A Two-Year Saga Continues with Cape May COAH Funds

CAPE MAY – It has now been two years since six City of Cape May employees received bonus checks approved by former City Manager Jerry Inderwies Jr. for work ostensibly done on behalf of the city’s affordable housing goals.
In 2020, approximately $100,000 was paid to certain city employees from the affordable housing trust fund. Controversy has followed these actions with residents of the city still writing the Herald regularly asking for information on what is being done to recover the money.
The city has reached an agreement with its outgoing Chief Financial Officer (CFO) Neil Young by which the city will cash out his accumulated leave hours to the benefit of the trust fund. According to Mayor Zack Mullock, Young has agreed to the arrangement. Attempts to reach Young for comment have not been successful.
It was not just the source of the funds that animated controversy but the fact that six individuals, the former city manager down to an administrative assistant, with far different abilities to impact affordable housing, all received the exact amounts, each in two bonus check disbursements. A seventh employee received one bonus disbursement of a much smaller amount and returned the money to the city.
The dissention over the use of the trust fund monies has been ongoing since early 2021 when the payments were discovered by just appointed City Manager Michael Voll and a newly elected city council headed by Mayor Zack Mullock.
The Background
Among the first steps taken was the passing of a resolution confirming the requirement that council must approve disbursements from the fund.
Next the city referred the matter to the Department of Community Affairs (DCA) in Trenton. When DCA finally responded it made things even more difficult for the city administration. The state agency said that the issuing of the checks did not follow proper procedure and violated the court approved spending plan that defines how the trust fund monies may be used. In what is all too often the state response, DCA agreed there was a problem and then declined any jurisdiction for resolving it. The hot potato was back in the city’s lap. Voll said at the time that the city would act sooner rather than later.
The subsequent action taken was to refer the matter to the Cape May County Prosecutor’s Office citing DCA’s conclusion of a violation of process. More time expired. No funds were recaptured for the trust fund. After months of deliberation, the Prosecutor’s Office replied that it would not seek criminal charges. It did not defend the action of issuing the checks, nor did it contradict the DCA finding of a violation of the spending plan. The Prosecutor’s Office then passed the hot potato back to the city.
Meanwhile the Fair Share Housing Center (FSHC), a non-profit given special standing by the courts as a representative of affordable housing consumers, demanded the city make the trust fund whole or potentially face litigation.
Here the city sat in the fall of 2021 having exhausted its attempts to have an outside agency intervene in the controversy. In November a city resident used the public comment period at a council meeting to press the city for information. Mullock said the city had taken action immediately upon learning of the bonus payments. He recounted the time spent with DCA and the Prosecutor’s Office. Voll said he was actively dealing with the situation. Solicitor Christopher Gillen-Schwartz assured the public that the issue “has not fallen into the abyss.”
By February 2022, now a year after the city administration took office, the city took the step of hiring a special council. Vincent Sarubbi of Archer and Greiner was chosen to lead an effort to resolve the trust fund issue. Sarubbi came to the task with a resume that included a stint as a county prosecutor. At that same February council meeting, city resident Jules Rauch urged the city to move immediately on the issue of recovery of the funds.
Gillen-Schwartz bristled at the suggestion of inaction implicit in Rauch’s comments. He argued that the city has taken the issue of the trust fund expenditures seriously and was working to resolve the matter in the “least impactful way” possible.
“It is a complex matter that requires time and care,” Gillen-Schwartz added, highlighting Sarubbi’s past role as a prosecutor.
“We were handed this,” Mullock said as he recounted again the actions the city had taken and then declined further public comment under advice of counsel.
By June the controversy lingered with no resolution. City council held a closed session meeting to receive an update on the “COAH Trust Fund Matter.” Almost 18 months after the last of the two bonus checks were issued, the city had no final resolution on the issue and the public had no information on status.
Inderwies filed a lawsuit arguing that comments and actions by the city and certain of its elected officials had damaged his reputation and negatively impacted a potential run for political office. He later added the executive director of the FSHC to the litigation. The case was subsequently dismissed by the courts.
When at a city council meeting in July, a representative of the city’s Taxpayers Association (TPA) called on the governing body to act with regard to the use of the COAH funds, the issue was seen by the TPA as languishing despite the city’s claims that it was actively seeking a resolution.
Status
At an Aug. 16, 2022 meeting the governing body approved a plan by which one of the six individuals who received bonus checks, Deputy City Manager Louis Belasco, could repay the city through the use of accumulated leave hours at his current salary rate of $56.52 per hour. The resolution approving the use of accumulated leave was specific to Belasco and did not mention the other bonus check recipients.
The whole question of payout for accumulated leave is itself a subject of controversy since a state comptroller report was issued earlier this year. Mullock said in an interview with the Herald that “the state is aware of what we are doing and is OK with it.”
Recently, Young left his position as Cape May’s CFO to become the CFO of Middle Township. In the same interview with the Herald, Mullock said that Cape May will not be paying Young for his accumulated leave upon his departure from the city. He said Young was aware and in agreement with the decision. The funds for the accumulated leave payout, much as in the case of Belasco, will be used to repay the trust fund. Mullock also praised Young as a hard-working and very effective CFO.
Now Christmas 2022 is history and the issue of the COAH funds with checks issued in September and December 2020, remains unresolved for four remaining individuals. Two are still employees of the city and two have since left city employment. According to Mullock all of them have their own legal counsel in the matter.
FSHC Director of Advocacy and Communications Alex Staropoli said early this month, “We maintain our position that the funds must be repaid to the trust fund and have been advocating for such with the City. We are hopeful that the city agrees and is working towards a resolution.”
As to the issue of the city working towards a resolution, one resident asked in a recent email to the Herald, “How much time does one need? We are into the third FY.”
Mullock said more time is essential. He said the city continues to actively pursue resolution.