Gov. Peter Shumlin responded Thursday to media scrutiny of a recent land deal. He is now saying he will extend a lease for an unspecified period of time to a low-income man who sold his family homestead to the governor in November.
When Jeremy Dodge sold the property to Shumlin for about a quarter of its then appraised value, Dodge claims he did not know what he was doing. More than six months after the closing, Dodge and community members are questioning whether the governor took advantage of him, and it’s unclear whether Shumlin will charge Dodge extra for allowing him to remain in the home he and his father built.
This week an FBI agent, responding to a tip, questioned a neighbor about the deal.
The governor said he was trying to bail a neighbor out of deep property tax debt and was not aware that Dodge had any issues with the sale until the press reported it. Dodge said he never told the governor he had any problems with the deal, either.
“I thought I was locked into it, and there was no way out of it,” he said. “That’s not just a person, but the governor of a state.”
Dodge, a high-school dropout, says he has trouble comprehending many things, and he didn’t retain legal counsel or a realtor for the deal. The 53-year-old ex-convict was facing an imminent auction of his house for the more-than $17,000 in back taxes on the property, which he inherited from his parents.
On Sept. 25, 2012, three days before Dodge’s 16-acre property was scheduled for auction, Shumlin and Dodge signed a purchase and sale agreement to the tune of $32,000. Part of that contract included paying down the taxes before the house went up for tax sale. That sum was paid Sept. 26.
Standing stiff-lipped at the Salvation Army warehouse where he works, Dodge said Wednesday that he earns less than $10,000 a year. He says when he sold his home, he didn’t know he might be able to make money from an auction or that he would have the option of retaining his property by paying off the taxes, plus interest, over the course of a year. Even if Dodge’s home was auctioned off, he would have had the option to stay in his home for another year.
“I actually thought I was going to have to move in 30 days with no money, and some money was better than none, and I could not afford a lawyer,” he said Tuesday. “He took advantage of me because I’ve got bipolar; I’ve got zero education really. I like the governor as a person … but as far as a businessman, this sucked.”
Dodge says he’s been in and out of mental health facilities over the years, and his childhood friend Bernie Corliss says Dodge was in no state to negotiate such a transaction on his own.
“He absolutely doesn’t have the brain it would take to make the deal. He never had it,” Corliss said. “I believe Jerry needs assisted living. I don’t think if Jerry had $100,000 from the governor, he’d last much more than two or three years in an apartment. He just doesn’t realize what’s going on around him a lot of the time.”
Corliss said an agent from the Federal Bureau of Investigation visited him earlier this week. The card left with Corliss was that of agent Christopher Destito.
While Destito did not deny visiting East Montpelier residents about the matter, he said he could not comment on whether the FBI was investigating the transaction.
“He wanted to know if I thought Jerry would be competent to make the decision and if I thought there was any wrongdoing,” Corliss said, adding that he did not reach out to the FBI.
Wednesday morning, the FBI field office in Albany would neither deny nor confirm an investigation into the matter and directed all questions to U.S. Attorney Tristram Coffin, who also said he could not comment on the status or existence of investigations.
The press and the governor’s story
The Vermont Press Bureau’s Peter Hirschfeld broke the initial story about Dodge’s “seller’s remorse” on Wednesday.
Expounding upon his previous statements, the governor explained to VTDigger how he viewed the deal.
“When we first talked about the tax sale, I told him that I would probably bid on the property if it came up, but I urged Jerry to reach out to his family for help and he agreed that would be the best outcome,” Shumlin wrote in an email. “Later he approached me and told me that he couldn’t get help from his family, and asked me to help him avoid a tax sale, which is always unpredictable.
“The land is right next to my house and so I was interested in it if it were up at tax sale,” he continued. “We talked about the terms of our agreement together, and I firmly believe he understood them and felt they were fair. He got cash-in-hand upfront, as well as money when he moved out to help him find a new place to live.”
Although Shumlin closed on the property in November, he allowed Dodge to stay in the house until July 15 without paying rent. If Dodge’s house was auctioned off, he could have stayed for another year.
After Hirschfeld’s article, WCAX’s Jennifer Reading spotlighted potential FBI involvement. Her story indicated that Coffin said there was no current investigation into the issue, but Coffin did not return a second request for comment on this matter.
Then, on Thursday at 4:22 p.m., Shumlin issued the following statement to a group of reporters:
“As I have said, I was saddened and disappointed that Jerry Dodge now regrets our agreement. I see and talk with Jerry frequently, and yet first heard about this from the press. When Jerry asked for my help to avoid the tax sale, I agreed, and I want to see this through to a good resolution. If that means Jerry stays in the house beyond July 15, that’s fine with me.”
At 8:56 p.m., Dodge said he had only heard the news from reporters, not the governor.
The deal and the property’s value
In the summer of 2012, Shumlin bought the 27-acre property on Foster Road next to Dodge’s. Shumlin paid less than a quarter of the property’s appraised value of $145,600. That figure doesn’t include the price of his new 2,200-square-foot house.
Shumlin went in on the property with a group of four friends who also formed a limited liability company known as Jersey Ledges LLC. The governor told reporters last fall that the price for the acreage was divided equally between two limited liability companies. Jersey Ledges purchased the adjacent 155 acre parcel for $630,000; his company, Foster Road LLC, purchased the 27 acres for $35,000. One of the friends, Thomas Hagemann, has a long-running financial relationship with the governor and supported his unsuccessful campaign for lieutenant governor. In 2012, each of the four adjoining property owners gave Shumlin $1,000 in campaign donations.
Shumlin used Foster Road LLC to buy Dodge’s homestead. The $32,000 purchase and sale agreement for Dodge’s property was signed at the end of September. It included a $23,000 deposit, including payments for back taxes, child support and the remainder of the deposit. According to the agreement that Dodge provided, the remaining $9,000 is contingent on whether he vacates the premises by July 15. Shumlin has not yet indicated whether he would charge that amount if Dodge remains on the premises.
Dodge told VTDigger that, to date, Shumlin has paid the back taxes and $2,708.12 for child support. Shumlin, who chairs the Democratic Governors Association, was at an association conference in Maryland and did not have the payment specifics with him.
Both men said Shumlin advised Dodge to seek legal help on the matter, and Dodge said Shumlin’s attorney, Gloria Rice, suggested he have legal counsel the day of the closing. Rice is out of town this week and was not available for comment.
Dodge said he had no recollection of signing the settlement statement on Nov. 7, but a document of the statement provided by the administration’s legal counsel, Sarah London, shows his signature.
The final settlement of $58,000 includes an $18,994.57 deposit, a $2,708.12 lien for child support, a $4,597.11 payment for this year’s property taxes and a $12,000 hold-back. It also includes $9,000 in “repair credits” and $9,000 in “prepaid occupancy charges,” as well as $30 in settlement charges. The remaining $1,670.20 is in cash to the seller.
“I believed $58,000 was a fair price, and we both agreed to it,” Shumlin wrote. “The house is in terrible shape; it will have to be knocked down or totally gutted. I took that and a number of other factors such as the amount owed, rent for the time he’d be in the house, repairs and other costs and arrived at the $58,000 purchase price.”
At the time Shumlin purchased the property, it was appraised at $233,700. That appraisal was based on a 2009 townwide assessment. The contracted appraiser only inspected the exterior of the home, and Dodge never grieved that the assessment was too high.
After purchasing the property, Shumlin asked Town Lister Ross Hazel to reappraise the property and inspect the interior. Hazel evaluated the property in March when the town conducts a slate of appraisals.
“There was wall-to-wall refuse, the toilet didn’t work, the sink didn’t work, and it was totally trashed,” Hazel said. “I gave the governor the benefit of the doubt and took off the value of the structure, aside from the foundation.”
That was an $80,300 reduction, dropping the home’s value to $16,000. Hazel also deducted the value of outbuildings, and he eliminated the $5,000 value of the sewage system because he said it wasn’t working.
The land value held steady at $114,000, but the overall property value dropped $93,700 to a total of $140,000. The reduction in town assessed value significantly reduces the tax liability for the property.
Did Dodge get a fair deal?
“What’s fair to one person would be unfair to somebody else,” Hazel said. “If the person is wealthy, they could gain or lose property, and it would not affect their life. So, for someone with limited income, it could be a devastating change.”
Phil Dodd, editor of Vermont Property Publishing, analyzed state data for property transfers dating back to Jan. 1, 2010. He looked at the “raw land” value of arms-length transactions (no family transfers or special relationships) in Washington County, where East Montpelier is located, and across the state.
The median per acre land value of the 16 parcels of that size that sold in Washington County was $3,723. Statewide, the median value of the 175 parcels was $3,000. This means that during that two-plus-year period, 16 acres of land in Washington County sold for a median price of about $59,500 and across the state for $48,000.
The $58,000 settlement on Dodge’s property falls in between those numbers. But the property also includes $10,000 in site improvements for water and landscaping as well as the $16,000 value of the foundation, if including the lister’s most recent appraisal.
Several real estate experts — from Dodd to Tim Heney of Heney Realtors to the Northfield appraiser Dick Alderman — all said to take countywide and statewide numbers with a grain of salt because the value of a property depends greatly on its siting.
The issue that people surrounding the Shumlin-Dodge deal see is not necessarily with the price, but with the vantage point the governor negotiated from.
“This was certainly not an arms-length transaction,” Hazel said. “Certainly that Jeremy was under stress makes it not an arms-length transaction. … Do I think it was fair? I don’t know what happened behind the scenes. On the face of it, it seems Jeremy could have probably done better if he had counsel.”
Corliss, Dodge’s friend, said he didn’t find out about the transaction until after it happened. For the past three years, he has seen Dodge less frequently. Dodge spent time in jail for domestic assault, and Corliss said the two remained friends but grew distant.
In recent weeks, Corliss said that word of the deal has spread, and he and other townspeople have grown increasingly concerned about what happened.
“The governor straight up took advantage of somebody,” Corliss said. “Even if Jerry is not considered completely incompetent or disabled, somebody with the governor’s stature walks into your house; if you don’t have all of the knowledge you need to make the decision, and the governor says this is the way to go, then you’re going to go that way because the man’s the governor, and he wouldn’t screw over a Vermonter. I truly believe that’s what Jerry thought.”
Tax buildup and the lack of help
William Davies is a Northeast Kingdom attorney who runs tax sales for numerous municipalities and helps them with tax issues. He’s the sort of expert’s expert that Dodd goes to when he has real estate tax questions that he needs answers to, and he’s the sort of person who can explain a tax sale inside and out.
In Dodge’s case, he had more than $17,000 in back taxes. So, if his property went to tax sale and was auctioned off, Davies explained, the roughly $17,500 in taxes and penalties would go to the town and the rest would go into an escrow account for a year. If Dodge wanted to hold onto the property, he’d have to pay off the taxes, plus interest, and the money would then go back to the bidder.
If Dodge liked the price, he and any other entities that were invested in the property, like a bank, would divvy up the remaining amount that didn’t go to paying off the taxes.
What Davies thought was strange about Dodge’s case is that, over three years, a guy making less than $10,000 a year had accrued more than $17,000 in taxes and penalties. At that income level, well below the federal poverty line, Vermonters are usually eligible for state tax assistance.
Dodge said he wasn’t aware of any such assistance, and his municipal tax bill doesn’t show any state tax payments. Dodge never filed a property tax adjustment claim or a homestead declaration to reduce his taxes.
“If the town saw that the fellow was not getting a state payment, it would have been very helpful to guide him to get a state payment,” Davies said. “It’s not required by law, but for those of us familiar with small towns and how they operate, that’s what town clerks and treasurers often do, is to help somebody like that.”
Karen Gramer is the collector of delinquent taxes for the town of East Montpelier.
“If he had applied for it, he probably would have been eligible,” she said about Dodge’s situation. “That’s not our job to mention it to him.”
Neither the town clerk nor the treasurer was available for comment, but Gramer said the town offices weren’t in close contact with Dodge.
As a former state senator, Shumlin helped to draft the current tax code and the income sensitivity mechanism Dodge wasn’t aware of. Asked why Shumlin didn’t point this issue out to Dodge, he replied: “You have to remember this was an already-warned tax sale of an amount that had accrued over a number of years.”
So, who could have helped Dodge?
Mary Peterson, commissioner of the Tax Department, said that her position was given the authority to grant “extraordinary relief.”
“That process requires a recommendation by the Taxpayer Advocate, and obviously, a case must fit the statutory criteria, and would be confidential as well,” she said.
Vermont Legal Aid didn’t have any suggestions and the Central Vermont Community Action Council directed questions to the Central Vermont Community Land Trust.
Harry Sanderson, senior housing counselor at the land trust, said there are very few resources available to sellers.
“We mostly help homeowners who are in trouble with their lenders,” he said. “About 90 percent of what we do deals with foreclosure.”
Sanderson said that if he received a call from a homeowner with unpaid property taxes, he would tell them to ask the town for an abatement.
“Homeowners are pretty much on their own,” he said.
Updated at 9:12 a.m. on May 24, 2013.