In Belchertown, near Amherst, leaders of the Belchertown Economic Development and Industrial Corporation (EDIC) admitted mistakes to making mistakes and defended other practices in the Corporation’s attempt to redevelop the former Belchertown State School, according to a draft of its response to a recent state audit.

The panel's response to Massachusetts state Auditor Joseph DeNucci's April 7 report on the EDIC was discussed and tabled at the July 27 selectboard meeting.

"Changes have and will be made where necessary," states the EDIC's July 15 letter to selectmen, which also says that "several of the findings recommend actions the (EDIC) has been doing and will continue to do in the future."

The selectboard will discuss the EDIC's response to the audit in depth at its next meeting. The time and place are at www.belchertown.org

"We agreed that it would be a good idea for them to appear with us on television at the next meeting to help clear the air," said Selectman Kenneth Elstein, who added that he was satisfied with the panel's response.

"It's important that audits take place and that public bodies are watched, but I think the publicity was worse than the actual acts," he said.

Selectman Michael Reardon also found the response acceptable but had mixed feelings about the audit.

"I believe the EDIC is operating appropriately and that there were some good ideas from the auditor's report that will help moving forward, but I think some of the criticisms may not have had sufficient grounds."

The audit listed eight recommendations concerning how the EDIC should improve its business practices, the most notable of which addressed the sale of land known as Parcel E - 44 acres of formerly undeveloped land on the state school campus - to Belchertown developer Mark Kislyuk in 2002.

The land was acquired by the town earlier that year.

Kislyuk paid $125,001 for the land, under the condition that he would make significant infrastructure improvements, including the installation of 2,200 feet of sewer lines, a pumping station, a traffic light and financing a traffic study, which would cost about $800,000, according to the audit.

Yet the audit noted that Kislyuk only installed 1,700 feet of sewer, a smaller pump than was specified and did not pay for the traffic light or study; the report cites a town official as estimating this work cost $200,000.

After spending $770,000 building an office park on the property, Kislyuk sold it for a $1.9 million profit, leading the report to conclude that "the EDIC missed an excellent opportunity to generate revenue" from the sale of the land. For future infrastructure improvements, the audit said the EDIC should consider legally recording the covenants and monitoring them to ensure they are fulfilled.

EDIC board member Kirk Stephens agreed that the sale was mishandled, but emphasized Parcel E was the board's first transaction.

Stephens said the EDIC, compromised of citizen volunteers appointed by the selectmen, originally required Kislyuk to complete all the proposed infrastructure work under one mortgage bond, but after the developer complained that would present him financial difficulties, the board allowed him to complete the rest of the work after the bond was set to expire.

"We wanted him to succeed. We didn't sell it to see it go under," Stephens said. "He was the first guy to develop the land, and the first guy has the most to lose."

However, Kislyuk did not finish the work he agreed to do and, since the bond expired, the EDIC couldn't force him to do so.

Kislyuk could not be reached for comment.

EDIC Chairman William Terry said discussion of the Parcel E sale should be placed in context.

"Back in 2002, we had no money, had never done a development, and had sent two requests for proposals on that property and received zero responses," which is how the EDIC decided on Kislyuk, Terry said.

Seven years later, Terry said he is more wary.

"Developers are entrepreneurs trying to make money and they aren't your best friend," he said.

Stephens said all subsequent sales have gone well - he said about 16 businesses are now located on former state school land - and is disappointed the audit focused so intently on a mistake that occurred seven years ago and which the EDIC has learned from.
He also said the board already had implemented, or was in the process of doing so, many of the audit's other recommendations, such as tougher financial oversight and vetting for prospective developers.

Paul McDermott, a developer whose recent plan for a multi-million dollar spa and resort for the site crumbled in 2007, was tapped by an EDIC consultant to rebuild the site. That consultant was a former business associate of McDermott, unbeknownst to the EDIC. McDermott later bounced a $100,000 personal check to the board. The audit recommended receipt of bank or cashier's checks in the future.

One recommendation said the EDIC should work closely with the University of Massachusetts, Mass Development and other entities to determine viable development opportunities, and another advised the board to consider supplementing its part-time volunteers with other resources, such as consultations with state officials, to aid development.

According to the board's response, the EDIC has worked with UMass on three separate occasions and is studying future development opportunities with Mass Development, a quasi-state agency.

The audit also said EDIC should pursue other sources of financing to aid development. According to the board's response, the state recently awarded EDIC a $10 million grant to clean contaminated areas of the state school campus.

Elstein said the audit's most important finding was that no EDIC members were in any way involved in any conflicts of interest, which he considered essential for people to trust what the board is doing.

"It's very important for a public body, even a volunteer public body, to have the confidence of the people," he said.

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This article originally appeared in the Hampshire Gazette. It is used here with the author's permission.