The City of Williamsport approved an installment plan to pay $1.4 million back to the Federal Transit Administration (FTA) owed for what it claimed was misappropriated grant funds received but under direction of a former city administrator given unimpeded financial leeway for years.

The FTA named former finance director William E. Nichols Jr., 71, the former city finance director and former general manager of the former River Valley Transit, now a separate authority, as overseeing funding for River Valley Transit. Nichols is accused of misusing more than $500,000 in city, state and federal funds. The state Attorney General’s office said most of the money was restricted grant funding for public transportation projects during a set period of years.

After Nichols’ termination, River Valley Transit was transitioned into the River Valley Transit Authority in part to better define its accounting and safeguard against the inappropriate comingling of revenue.

The letter that promoted the repayment was signed by Theresa Kohler, chief financial officer for the FTA. It details how the FTA conducted a review with a third-party legal firm under its financial management oversight program to identify how the city, during Nichols’ tenure, misallocated federal grants. The FTA claims the city is unable to account for how some expenses were calculated and also that the city spent the money on construction that was ineligible under the grants’ conditions.

It then warned the city that if the debt is not paid within 30 days of the date of this letter, the debt will become delinquent and the FTA will charge interest on the delinquent portion of the debt … “If the debt becomes delinquent, FTA may report this claim to commercial credit bureaus and consumer reporting agencies. FTA may forward this claim to a collection agency, the United States Department of Justice, the United States Department of the Treasury, or a private contractor for collection of the debt. FTA is required to refer any debt more than 120 days delinquent to the U.S. Department of the Treasury for collection.”

Answer after extension granted

Council passed a resolution that said the city will pay installments of $35,000, starting on April 15, and the money will be drawn from the legislative contingency fund. Council stated it was united in authorizing the payments and provided a group statement read by Council Vice President Eric Beiter.

“In a few moments, those of us present will be voting to approve the repayment of $1.4 million to the Federal Transit Authority,” the statement opened.

“After many hours of discussion amongst ourselves, with the legal counsel and internal reflection, we have come to a conclusion,” he said.

“We ask that our constituents understand that this is not an admission of guilt by the city.

We have been placed in an unfortunate position dealing with a federal agency that has maintained an obstinate determination to pursue what it feels is justice.

“Since the beginning of this process nearly five years ago City Council and the City of Williamsport has been completely cooperative in every request it has received from the FTA.

“We have created a public transit authority. We have begun a process of relinquishing properties.

“We have opened our finances to countless audits and provided every document requested in support of the broader investigation. Not one of us agrees with the way FTA is demanding of repayment when they along with other agencies and independent firms outside the city were fully aware through their own audits and legal advice of what was taking place.

“Voting yes tonight enables us to continue the pursuit of lowering the debt value due to the FTA and is a hopeful means to an end of the federal portion of the investigation.

“As we continue to engage with our elected representatives from the federal and state level and our legal counsel we will continue to seek a long-term resolution more amicable for the city and that addresses the systemic issue unearthed by his investigation.”

The first installment of $35,000 will be paid from legislative contingency and each installment payment will be paid on the 15th day of each month thereafter.

As for the Attorney General charges, Nichols remains free and has not entered a plea in Dauphin County Court on felony charges of theft and tampering with records. He has a date on May 5 with a Dauphin County judge on a motions hearing.