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The Erie Basin Marina, one of the Buffalo waterfront's most established attractions, every year draws about a million people who walk along the rocks, dock their boats, race up the steps of the observation deck, and enjoy hot dogs and ice cream cones at the Hatch restaurant.
To make it an even more attractive place to visit, the city is spending $1.8 million to add a second floor to the Hatch and build a new ice cream stand and clam shack.
But those aren't the only changes the city has planned.
Revelations that the marina's private manager underpaid the city by more than $340,000 over the last five years, contained in a highly critical audit that the city comptroller released Thursday, have prompted the city to say it will make significant changes in how business is done there. The city will hire a new operator and an outside auditor to monitor the marina's finances, and has reassigned a key employee in the wake of the comptroller's startling findings.
Brand-On Services, which operates the marina and the Hatch, is run by President Renee Wolasz and her husband, Michael, the operations director who retired from city employment in 2012.
Michael Wolasz has donated $1,200 to Mayor Byron W. Brown's campaign accounts since 2006.
Daughter Julie Wolasz, who was working Thursday at the Hatch, said the marina is a family-run operation and that they hadn't seen the audit yet and couldn't comment on it.
“We need to read, review and rebut,” she said.
The company, which would have stood to benefit from a more attractive facility that will allow for greater food and alcohol sales, owes the city $343,245, money that should have been paid from 2008 to 2012, according to city auditor Kevin J. Kaufman.
“The city has borrowed nearly $2 million in capital funds to invest in the Erie Basin Marina and Hatch restaurant,” said Comptroller Mark J.F. Schroeder. “I want to ensure that the taxpayers are getting their money's worth for these investments, because right now, they clearly are getting ripped off.”
Part of the money that is owed to the city comes from the sale of more than 20,000 gallons of gasoline that is unaccounted for.
Brand-On Services operates under a contract with the city and is supposed to pay rent based on sales of such things as food, beverages, slip and dock rentals, and fuel.
The city will hire new vendors for the 2014 season and will seek separate bids for the restaurant operations and for the marina operations, according to a response to the audit from Public Works Commissioner Steven J. Stepniak.
A Public Works employee previously assigned to the marina, Donald Poleto, has been “relieved of his duties” there and reassigned “pending a review to determine if further action is necessary,” according to the city's response.
The marina will now be overseen by two of Stepniak's deputies.
In separate interviews, Schroeder and Stepniak said any decision to turn over the audit findings to the Erie County District Attorney's Office for possible prosecution would be made by the city's Law Department.
The audit advises the Common Council not to approve a two-year lease extension with the company at the end of the season unless immediate corrective action, including full payment of the amount owed, takes place. That advice appears to be overruled by the city's decision to put the contract out to bid.
The city agrees with the audit's assertion that if the amount owed is not repaid, the Law Department should take action to recover the money.
Stepniak, however, determined that the company spent $60,819 to rectify an unsafe condition at the marina, which should not have to be repaid.
Schroeder said he stands by his figure.
The audit is the third such critical review by the Comptroller's Office of Brand-On Services' operations at the marina since it took over in 2001.
The company underpaid in three major ways, including paying the city 10 cents per gallon for fuel sales, instead of 10 percent of the fuel sales, as the contract stipulated.
A 2006 letter between the company and then-Public Works Commissioner Joseph Giambra states that the parties agreed to a change from 10 percent to 10 cents per gallon, but the letter is invalid because the contract stipulates that only the Common Council can approve a reduction in rent, auditors said.
Following a 2005 audit, the Council discussed repealing a 10 percent fuel surcharge on the gasoline, but nothing was formalized.
Auditors also obtained the number of gallons of gasoline supplied to Brand-On Services and found that 20,689 gallons was not accounted for.
Between the missing gallons of gas and the lower amount the company paid to the city per gallon, $82,923 is owed to the city from gasoline sales, according to the audit.
The city will now purchase and sell the gasoline on its own, Stepniak said.
The rent the company paid was calculated using a lower rate than what the contract stipulated, and sales totaling $107,407 weren't included in the calculation and “not adequately explained by the operator,” according to the audit.
Instead of paying rent on a scale of 7 percent to 13 percent of base sales, with a higher percentage paid when the sales reach a certain amount, the operator used a scale of between 7 percent and 10 percent. The operator's accountant acknowledged the error and said it would pay the city $24,510, though the audit found that in this category, the operator owes $44,041.
The company also deducted $224,377 in maintenance costs, which it incurred, from the rent it was paying the city, which the contract does not permit without approval from the Council.
In one respect, the company overpaid the city by $8,096 for renting transient slips, which isn't called for in the contract. Auditors included the figure in their final analysis of money owed to the city.
Brand-On Services also operates the City Hall cafeteria, Clinton's Dish at Canalside and First Buffalo River Marina, owned by the New York Power Authority.
The city is soliciting bids for City Hall cafeteria operations, which it did prior to the release of the marina audit.
Auditors suggested conflicts of interest in the contract, because Michael Wolasz worked in the city's Department of Public Works at the time the department awarded the contract. Wolasz's son also is Public Works employee.
“These factors suggest a conflict of interest may have existed at the time of execution of the contract and may still exist,” Kaufman wrote.
Stepniak disagreed but said he would seek the opinion of the city's Law Department.
A 2009 marina audit, from then-Comptroller Andrew A. SanFilippo, found a “serious lack of internal controls in all revenue generating areas,” and a 2005 audit also found problems.
The company underpaid the city for all marina operations, according to the terms of the lease agreement, by $160,028 in 2008, $32,065 in 2009, $38,070 in 2010, $60,799 in 2011 and $52,283 in 2012, the auditors found.
The city is spending about $406,000 on a new gazebo and clam shack, now under construction, and $1.4 million on the second floor at the Hatch, which will be under construction in the fall.
email: jterreri@buffnews.com