DATE: Wednesday, September 24, 1997         TAG: 9709240432

SECTION: LOCAL                   PAGE: B1   EDITION: FINAL 

SOURCE: BY TOM HOLDEN, STAFF WRITER 

DATELINE: VIRGINIA BEACH                    LENGTH:  104 lines

BOARD CHIEF TAKES BLAME FOR PROJECT'S COST OVERRUN STILL, BEACH MAY FURTHER EXAMINE THE BREAKDOWN IN COMMUNICATIONS.

The Community Services Board chairman accepted responsibility Tuesday for the mishandling of a planned building project, but City Council members indicated that the real blame may lie elsewhere.

Council members grilled board chairman Donald V. Jellig about how a plan to relocate mental health, mental retardation and substance abuse services to a Bonney Road site has ballooned to millions over budget.

``I regret the controversy this has caused,'' Jellig said. ``I accept responsibility for it. If there was a breakdown in governance, it took place at the CSB.''

But while Jellig asked forgiveness, at least one council member appeared ready to focus more intensely on the breakdown at the board and whether someone should be held accountable for it.

``There's a process that's gone wrong here and maybe we can get into that in executive session of what went wrong,'' said Councilman William W. Harrison Jr. ``You've taken the blame, and I'm not sure that blame lies with you.''

Council members met for about an hour in executive session with Jellig to discuss the breakdown in communication and how the council was not informed of the impending cost overrun.

While not named specifically by council members, Community Services Board Executive Director Dennis I. Wool appeared to be the focus of Harrison's and other council members' concerns.

Jellig's public presentation laid out the now-familiar issues before the City Council: how a planned $12 million project to purchase property, renovate it and then relocate the board's operations ballooned into a $17.2 million plan to build a new complex - a proposal that has yet to win final approval.

What the council learned Tuesday, though, was that the preliminary architectural review of the properties, later deemed to be incomplete, was ordered by the board's executive staff.

That architectural review is central to the cost overrun because it was the basis on which the board asked the City Council to approve the $12 million to purchase land on Bonney Road and renovate a former six-story Days Inn hotel.

CMSS Architects, which Wool said was on retainer by the Virginia Beach Economic Development Authority, provided the first professional evaluation of how much it would cost to renovate the hotel.

In a letter dated May 10, 1996, John H. Crouse wrote to James P. Duffy, the board's director of finance and administration, that the hotel's construction budget should be set at $2.4 million. A copy was sent to Robert Ruhl, an economic development department official.

The letter was then used, in part, by Wool and the board to persuade the City Council to appropriate the $12 million. But 15 months later, Crouse said that his evaluation was only a cursory one, and that some of his findings were based on his best ``guesstimate.''

``Basically what we did was spend 24 hours going through a building assessment,'' Crouse said on Sept. 9. ``(The board) didn't have us do the second part. That would have been a more complete building evaluation where we look more specifically at the things that are causing problems. That did not occur. They never had us go that second step.''

When Paul Finch & Associates eventually was appointed project architect, the company conducted a more detailed examination of the Days Inn property and found that renovation costs would be $4.2 million.

That revelation came five months after the council had appropriated the money, but council members were not told until two weeks ago.

The higher cost arose from expenses associated with plumbing, adding a heating and air conditioning system, and the need for a new roof.

Because the hotel rooms were too small for their intended use, the interior of the building would have had to be substantially redesigned, and that would have required additional floor supports, which contributed to the higher cost.

All together, the proposal from Paul Finch put the cost of the renovation project at $19 million. The board balked and pushed the price down to $18 million. With costs still too high, the board then decided two weeks ago to demolish the hotel and a building on adjoining property and start from scratch.

That $17.2 million project would need additional money. The board said that some could come from the board's reserves, some from the sale of a board-owned property, and the rest from the sale of bonds. Issuing those bonds requires council approval, which is why the council is now looking at the project again.

Correspondence between CMSS and various city officials appeared central to the City Council's efforts Tuesday to pin down the chain of events that lead to their false assumption of how much the project would cost.

``CMSS sent a letter, and we have a copy of it, that talked about two levels of examination of the building,'' City Councilwoman Nancy K. Parker said to Jellig.

``One that dealt with basically a preliminary one, and then the other one requesting a much more detailed report. In that original one, they talk about some of the problems you had with that particular building. Did you all get a copy of this, that it was a two-step process? What did you think you were getting when you got this''?

Jellig said, ``My recollection was that we did not know that there was a two-phase process. We hadn't seen that letter.''

``You came to us suggesting that we buy this property based on just a preliminary?,'' Parker asked.

``No,'' Jellig answered. ``We didn't know it was a preliminary. We thought it was a complete analysis by CMSS. We did not understand that there was another phase to it.''

Council members took no official action on the matter Tuesday beyond questioning Jellig.

The board will meet Thursday. ILLUSTRATION: Color photos

Donald V. Jellig accepted blame . . .

. . . but Dennis I. Wool, might be the subject of concern.

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