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The Towpath's Hidden Trail

Plans to revive barren land in the Flats reveal faulty appraisals — and public officials who looked the other way

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On your standard map of Cleveland, the Scranton Peninsula is just a clenched fist of land uppercutting the Cuyahoga River, another nondescript piece of the Flats jigsaw situated just south of downtown.

Zero in to street level and the area is even less than what's promised on paper: Like a scene out of a nuclear winter, the empty roads are as pocked as moon rock, the buildings all bombed-out or boarded-up, and every stray surface overwhelmed by the Technicolor spaghetti mess of graffiti. Except for random cars and daytime joggers, the area is abandoned.

The land sports all the cuts and bruises that come from the century-plus arm-wrestle between industrial man and Mother Earth — which makes it all the more surprising that this abused sliver of riverfront is the most contentious piece of property in town.

That's largely because for the past twenty years, people have looked out at the wasted ground and only dreamed of green. For some, the blasted land is the opportunity for ecological restitution at any cost, a chance to swap fissured parking lots with park space, rail tracks for bike trails. But it's been a struggle to make this eco-friendly facelift a reality — that is until recently, when the Towpath was finally ready to shoot into town.

A planned 101-mile recreational path following in the footsteps of the old Ohio and Erie Canal, the Towpath Trail snakes north from mid-Ohio toward a future dead-end at Lake Erie. The project is widely considered the symbolic jewel of Ohio's conservation movement; once completed, officials boast, it will represent a leap from the state's dank industrial past into an eco-conscious future.

The trail's first 88 miles were constructed by groups across the state. The final link to the lakefront will be built by the trail's local planners, the Ohio Canal Corridor. A few years ago, when the non-profit indicated it was prepping to purchase the necessary land in the Flats, other area non-profits readied their own projects designed to complement the Towpath, ostensibly setting off an orchestrated movement toward a neighborhood fix-up.

For many groups involved, the first stop for funding was the Clean Ohio Fund, a $400 million honey pot divided up statewide by the Ohio Public Works Commission. Every year, non-profits apply through local Natural Resources Assistance Councils, which rank each project and recommend state funding for the best.

But as Scene first reported in April, the road to Clean Ohio funding was bumpy for Ohio Canal Corridor. Late last year, as the process commenced, accusations flew that the Corridor's point man, Tim Donovan, inappropriately tipped the process in his project's favor. Despite the controversy, the Corridor was awarded the money it needed to finish its trail.

Afterward, chatter surrounding the Towpath didn't go dead — it only slipped underground and off the record. Ask those with a stake in the Flats' rebirth about the Towpath project, and talk quickly turns conspiratorial — uncharacteristic for a crowd made up largely of do-gooder green thumbs and Earth aficionados.

Rumors are tossed about: talk of cookie-cutter appraisals, inflated project costs, and whispered ties to fallen county Auditor Frank Russo. But elbow the rumors aside, and a detailed look at the fine print and crunched numbers reveals a troublesome pattern — not only with the controversial land purchases, but with the entire funding process. At the heart of the problem is a pattern of excessively high property appraisals with the same fingerprints on each application. Compounding matters is the fact that state agencies that could have questioned the inflated figures opted instead to do nothing.

The Marina

Mystery

Once the final leg of the Towpath Trail was on the horizon, ParkWorks Inc. emerged as one of several groups with a vision for claiming a piece of the industrial Flats to complement the Towpath. The local non-profit planned to turn a ribbon of old railway and surrounding mud into a green space that would link Wendy Park on Lake Erie's shore with the future end of the Towpath Trail. In 2008, ParkWorks prepared to buy the necessary land: parcels located on the West Bank of the river and owned by Shaker Heights investor Earl L. Walker.

The Trust for Public Land, a San Francisco-based conservation organization, stepped forward to broker the deal. It hired a local company, A&E Appraisals Inc., to determine the property's value.

According to ParkWorks' application for Clean Ohio money submitted to the Natural Resources Assistance Council on December 1, 2008, A&E's Kathleen McGee finished her appraisals at the end of November. In the document, she used six comparable land sales to determine the value of Walker's property. Of the six parcels, four are also located in the Flats; the other two are downtown parking lots near Tower City. From these comparisons, McGee valued the 72,700 square feet of land in question at $2.3 million, or around $32 per square foot — at least for the first 70 pages of the report.

Throughout the 90-page document, McGee places the land's value at $2.3 million. However, in the "Correlation and Conclusion" section, there is a curious change: McGee refers to the ParkWorks land as having "a warehouse and 52 slip Marina," and places the overall value at $6 million — nearly three times the value previously cited in the document. A few pages later it reads: "This report was prepared for John Ferchill for purposes of establishing an opinion of fair market value for use for income tax purposes."

Problem is, the property in question does not include a warehouse or a marina, and was not owned by John Ferchill. Never in the previous 70 pages of analysis did McGee value the property at $6 million. The inflated references appear completely out of context, as if they were a cut-and-paste gaffe from an unrelated appraisal. (McGee did not respond to repeated calls to be interviewed for this story. Ferchill's office did not return calls to confirm whether the landowner had used A&E for appraisals prior to the 2008 ParkWorks application.)

Regardless, the Assistance Council board didn't bother to note the mistake. It rubberstamped the application, and the Public Works Commission issued a $1.3 million grant based on the $2.3 million appraisal — the largest chunk of Clean Ohio funding served up locally in 2008. ParkWorks completed the land purchase later that year.

Back in 2008, a floating reference to Ferchill and a piece of land worth $6 million with a marina and warehouse could easily have been discarded as a mistake. A year later, however, it would take on a whole new significance.

A&E's

Cookie Cutter

When it came time for the 2009 round of Clean Ohio grant funding, the Trust for Public Land and A&E Appraisals teamed up again for two proposals: Ohio Canal Corridor's Towpath project and the Cleveland Rowing Foundation's Rivergate Park.

The Towpath purchases would provide the last link in the coveted trail. Ohio Canal Corridor had its eye on two sections of land running along the eastern edge of the Scranton Peninsula. From the street, the land is nothing special: an overgrown tract girded by a rusted chain fence and ending in the skeletal remains of a warehouse and 52-slip marina. Two local real estate heavyweights held the land: the northern vacant property (1825 Scranton Road) was owned by the Wolstein family; the marina and building (2065 Scranton) belonged to John Ferchill.

The Wolsteins acquired their property in 1988 for $2.5 million; Ferchill bought his in 2005 for $2.6 million. For the Towpath, the Trust for Public Land brokered deals with both owners in 2009 for $2.4 million for each property, a slight drop from their initial investments. To make the purchases, Ohio Canal Corridor applied for Clean Ohio funds; as was standard, that grant would not be determined by the agreed sale price, but by a percentage of the land's market value.

A&E's McGee finished the two appraisals in late August 2009. Soon thereafter, Ohio Canal Corridor submitted the Towpath proposal to the Assistance Council. McGee valued the land using five of the six comparable land sales she'd used when valuing the ParkWorks property a year before. She concluded that both properties were worth $22.50 per square foot: the Wolstein property at $5 million; Ferchill's at $6 million.

McGee's conclusion on the Ferchill appraisal would have been familiar to studious readers of the previous year's applications: The entire page is a verbatim copy-and-paste of the seemingly out-of-context conclusion tacked to the end of the ParkWorks application from 2008. Only this time, the description matches the actual land in question.

While A&E was evaluating the Towpath properties, the firm also was working on a piece of riverfront property on Merwin Avenue for the Cleveland Rowing Foundation. Located a Hail Mary pass away from the Towpath properties, the land included the shuttered Commodore's Club marina and was slated as the future site of the foundation's Rivergate Park, a public green space that would serve as a launch pad for rowing and canoeing on the Cuyahoga.

Again, McGee created her appraisal by drawing upon the same five comparable sales. The sixth sale was also familiar: Ferchill's 2005 purchase of the Scranton Road property. However, the appraisal mistakenly lists that sale as $3.1 million; documents show Ferchill picked up the property for $2.6 million.

With these comparables, the appraiser determined the Merwin Avenue land was worth the same $22.50 per square foot; the total land was valued at $6.3 million. The Rowing Foundation needed only about half of that parcel, making the final appraisal of the land in question $2.7 million.

But again, the document climaxed with the same assembly-line conclusion: a reference to a "warehouse building and 52 slip Marina," and the statement that the property's final value was $6 million — never mind that the property's total value throughout the report had been repeatedly listed at $6.3 million till that point, a difference of $300,000.

And again, the repetition and mistakes appear to have gone unnoticed by members of the Assistance Council. The applications were thrown in with 19 other project proposals for review.

Approval &

Oversight

When the Assistance Council sat down to vote on which projects would receive Clean Ohio money for 2009, the conversation was strafed with accusations and controversy. As Scene reported in April, Ohio Canal Corridor head Tim Donovan — at the time also a member of the Assistance Council — came under fire for rating his own Towpath project higher than any of the other applications. The council went ahead and awarded Donovan's group its requested chunk of money. At around $3.2 million, it was the largest Clean Ohio grant ever awarded.

Due to the concern other council members expressed over Donovan's lack of objectivity, in December he was not reappointed to the council. (Donovan did not return calls for comment.)

But dubious voting wasn't the only controversy dogging the Towpath purchases. Soon, individuals close to the situation began to question the accuracy of the appraisals. In late 2009, Daniel Wright, a local attorney representing a secret "whistleblower" client, started making public records requests and bombarding members of the Assistance Council with information challenging the Ohio Canal Corridor's appraisals. In his letters, he charged that the A&E appraisals were inflated and that the Assistance Council and Ohio Public Works Commission had a responsibility to correct the mistake. (Wright declined to comment for this article.)

What emerged was a picture of two properties that had rollercoastered dramatically in value according to the paper trail, which at times was as mysteriously incomplete as the Towpath itself. Records indicate that both owners logged face time in the mid-2000s with what could be the least-reputable government body in Cuyahoga County: the Board of Revisions. Over the summer it was revealed that the board — a side attraction in ousted Auditor Frank Russo's corruption circus — allegedly tweaked property values without following proper procedures; important documents related to land values also had a habit of disappearing, according to a Plain Dealer investigation.

In 2005, the Wolsteins successfully petitioned the board to revalue their land, originally purchased at $2.5 million, to $1.3 million; Ferchill was awarded a revised value of $1 million for land that was purchased at $2.6 million. The appraisals related to that review, however, have disappeared from the county auditor's office.

That means, in 2009, as McGee rolled out her appraisals, Wolstein's and Ferchill's properties were valued in county tax records at $1.3 million and $1 million, respectively. But the appraisals submitted to the Assistance Council represent a 387 percent and 600 percent increase, respectively, compared to the properties' recent county-appraised values. Such market acrobatics seem unlikely, particularly given the recessed economy and the fact that neither of the abandoned properties had been repaired or improved in any way.

"The foregoing information raises questions as to the veracity of the Ohio Canal Corridor's application and the integrity of the process used by the Cuyahoga County Natural Resources Assistance Council at the time when the public's confidence in Cuyahoga County government is at an all-time low," Wright told the Assistance Council's chairman, David Beach, and Public Works Commission Director Michael Miller in a letter dated late December 2009. Wright added that it was "important to the future of the program and Cuyahoga County that these questions be answered and issues resolved in an open and transparent manner."

Apparently, the gulf between what the county signed off on in the mid-2000s and McGee's appraisals in 2009 didn't trouble the Public Works Commission, which had the final say on how its funds would be released. In an e-mail to Beach dated February 9, 2010, Miller discarded Wright's concerns.

"While numerous opinions have surfaced, the valuation was set by a State Certified General Appraiser and approved and supported by the Ohio Department of Natural Resources," Miller wrote. "With this in mind, and understanding the Commission does not conduct appraisal reviews, the project will be funded as submitted."

But in fact, the Department of Natural Resources was not kosher with the controversial appraisals at the time. Although it initially approved the values, the department brought in a third-party appraiser from Toledo in March to review A&E's work and issue a report on its veracity.

That document, released in early April and obtained by Scene, took an axe to McGee's methodology and concluded the work "cannot be relied upon for the stated purpose of a credible opinion of market value." Specifically, the reviewer took issue with the five comparable properties McGee cited, stating they were too dissimilar "to adequately predict the pricing for the subject property." Also, regarding the Ferchill property, the reviewer questioned why McGee did not use Ferchill's 2005 purchase of the same property for comparison.

When the Department of Natural Resources' report went live in April, the department yanked the funding it was set to contribute to the Towpath purchase — around $500,000. In response, the Trust for Public Land asked A&E to redo the property appraisals. In mid-April, McGee turned in her revised draft. Swapping out three comparable properties (including the downtown parking lots), she revalued the Wolstein property at $3.4 million and the Ferchill land at $4 million — still a considerable climb from the $1.3 million and $1 million values submitted and signed off on by the county Board of Revisions. But before the draft could be finalized and officially submitted, the Ohio Canal Corridor and Trust for Public Land pulled the trigger.

Too Late

to Back Out

In August, Ohio Canal Corridor purchased the 11 acres of Flats property needed to complete the Towpath Trail. It paid $4.8 million, with $3.2 million coming from the Clean Ohio grant. A fit of jubilant press releases and media coverage followed, celebrating the imminent completion of the project almost 20 years in the making.

But the coverage failed to mention the ongoing controversy still dogging the project regarding land value. Even after A&E's initial assessments were challenged by the Department of Natural Resources, and after McGee reissued a set of lower assessments, the department still balked at signing off on the project and releasing its grant money. With the department tied up examining the new values and a closing date approaching, Ohio Canal Corridor opted to use other state grant money it had set aside to help buy the 11 acres.

"We did have a concern on the appraisal, but at this point, because our money is not involved in it, we won't be dealing with that issue any longer," Dameon Shipley of the Department of Natural Resources said at the time of the sale. The money withheld, he added, would be used on another aspect of the Towpath project.

But the sale did more than clench the properties; it also effectively closed the door on the building controversy. Because the purchases were made without the department's money, Ohio Canal Corridor and the Assistance Council could ignore the revaluations in light of the Public Works Commission's February decision not to hold up funding. As far as Clean Ohio money was concerned, the Department of Natural Resources' report and A&E's backtracking were non-issues.

"We ended up not using the ODNR funds, so the whole issue of the reappraisal was moot," the Trust for Public Land's David Vasarhelyi tells Scene. "In fact, we never got the appraisals officially redone; we only got the draft."

Despite the reappraisal, Vasarhelyi stands by A&E's work on the Towpath properties and other Flats projects. As the Trust's project manager, he helped broker the deals and contracted with A&E for the firm's Clean Ohio-related work. Not an appraiser himself, he emphasizes that the Trust picked A&E because the firm is not only state certified, but pre-qualified with two state agencies for appraisal work, one of only a handful of such firms in Northeast Ohio.

Vasarhelyi says the comparable properties used on each Flats project are all within the Cleveland planning department's definition of the neighborhood; it's also not surprising that the appraiser used the same work repeatedly. He says: "Finding comparables is a challenge, and there isn't a lot of them because of those factors, so I'm not surprised at all by the fact that they have similar comparables because of the nature of the properties and their similarities." Regarding the questions about apparent mistakes and out-of-place repetition in the A&E work, Varsarhelyi suggested Scene contact McGee (who did not return calls for comment).

According to Vasarhelyi, the Trust had no issue with the Department of Natural Resources' request for new appraisals with new comparables. He adds that it does not necessarily reflect negatively on the original work.

"Those state reviewers [ODNR] approved the appraisals the first time around. There's no doubt that when somebody makes a lot of noise and does a lot of stuff, you get some retrenching. That's obviously what happened."

Even the new appraisals, he adds, were less than the contracted purchase price of $2.4 million for each property. But again, those appraisals were not tied to the actual purchase. "The only funds that were used were the Clean Ohio funds, and those were [set to] the original appraisals," he says.

In August, following the sale, Assistance Council chairman Beach confirmed to Scene that the Clean Ohio money was given out based on the original A&E appraisals first signed off on by the Department of Natural Resources and OK'd by the Public Works Commission. When the department circulated the new draft, Beach said, the council rescored the Towpath project and determined it would have ranked high enough for funding even if the revised numbers had been in play.

"We paid less than the appraised value, even if you reduced the appraised value. These are very unusual properties in the Flats, and there can be different interpretations on appraisals. It's more of an art than a science," Beach said in August. "I haven't seen appraisals that are coming in less than the grant amount." (Beach did not return Scene's calls for follow-up.)

Public Works Commission Director Michael Miller says he initially decided to award the grant money based on the original appraisals in February because the Department of Natural Resources had signed off on the appraisals. By the time the department pulled back that approval and asked for adjusted appraisals, the Public Works Commission was already contractually obligated to Ohio Canal Corridor for a grant based on the $11 million values, Miller says. Echoing Beach, Miller says he rescored the project with the Assistance Council and found it still would have been ranked on top. By the time the department circulated drafts of the new appraisals, he insists, it was too late for the Public Works Commission to turn back.

"If we breach the contract, then that's a whole different ballgame."

But new information also suggests A&E's work might have offered a less than accurate value of the area. Between late July and December 2009, while A&E was evaluating the Towpath properties, the Ohio Department of Transportation was doing its own appraisal work in the area. Using a state-certified, pre-qualified appraiser, ODOT was valuing pieces of property throughout the Flats for work related to the future Innerbelt Bridge project.

According to eight ODOT site appraisals obtained by Scene, the values for property in the Flats ranged from $3 to $11 per square foot, with most hovering around $7.50. By comparison, the lowest of A&E's appraisals for the Flats properties was $15 per square foot.

One riverfront site examined by ODOT reviewers happened to be contiguous to the Ferchill land. It was valued at $3.27 per square foot. Next door, A&E had the property appraised first at $22.50 per square foot and later at $15 per square foot. All of the values submitted by ODOT reviewers were less than any of the values submitted by A&E. (Ironically, when determining the value of the parcels, the ODOT appraisers used Ferchill's 2005 purchase of the Scranton Road property — the same comparison A&E did not use when assessing that very property.) The actual sale price of the properties — $2.4 million for each — breaks down to $10.70 and $9 per square foot.

A Phantom &

a Blind Spot

In the wild world of grant writing, the greatest concern over inaccurate appraisals is tied to a shady practice known as "phantom matching." It often results in a win-win for both land owners and non-profits squirreling for grant money. In the end, only taxpayers get shafted by such deals.

When taking applications for grant money, most government bodies handing out checks allow applicants to apply only for a portion of the total cost of the project; in this way, responsibility for funding a given project is shared. When grant writers request that a higher percentage of the total cost be covered by the grant, their projects are less likely to earn funding. One unscrupulous way around this is for applicants to jack up the appraisals of their land — dramatically raising the overall project cost — then asking only for a portion of that total. Thus, more money is granted than the project demands, and planners walk away with a larger chunk of change.

On the other end of the table, those selling the property win on two fronts: First, they are handsomely paid for the over-appraised land. Also, if the appraised value is dramatically higher than the actual sale price, the owner can take a considerable tax deduction because the deal qualifies as a charitable sale to a non-profit.

Vasarhelyi, Beach, and Miller all say Ohio Canal Corridor's Towpath grant was not over-funded because the Clean Ohio money was based on the original appraisal done by a certified professional and signed off on by the Department of Natural Resources (which later pulled back its approval). In its application for Clean Ohio funds, Ohio Canal Corridor asked for a grant that was 29 percent of the anticipated project cost. With the original appraisal of $11 million, the grant size was a record $3.2 million. Had the grant been based on the revised appraisal of $7 million, the grant would have been considerably smaller.

But as an examination of the maze of property assessments associated with the Towpath project shows, no particular appraisal appears more reliable than any other.

According to Paul Alsenas, director of the Cuyahoga County Planning Commission and a member of the Assistance Council, the Towpath situation has exposed a blind spot in the Clean Ohio funding process hidden beneath the intersecting authority of the Assistance Council and Ohio Public Works. Currently, appraisals are accepted directly from grant applicants — and that's proven to be a problem, he says. The process is not equipped with a provision that hammers home a single, reliable value for a given property.

"If in fact there is this kind of sloppiness in how appraisals are sourced, [questions about] whether they're independent, who actually verifies that they are independently sourced and that it's a good appraisal — that really does start down at the state level," Alsenas says. "All these public processes — the board of revisions, [Assistance Council], Ohio Public Works Commission — ought to be consistent when it comes to value.

"If we're going to be good stewards of the public's money," he says, "you have to do a professional job."

Send feedback to kswenson@clevescene.com.

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