, all viable options,” along with comment cards submitted by residents over what to do with HES. The responses range from a splash pad and pickleball courts to a police office or town hall.

Writing in HK News on May 1, 2024, after having selected Rak Realty as the winning bidder, McGarry said the choice for Haddam was between paying “$100,000/year to maintain what is essentially a big closet with a gym and meeting room while we decide what to do with HES, we can invest $32 million to renovate the building for town hall and other municipal uses, or we can accept the developers proposal and the Community Challenge Grant.”

The second referendum, approving the lease of the property to Rak Realty was passed by voters on July 23, 2024, by a 69-vote margin.

In approving Rak Realty’s plans, the townspeople were getting part of what they wanted, regardless of which side of the fence they were on: There will be 36 units of affordable senior apartment housing built on the site, but there will also be a senior center, community center, town offices, and athletic courts – maintaining some of the civic use Hesselberg and Schwing say Haddam residents wanted.

Rak Realty had initially proposed to purchase the property, valued between $3 and $4 million, for $450,000 to build apartments. It would have given them a very valuable asset for a fraction of the cost. Under the terms of the deal with Haddam, however, Rak Realty will lease part of the property for 99 years for one initial payment of $350,000, and then $1 per year for the next 99 years with the option to renew the lease for another 99 years for $1 when the initial term is up.

While the town technically retains the rest of the property, Haddam will also pay Rak Realty $140,000 per year for the next ten years, amounting to $1.4 million in total as the town’s direct contribution to the renovation costs. Rak Realty is responsible for property taxes and maintenance for the apartments and associated parking, while the town will pay for property maintenance costs for the rest of the property.

“The public/private partnership with Rak Realty is very beneficial to Haddam. It creates tax revenue. It builds 36 affordable apartments which are in short supply here as they are throughout the state. It adds public recreational facilities to the grounds. The original section of the building will become a community wing with a new senior center, a community center and offices for our Registrar of Voters and resident state troopers,” McGarry said in email. “Rak will build those spaces to our specifications at a much lower cost than we could.”

Although Rak Realty technically won’t own the property, they will have it for the next 99 years at least and have essentially made $1 million on the deal, while also having the town supply half the cost of construction through the Communities Challenge grant. Not owning the property, however, means it will take much longer to recoup their building costs or turn a profit, and will likely impact their ability to sell that asset in the future.

“This civic/private use the voters approved will restore HES as an asset to Higganum Center,” McGarry continued. “It will bring people and activities back to the center. It’s a critical step to revitalizing Higganum Center.”

Outside of HES, the town recently completed construction of a new playground for children, part of another state grant dedicated to revitalizing Higganum Center. It’s something that has won over Hesselberg, who took a break from chasing down the bidding problems in Haddam, to comment on social media that he enjoyed having a coffee and watching the families roll up to let their children play.

However, the bidding irregularities in Haddam’s procurement of Rak Realty to renovate the old elementary school still hang over the project.

By town officials’ own admission, they posted one RFQ publicly, and sent a second RFQ with a different submission date to developers with whom they had a prior relationship; Elm Tree Communities and Heritage Housing were notified of the date change the day the submission was due – in the case of Heritage Housing, the change was reportedly mentioned verbally in passing and they had already turned in their bid; the bids were not received in sealed envelopes per the RFQ guidelines, and at least one was stamped “received” on October 10, while electronic copies were not contained on a flash drive in the sealed envelope, but reportedly emailed to Warner.

None of this comports with state rules and regulations surrounding competitive bidding and procurement, which the town was required to abide by because they are using $4.5 million in state taxpayer funds, let alone the town’s own RFQ notice posted for thousands of contractors to view.

Developers and contractors are loathe to complain when it comes to bidding awards; they don’t want to be seen as “spurned bidders,” as it could affect future opportunities. Elm Tree Communities, which has other projects in town, did not return our request for comment; Inside Investigator spoke with Rak Realty, but they also declined to give comment on the record – it’s not really their problem, it’s the town’s.

Hesselberg may be a thorn in the side of town officials who clearly want to get this project done with their selected developer, but, at the very least, his efforts should serve as a reminder that municipal and state projects worth millions should not be treated so casually, and that the rules surrounding RFP notices, deadlines, and sealed bids exist to prevent just this type of issue.

Were it simply a matter of a town referendum not going his way, Hesselberg likely would have backed off; instead, he, together with Ed Schwing, found issues that prompted him to keep digging.

“I want to get the truth,” Hesselberg said. “Whatever the truth may be.”

The post Unsealed: Bidding irregularities in Haddam state-funded project appeared first on Connecticut Inside Investigator .