Earlier this year, I wrote about the proposed-and-failed sale of the FMCC Dorms in Johnstown, NY. Fulton-Montgomery Community College is part of the State of New York’s SUNY system and serves about 1,650 students. FMCC sits between Albany and Utica. It also provides an ongoing “cautionary tale” about the importance of having a functional Board of Trustees.
FMCC had a couple of aging dormitories on its campus, which it sold to a non-profit organization – the Fulmont College Association. FCA was set up specifically to own and manage the dorms. In 2010, FCA borrowed $11.3M from the USDA to purchase and renovate the two dormitories ($4M) and build a third ($7.1M.)
The FCA rented a significant number of the available beds to international students. Following the emergence of COVID-19, FMCC – like many other schools – closed in-person instruction. Without the students in the dorms, FCA could not make the payments and defaulted on the USDA loan.
FCA, which still owed $10M to the USDA, hired a broker to market the dorms. The FCA Board of Trustees then sought permission to sell the dorms to a sole offeror for a below-market offer of $1.1M. The USDA preliminarily agreed to the sale, provided that FCA turn over the proceeds of the sale – minus the broker’s commission of 7% – to the USDA. In exchange, the USDA would forgive the balance due on the loan.
FMCC Board of Trustees approved the sale
And the sale would have gone through, except that a student and another prospective buyer filed suit to stop it. As it turns out, the real estate broker in the deal – the one who was collecting a 7% commission to market the property – was the former FMCC Board Chair. By itself, that is not necessarily a problem. However, the broker claimed to use the Fulton County Multiple Listing Service (MLS) to market the property. Unfortunately, the Fulton County MLS doesn’t actually exist. That is a problem.
Additionally, the student’s attorney discovered that the FCA Board of Trustees did not have the quorum required to authorize the sale. Getting a quorum was always a problem because the FCA Board of Trustees did not even have the requisite number of members its bylaws call for. And according to the sales contract, the broker/former Board Chair will get paid, regardless of whether the sale closes or not.
FCA withdrew its petition to sell the dorms, which is good because the USDA withdrew its approval to sell them. Afterward, FCA spent some quality time with the New York State Attorney General and the US Attorney for the Northern District of New York. Together, they hashed out the terms under which the FCA Board of Trustees could sell the dorms. (It sounds like they also got a lot of really good legal advice for free!)
The FCA Board of Trustees is once again hoping to sell the property, which requires a new approval from the USDA. And thanks to the publicity, another potential buyer has emerged. (Note: the legal proceedings in this case were 200% more effective at marketing the dorms than the non-existent MLS was.)
Low functioning boards don’t serve the public
The FCA Board of Trustees in this case were supposed to perform due diligence on the sale of the dorms. Aside from the fact that their board composition was fundamentally flawed, no one asked any questions. And they tried to stick the taxpayers with a $9M loss so that a pal could collect a $77,000 commission on the sale he never made of a property he never marketed.
Trustees of public institutions exist for a reason. When they prioritize their own interests over those of the public they’re supposed to serve, things like this happen.
Remember this the next time you vote for a WCC Trustee.
Photo Credit: SomehowShawn , via Flickr