39 pets euthanized

Financial difficulties lead to uninhabitable conditions

The condemned house in Carriage Park subdivision, Solon, Ohio

We do not inherit the land from our ancestors, we borrow it from our children-Native American proverb

Kermit Baker, Chief Economist of The American Institute of Architecture confirms that the fat McMansion lady has indeed started singing.

“We continue to move away from the ‘McMansion’ chapter of residential design, with more demand for practicality throughout the home. And with that there has been a drop off in the popularity of upscale property enhancements such as formal landscaping, decorative water features, tennis courts and gazebos.”

Decorative water features reminds me of the gigantic water foundation that Paul Vitti (Robert De Niro) gifts to psychiatrist Ben Sobel (Billy Crystal) in the movie Analyze This.

Mat Foundation Credit: Pacific Housing Systems-Click to enlarge

Potential issues at Chagrin Highlands-Click to enlarge

At a public meeting in City Hall, a member of the Solon Planning Commission referred to the safety issues involving the slopes of Chagrin Highlands.  The member stated that several homes in Chagrin Highlands have severe foundation problems.  He said that a few homes in the Chagrin Highlands subdivision were lost over the slopes about a decade ago!

A mat or a structural grade beam foundation are good options for consideration under these unstable slope conditions.  Further, it would prudent to evaluate the need to install a backwater valve in homes located on slopes in Chagrin Highlands.

Remember, in most home transactions, buyer beware applies.

The closed loop

“For decades, the real estate industry has operated under the principle that the less information buyers and sellers have, the better it is for agents, lenders, title companies, and all the other folks who eat from the trough.  But the real estate tide seems to be turning, as the housing and credit crises of 2008 have heightened awareness in Washington, D.C., and on Wall Street about the catastrophic consequences of a closed information loop – Michelle Singletary of  Washington Post quotes Ilyce Glink in “Buy, Close, Move In.”

There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don’t know. But there are also unknown unknowns. These are things we do not know we don’t know.

A few days ago, John Chambers, CEO of Cisco Systems, a bellwether for technology companies, echoed Bernanke and stated that,

“We are seeing a large number of mixed signals in both the market and from our customers’ expectations, and we think the words ‘unusual uncertainty’ are an accurate description of what is occurring.”

Recently, RealtyTrac reported that foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 325,229 properties in July, a nearly 4 percent increase from the previous month.  One in every 397 U.S. housing units received a foreclosure filing during the month.  For July, Ohio ranked sixth with 13, 500.  Ohio is a recourse state unlike California and Arizona which took the top foreclosure filings honors.

How will the double dip recession look:

• Home prices and home mortgage activity are both likely to return back to the rational level in the mid or late 1990′s.
• Mortgage originators might be held accountable for the quality of the mortgage they originate.  The Mortgage Church Lady would say, “How inconvenient”?
• For home buyers who are able to put 20% down payment and have steady employment, the best of times is yet to home.   Condos in Florida are selling for less than the price of a Toyota Corolla and buying this condo may not be the better buy.
• For home sellers, the worst of times is yet to come.  For some, their home will become their ball and chain.
• American companies will continue to outsource jobs overseas and this will increase non-governmental  unemployment numbers.  Outsourcing will seep down to the mid-size and small companies.
• Christmas 2010 will reflect ground zero conditions in retail.  Walmart (WMT) might overtake Amazon (AMZN) as the most popular online store.  So sell AMZN before Dow reaches 8500.
• Municipalities will start cutting services.  As an example, Colorado Springs is planning to save money by turning off a third of its streetlights.
• Taxes will increase after the November 2010 elections.
• Layoff in schools will occur and this will further contribute to return to normalcy of home prices.
• We might learn to save for the rainy day.  The era of America as the consumer engine of the world might thankfully end, for now.  We might realize that home ownership as a reflection of the American dream is a translucent sales pitch.
• The Chinese economy might stumble.  Or not.
• Nouriel Roubini will be officially prohibited from appearing on television programs.
• Banks will keep their fangs sharp.
• GM will be the only company operating its plants to capacity!

How to invest in a double dip recession

Only individuals who itemize deductions can benefit from the Mortgage Interest Deduction (MID), and the value of the deduction increases with the marginal tax rate. If the government wishes to promote home ownership, a refundable tax credit available to all taxpayers would be more effective.

Henry Paulson, former US Treasury Secretary, recommends that

We should go further and reduce the subsidy for home ownership that helped create the crisis.  The central place of home ownership as part of the American dream reflects a bias of our society that is unlikely to simply end.  Policymakers may well decide that we should continue to facilitate lower-cost mortgages through a subsidy to mortgage credit guarantors.  Even so, the scope of the subsidy should be reduced by rationalizing and reducing the missions of the FHA and the successor(s) to Fannie and Freddie.  I would recommend limiting the availability of the subsidy to smaller mortgages or lower-income buyers or both.  And the price the government charges this new private-sector entity for its credit guarantee must be high enough to leave room for a robust private-sector mortgage market that serves taxpayers and homeowners equally. The benefits of a reduced subsidy for home ownership are clear.  But we cannot move toward this model until the housing market is stabilized and housing prices are likely to rise.

Click to enlarge-Atahualpa WordPress Theme Options

How to change line spacing in Atahualpa WordPress Theme Options

• Click on Appearance and open up the sub menu.
• Click on Atahualpa Theme Options
• From the list of various options, click on Body, Text & Links in Overall Style & Config.
• In Body Style, insert, line-height: 20px; Click to see the image above in larger size.
• Click on Save Changes

The downloaded default Atahualpa theme comes with line spacing set to 18px.  This increase in line spacing  may give your Atahualpa WordPress theme better readability.  While you are making this change, change the font type to Verdana.

Credit: Sue Reid, The Solon Times

Ohio State Auditor, Mary Taylor, conducted a special audit of the City of Solon to determine if City of Solon received the quantity and quality of material billed by the contractor for the contracts entered into with Midwest Paving, Chaney Cement Contractors, Inc. (for the extended period of January 1, 2001 through December 31, 2007), and MGL Enterprises, Inc.  This engagement was conducted in accordance with the Quality Standards for Inspections established by the President’s Council on Integrity and Efficiency (January 2005).  The results of the special (cost to the Solon taxpayer $ 165,000) audit were provided to City of Solon Mayor, Susan Drucker.  An extract from Ohio State Auditor’s special audit report follows:

GENERAL CONTRACT NON COMPLIANCE TO OHIO REVISED CODE AND INTERNAL CONTROL RECOMMENDATIONS TO CITY OF SOLON

1. Destruction of Public Records

Ohio Rev. Code Section 149.351 states in pertinent part that “all records are the property of the public office and shall not be removed, destroyed, mutilated, transferred, or otherwise damaged or disposed of, in whole or in part, except as provided by law or under rules adopted by the records commissions provided for under sections 149.38 to 149.42 of the Revised Code…” 1 During the Period, there were construction reports, concrete delivery logs, itemized sheets and drop slips which the City of Solon was unable to provide.  Additionally, the City Council approved an amount to be spent on road improvements for the year and a general list of streets needing repair. The City’s engineering department was unable to provide documents to identify areas designated for replacement or repair, and to support estimates used in bidding documents. Without maintaining complete documentation of work performed, the City of Solon is unable to monitor whether the contractor’s invoices accurately reflect the work completed. Additionally, failure to maintain the annual list of needed street repairs reduces the City’s ability to ensure the required work was completed. We recommend that all documents related to the contracts be maintained. These documents should be used to verify the amounts invoiced by the contractors prior to the City’s payment. Additionally, maintaining the documents will provide a historical timeline of prior projects for the City’s review and evaluation.

2. Bid specifications should include the actual specifications

As part of the audit we reviewed numerous contracts containing bid specifications for eight and ten inch concrete which required mesh reinforcement; however, beginning in 2004, Chaney and MGL used fiber mesh reinforcement instead of the required wire mesh. According to the City’s engineer, John Busch, Chaney and MGL were given verbal permission to use fiber mesh, which is less expensive to install than wire mesh. Mr. Busch stated the City of Solon had been allowing fiber mesh instead of wire mesh on concrete projects for the last three or four years, without updating the contracts or bid sheets, and without notifying all bidders of the change. Mr. Busch further stated that Chaney and MGL were the only two contractors that knew they could use fiber mesh instead of wire mesh. Competitive bidding only works when all competitors have the same specifications for the scope of work. To effectively competitively bid City projects all competitors should have the same specifications for the scope of work. Otherwise, the bids which are received cannot truly be compared to each other in determining the “lowest and most responsible” bidder. Chaney and MGL’s knowledge that fiber mesh could be used instead of wire mesh put other bidders at a disadvantage. This helped Chaney and MGL to submit bids which were lower than their competitors. We recommend the City of Solon update the bid documents to include the actual specifications for the job, and ensure that each bidder has received the same information from the City of Solon regarding the prospective project. The construction reports, concrete delivery logs and itemized sheets were prepared by an on-site inspector either employed by the City or contracted through a private company. Construction reports documented each day’s work. The concrete delivery logs were used on days when concrete was poured to document the amount of concrete delivered. The itemized sheets identified a running total for each bid item. The drop slips were completed by the concrete supplier and documented the location, amount and type of concrete delivered.

3. Monthly invoicing means an estimate once each month

The contract documents state, “The contractor shall submit to the City once each month a certified estimate approved by the engineer for the work performed. Not later than 30 days after the submission, the City of Solon shall make partial payment to the contractor.” In eleven of the contracts reviewed, the contractor failed to submit a certified estimate once each month as required. For one contract, the contractor failed to submit an estimate or invoice for ten months. The failure to submit estimates or invoices in a timely manner increases the risk of billing errors not being detected in a timely manner or difficulty in determining that work billed was actually completed. We recommend the City’s engineer monitor contract invoicing to confirm certified estimates and/or invoices are submitted in accordance with contract requirements.

4. Change orders must be in writing

The City’s Codified Ordinance 234.04 requires all contract amendments to be in writing and also states, “Such amendment shall have the written approval signatures of the Mayor or the authorized head of the department involved, the contractor, and the Director of Finance, and shall be approved as to form by the Director of Law.” Additionally, the standard contract language states, “If changes in the design of any portion of the work or in the requirements of the specifications are deemed necessary by the engineer, he may, in writing, order alterations to or changes in the work.” It further states, “Should the contractor desire to make any alterations in the drawings or specifications, the same shall be submitted in writing to the engineer.” For 16 of the contracts reviewed, the City of Solon either did not complete a change order when required, or failed to thoroughly complete change orders with all required information and signatures. Some of the changes not documented in a formal change order included contractors billing for items which were not part of the original contract specifications. For these items, the lack of a written change order prohibited us from determining whether changes to the contracts were paid in accordance with an agreed upon, established price. The failure to document contract changes and amendments in writing and to obtain the required signatures increases the risk of inadvertently exceeding budgetary restraints and overpayment. We recommend the finance director monitor contract payments and confirm amendments are properly completed prior to payment.

5. Project deadlines have a meaning

Each project included an established completion date. The City’s contracts contain standard language which states, “To secure any extension of time, the contractor must submit a written request to the engineer, citing specific reasons, explanations, and dates.” Additional language states the contractor agrees that the City shall deduct and retain liquidated damages for the non-completion of the work within the times established. The contracts we reviewed identified a completion date and also imposed damages for each calendar day the project was not completed past the designated date. The final day of work performed for 14 of the 28 contracts exceeded the agreed upon completion date. There was no documentation provided by the City of Solon which extended the completion date, nor were liquidated damages assessed against the contractor. The failure to enforce the completion date subjects the City’s residents to longer than necessary inconvenience and gives the contractor an advantage over other bidders for the project as those bidders may calculate their bids based on the completion date established by the City of Solon. The City should monitor contractors so they do not exceed the completion dates. If, through no fault of the contractor, the completion date cannot be attained, the City should document the cause for the delay and identify the new date. However, if the contractor repeatedly exceeds the completion date, the City should consider whether the contractor should be allowed to bid on future contracts. Additionally, we recommend the City either begin enforcing the contract language which provides for liquidated damages for not meeting the completion date, or consider removing that language from the contract documents.

MANAGEMENT COMMENTS TO CITY OF SOLON

1. Contract estimates ($4 concrete) versus Contract billings ($6 concrete)

Midwest, Chaney, and MGL’s bids for the concrete repair programs included two different classes of concrete to be used in varying amounts. Each contract documented the quantity of each type of concrete and its cost. For example, the 2007 contract with Midwest projected Midwest would use 120,000 square feet of concrete priced at $4 per square foot and 2,000 square feet of a different class of concrete priced at $6 per square foot. However, Midwest did not bill the City for any of the $4 concrete, but billed the City of Solon for 104,846 square feet of $6 concrete. Although the quantities of concrete provided in the contract were estimates, the variances between the two classes of concrete which were billed resulted in significant increased cost to the City. In the 2007 contract, the difference between the price estimate and the actual charges for concrete was $137,076. Also, the ability to charge in excess of the engineer’s estimate on certain items, without charging other items, was one of the factors which resulted in the contractor overcharging the City as indicated in the Findings for Recovery identified later in this report. We recommend the City include a more accurate estimate of quantities needed. If, for any reason, the specifications need to be changed, the city engineer should document the required change, the reason for the change, as well as the increase or decrease in estimated cost. These procedures would help ensure all bidders have the same information to submit a well informed bid and also reduce the risk of overcharges to the City.

2. Contract documents must be complete

Contract and bid documents were not entirely completed. Construction reports, concrete delivery logs and itemized sheets were not always accurately and fully completed for the 28 contracts reviewed. These documents did not always identify specific work, depth, measurements and/or square feet of concrete poured. Construction reports, concrete delivery logs and itemized sheets should be completed in their entirety, for use by the City of Solon in verifying prescribed work was completed. Failure to adequately document work being performed and comparing those reports to amounts invoiced resulted in overpayments to the contractor. We recommend all documents related to the contract be complete and accurate with all required information and signatures. This will allow the documents to be compared to the invoices and reduce the risk of paying for work that was not completed.

3. Contract start dates are real

The contractors routinely began performing work on contracts as soon as they became aware of the acceptance of their bid, prior to the contract being signed or the “notice to proceed” order being issued. For projects started prior to the contract or “notice to proceed” date, we discovered drop slips indicating work had begun; yet, inspector reports were not provided. This may indicate that an inspector was not on site, resulting in work being performed which was not documented in a formal construction report. We recommend contractors not begin work until either the contract is signed or the “notice to proceed” is issued by the City of Solon. An inspector should always be present to review the contractor’s work for adherence to contract specifications. The City of Solon should require the contractor to notify the City of the dates it intends to be working, to allow for an inspector to be on site.

4. Invoices must be checked and rechecked

Invoices contained numerous calculation errors and per unit pricing errors. This resulted in overbilling by the contractors and subsequent overpayments by the City. Invoices should be reviewed for correct unit pricing and recalculated to ascertain correct billing. Items which are “lump sum” pricing should be tracked to determine the payment does not exceed the contract approved amount. Contract items which have “allowances” requiring supporting receipts should have a copy of the receipt attached prior to payment. These procedures would enhance control over disbursements and reduce the risk of overpayments to contractors.

5. Emergency repair prices should not be without limits

During the Period, emergency repairs were not bid. According to John Busch, it was the City’s practice to use the contractor that was in the City doing the annual concrete program to do emergency repairs. Domonic Bisesi would identify the emergencies and then have the contractor perform the work. Mr. Busch also stated that the cost of repairs was not discussed or approved prior to the contractor performing the work. During an interview with Marco Leone, he indicated that if the work was an emergency, he had full discretion to charge any fees which he established. For example, during the performance of the 2006 Concrete Repair Program, one street received emergency repair work which was charged to the City for $45,000. Had this repair been paid according to the established prices in the 2006 Concrete Repair Program contract, it would have cost $9,500. However, since the emergency repairs were not bid and the contractor could establish his own price, the City paid $35,500 more than they would have been charged, had the emergency been paid from the annual contract price. In 2008 the City accepted bids for an annual contract for emergency repair work. By doing so, the emergency work will no longer automatically default to the contractor performing the City’s annual concrete program. We recommend the City ensure that emergency work includes only true emergencies, and that prices for emergency work are agreed upon in writing and in advance of the performance of work.

6. Unbalanced bids

The City received five bids for the 2002 Concrete Repair Program. Chaney was originally the second lowest bidder on this contract. The lowest bidder included two items on its bid sheet that were bid well below the cost of materials to complete the work. These same two items were also bid below cost in the prior year’s contract, which was awarded to Chaney. According to the United States Department of Transportation (USDOT), Office of Program Administration, “A mathematically unbalanced bid is one containing lump sum or unit bid items which do not reflect reasonable actual costs plus a reasonable proportionate share of the bidder’s anticipated profit, overhead costs, and other indirect costs, which he/she anticipates for the performance of the items in question.” In an interview, Sally Reemsnyder, former director of engineering, said the unbalanced bid for the 2002 Concrete Repair Program was brought to her attention by Domonic Bisesi. She stated that Mr. Bisesi did not identify Chaney’s 2001 bid as being unbalanced, which is why the 2001 contract was approved for Chaney. As a result of Mr. Bisesi notifying Ms. Reemsnyder of the 2002 lowest bidder’s unbalanced bid, Ms. Reemsnyder rejected the original bids and held a second bid opening. This time, Chaney was the lowest bidder and was awarded the contract. The 2001 Concrete Repair Program contract was awarded to Chaney with an unbalanced bid. Because no one at the City identified the bid as unbalanced, Chaney received the contract at an unfair advantage over the other bidders. We recommend the City perform a detailed review of all bid documents to ensure the lowest bidder is not submitting an unbalanced bid. USDOT recommends that bids be analyzed by considering whether the bid is mathematically unbalanced and the effect the unbalanced bid items have on the total contract amount. Bids should also be evaluated for reasonable conformance with the engineer’s estimate.

Download the report from Ohio State Auditor Mary Taylor  Solon_City_of_01-07_Special_Cuyahoga

One rotten apple spoils the whole barrel

Construction traffic sign

City of Solon installed 25 MPH regulatory speed limit signs to replace 35 MPH posted speed limit signs in a construction zone on Bainbridge Road.  Ohio Department of Transporation advised the City that the change cannot be made without a formal study.  Obviously, the City’s study could not justify the installation of 25MPH sign on the arterial Bainbridge Road and the 25 MPH speed limit signs had to be removed.

Dr. Brian Stacy of NOAA prepares to clean an oiled Kemp's Ridley turtle.

An oiled Kemp's Ridley turtle-Click to enlarge

Deepwater Horizon Gulf of Mexico Oil spill

The Gulf of Mexico is a very big ocean. The amount of volume of oil and dispersant we are putting into it is tiny in relation to the total water volume – Tony Hayward, Geologist and Chief Executive, British Petroleum quoted in BP boss Tony Hayward admits job is on line over Gulf oil spill by Tim Webb of The Guardian May 14, 2010

Signature of Solon Golf Community Subdivision

A Signature of Solon resident approached City of Solon Planning Commission and stated that she believes there have been builders in the Signature of Solon neighborhood who have built homes and rented them prior to obtaining an occupancy permit.  Additionally, many Signature of Solon model homes were built but not sold and have become rental properties.  Many of these Signature of Solon rental homes are neglected and improperly maintained which is damaging to the Signature of Solon community. This resident was concerned that the appearance of some of the homes will affect overall resale in the Signature of Solon neighborhood.

It appears that due to  the economic downturn, builders and homeowners associated with some  Signature of Solon properties are renting homes out of necessity rather than facing foreclosure.  There have been some foreclosure filings on properties located on Royal Portrush Drive, Capilano Drive, Vahalla Drive, Bellerive Drive, Merion Court, Prairie Dunes Court, Sotograde Court in Signature of Solon.

Foreclosure decreases the property value by 28% (Campbell, John Y., Stefano Giglio, and Parag Pathak. 2009. “Forced Sales and House Prices.” NBER Working Paper 14866).  Some builders are facing property foreclosures because lenders have become conservative by cutting their line of credit.  Common sense lending standards mean that lenders expect builders to have their own skin in the game.

Home-equity loans and lines of credit are second mortgages.  Second mortgages are made after a primary mortgage is in place.  If a homeowner defaults, the proceeds of the home’s sale go first to the lender that holds the primary mortgage.  The second-mortgage holder gets whatever is left after the primary mortgage is satisfied.  Lenders are rightly shying away from secondary mortgages and rental occupancy permits will not loosen the line of credit leash.

Signature of Solon does allow home rentals, however,  a deed restriction stipulates that home must be owner-occupied for the first year to ensure that landscape work and proper maintenance is completed.  However, Signature of Solon does not request the tenant’s name.  Chagrin Highlands subdivision in northeast Solon also has a deed restriction similar to Signature of Solon.

A deed is the legal document that transfers ownership of real estate.  It contains the names of the old and new owners and a legal description of the property etc.  The deed is signed by the property owner.  Deed restrictions place limitations on the use of the property by the property developer.  It is my belief that some property owners may use a bypass  to get around a deed restriction.

1. Plain Dealer/cleveland.com- Heartbreak: Lebron leaving Cleveland for Miami
2. Akron Beacon Journal/ohio.com -James burns Cavs in favor of Heat

Witnesses to foreclosures, crime, sprawl, pollution, hype..

It was reported that people were tearing up Lebron James’s jersey in Cleveland.  People were driving by his 35,000 square feet home in Bath Township and yelling profanities at the 25 year old and his family.  He was being called a traitor and sell out. 

Lebron James said he chose Miami because he felt that Miami heat offered him the best opportunity to win, both this year and in future seasons.  He said that he did what was good for Lebron James and what would make Lebron James happy.  He said that he took his mother’s advice.  He explained that it was not an emotional decision and it was business.

Lebron James is a basketball player.  He excels at throwing a round ball through an elevated basket and therefore his influence on the quality of life of an average Northeast Ohio resident was negligible.  The newspapers and television placed him on an altar by giving him the moniker of King and now they attempt to denigrate him.  The emotional backlash from a minority of Northeast Ohio residents has been amplified by the media.  I am beginning to suspect that the popular media chooses to go along with the popular sentiment for dubious reasons.  I am not a big fan of basketball; it appears to me that the Cleveland Cavaliers failed to win a NBA Championship because they did not have the required firepower.  Millions come to our country in pursuit of better opportunities but according to some Northeast Ohio residents and an owner of Cleveland Cavaliers, its trief for Lebron James to do this

The appropriate response could have been to thank this young and successful Northeastern Ohio resident for his significant contributions to the area and wish him luck in his future career with Miami Heat.