Tuesday, September 29, 2015

Developers Create Shadowy Stores Trying to Win Millions

By John Dorschner

    Well before they were charged with criminal activities, the leaders of two South Florida affordable housing companies were caught creating shadowy grocery stores and even an ersatz library in attempts to get millions in complex tax credits.
    The actions of leaders of Biscayne Housing Group and Carlisle Development Group reveal how complex and competitive are the efforts to get money from the Florida Housing Finance Corp., the state agency that administers the federal low-income housing tax credits for affordable housing -- a crucial issue in Miami-Dade where about 495,000 households are in desperate need for affordable housing, according to the University of Florida.

A developer labeled a door on the second floor "Grocery Store". Source: Google

    In the recent criminal cases, Matt Greer of Carlisle and Gonzalo DeRamon and Michael Cox of Biscayne Housing pleaded guilty earlier this month to charges that they schemed to inflate the construction costs of affordable housing and then profit from secret kickbacks.
    In order for such schemes to work, developers first had to win awards from the FHFC to get tax credits -- and there's huge competition for such awards, which can run $20-million plus for an affordable housing project.
    Applicants boost their chances for credits by scoring well on the lengthy list of FHFC measurements, gaining points for how close the proposed development is to transit stops, grocery stores, drug stores, clinics and libraries under the assumption that the poor might not have cars to drive to these places.

                             Years of Whac-A-Mole

    The requirements have gotten increasingly complex over time because the FHFC keeps struggling to close loopholes.  "Every single word has blood on it," says Hugh Brown, FHFC's general counsel.

    He says the agency has been playing "years of Whac-A-Mole" with developers who keep devising ways around existing regulations.
    In 2011, developers "were pulling grocery store shenanigans all over the place," Brown says. "We were seeing a lot of squirrelly stores."
Hugh Brown

    At the time, FHFC defined a grocery store as "a retail establishment, open to the public ... consisting of 4,500 square feet or more of contiguous air conditioned space available to the public," selling "foodstuffs, fresh and packaged meats, produce and dairy products, which are intended for consumption off-premises."
    Brown says Biscayne Housing pulled out a particularly elaborate plan, to create a grocery store on the second floor of 100 S. Miami Ave. 
    Cox of Biscayne Housing rented a dingy space above an Italian restaurant. Biscayne Housing called it Downtown Miami Grocery on its 2011 application to bring affordable housing to downtown Miami.
    Competitors for the tax credits often examine each other's applications carefully, and at least one suspected that something was wrong with this alleged grocery store.
Door leads to stairs to alleged  grocery store

    Documents started flowing to FHFC. Downtown Miami Grocery had obtained a "Certificate of Use" as a "Grocery -- Retail" but did not obtain a food license as required or a resale tax certificate -- both of which were required for the store to sell food, according to an administrative complaint later filed by FHFC against Biscayne Housing.
    Cox's lease was for six months. Photographs of the grocery -- apparently provided by competitors' investigators -- "reveal an almost empty space, containing three upright coolers, a few boxes of produce, a shelf limit containing a few loaves of bread and a meat cooler with prepackaged meat bearing Publix Supermarket pricing labels, with Downtown Miami Grocery labels stuck on the packages," according to the FHFC complaint.
    The complaint stated that two employees of Govinda's Garden restaurant on the first floor said that the "food market" was apparently open only for a few weeks in January 2012, and when they tried to purchase milk there in January 2012, "they were told that the store was closed, and that two women would stand in the door and tell anyone who attempted to enter that it was not open for business.     "The restaurant employees stated they never saw regular traffic at the 'food market,' and described the interior as big, with empty shelves and little to no merchandise," according to the FHFC complaint
    By March 2012, the space had been vacated.
500 W. Flagler Grocery Store
A similar scenario unfolded at 500 W. Flagler, to benefit another Biscayne Housing proposal: Cox signed a six-month lease on the space. "Residents and workers in the neighborhood confirm that the Flagler Street 'food market' was open only for a brief period in January 2012, but that they were told by two women at the site that the store was closed and not selling anything."
    Photographs taken on March 5, 2012, "reveal an almost completely bare building, with two bare plywood bins similar to those used to hold small amounts of produce. ... Large pieces of air conditioning duct work are in the middle of the floor."
      The case of the invented library was less elaborate, says Brown, the general counsel.
    Carlisle Development called a store front a library. Brown recalls that its contents consisted of one of the Carlisle principals collection of old Architectural Digests.
       "We flunked that deal," Brown says, after rivals' investigators sent the agency photos and details of the library.
    In the Carlisle case, the company abandoned that application,  Brown says, but Biscayne Housing fought strenuously and in 2012, FHFC filed an administrative complaint against it, charging each grocery store was a "sham" and that Biscayne Housing had "committed fraud and/or material misrepresentation."

                                    Regulations Changed

    Biscayne Housing responded that it was playing by FHFC's own rules and the stores had been open at the time of the application, which is all that mattered.
    The developer showed that it had obtained all necessary licenses and permits to sell groceries.
    FHFC decided it didn't have a case. "We couldn't prove fraud," Brown says, because the agency's rules weren't specific enough.
    FHFC dropped its administrative complaint with a consent decree, conceding "there is no wrongdoing committed by any party or employee of any party in the matters addressed in this action."

    The state agency, whose board is appointed by the governor, then  changed its rules so that places like nearby grocery stores that were not part of major chains had to be open for at least six months before the application was submitted.
    None of these three deals with Biscayne Housing or Carlisle received the coveted tax credits, but the two developers kept filing applications and winning awards for other projects, gaining tens of millions of dollars.

           $30 Million Alleged in Hidden Kickbacks
    Earlier this summer, federal prosecutors charged the firms' leaders with conspiracy to commit theft of government money -- about $30 million in hidden kickbacks siphoned off of 10 low-incoming housing projects. Several principals in the developer companies and the construction companies pleaded guilty. Lloyd Boggio, a Carlisle principal, is awaiting trial.
    Doug Mayer, an affordable housing developer who works with nonprofits, called the criminal scheme “Robin Hood in reverse” – stealing money intended to help the poor and giving it to rich developers and contractors. 

    Mayer noted that $30 million apparently lost in the scheme could have built two affordable housing apartment buildings in Dade.
    Matthew Rieger, chief executive of Housing Trust Group, a Coconut Grove developer that does much affordable housing, says the scandal "has a negative impact" on the affordable housing industry in general, bringing "an extra scrutiny and extra skepticism" to a process that is already complex.
    Earlier this month, when Greer pleaded guilty, the U.S. Attorney's Office in Miami issued a press release saying $9 million had been seized from Greer and he promised to give back another $7 million prior to sentencing in November.
    A Miami Herald story on the guilty pleas noted that the recovered millions had been sent back to the U.S. Treasury, not to FHFC, where they could have been redistributed for housing for the poor.
    The U.S. Attorney's Office in Miami didn't respond to a request for an explanation on why the recovered funds weren't dedicated to lower-income housing.

Thursday, September 24, 2015

A "Safe Haven" in Liberty Square

Updated 5:40 a.m. Sept. 25 to add comments of Children's Trust and Commissioner Hardemon's office.

By John Dorschner

     At the heart of Liberty Square, in cramped rooms beside  the community center, is the children's services area of Samantha Quarterman, taking care of some of the neediest kids in the neediest sector of Dade County while struggling to find funding.
    She is both hopeful and skeptical about the bidding process going on now for a $200 million redo of the 78-year-old,  753-unit public housing unit in the center of Liberty City.
    "It's going to create jobs," says Quarterman, whose organization is called the Multi-Ethnic Young Group Association (MEYGA).  "I just hope whoever gets the project does the right thing with it – and has social services involved, to give back to the community, because they're going to need it.”
Samantha Quarterman

    She says two of the six bidders -- Carrfour Supportive Housing and Miami Waymark, both nonprofits -- have chatted with her about what her needs might be in a redesigned project. “I hope we can move back over here, and I hope we can get a bigger educational place, so we can keep on what we're doing.”
    Will the county promise MEYGA a spot in the new Liberty Square? Michael Liu, the county's housing director, said in an email that he was prohibited from answering  because of the "cone of silence" surrounding the bidding process and the "involvement by many service organizations in this process."
    Clearly, Liberty Square is in deep need of social services,
According to 2013 estimates of its census tract, 47.4 percent of those over 15 are mired in poverty. Unemployment runs 46.8 percent. Those sad statistics are virtually unchanged from 1980, the year of the McDuffie riots, which sparked national and state blue-ribbon panels, which demanded major increases in social programs in the area -- demands that were quickly ignored.

         "Liberty Square Needs a New Beginning"

   The county's idea is that a new Liberty Square would consist of mixed income housing, with the very poor living close to some middle-class families.
     "I think that's a good idea," Quarterman says. "Liberty Square needs a new beginning. ... Right now, all we have is a lot of poverty. We don't have any jobs. We don't have any companies who want to come into this area. It's a whole social services type of thing – it's a handout type of thing. … The community deserves better."
    She grew up in the area, went to Northwestern High and Florida Atlantic University. “I had a great passion for working with children.” For a while she worked with the juvenile justice system in crime prevention efforts.
    In 2006, Sherdavia Jenkins, 9, was shot and killed while playing with her doll outside her Liberty Square home. Quarterman decided to open an after-school program for girls. Several years later, a 19-year-old man hung himself from a tree in the project, and Quarterman decided she should expand the program to boys, too.

Sherdavia Jenkins Peace Park. Source: Google Maps
    “We are the safe haven in this community," where kids are often being raised by single moms or grandparents. She provides an after-school program, summer camp and a small school for troubled kids with learning disabilities.
    At times, she's fed up to 200 kids a day. “This is not a high-paying job. You do it because it's something that needs to be done.” Her latest available 990 IRS form, which nonprofits must file, states she earns $31,000.
    She's constantly scrambling for money. "I was doing it out of my pocket for a while. I almost lost my home three or four times, taking mortgages to fund my efforts."
    In recent years, she has been funded largely by Miami Children's Trust, which by law gets a small slice of the property tax that works out to about $45 year for the average non-homesteaded house.

            Children's Trust Said Funding Would Stop

     Earlier this year, the Trust told Quarterman her funding would stop Aug. 1. "I didn't know what to do. ... I cried about it. I talked to my heavenly father about it."
    Doug Mayer, an affordable housing developer who's on Quarterman's board of directors, says one issue was that the Trust started requiring annual audits, and her organization was too small to perform that kind of financial reporting.
     Emily Cardenas, the Trust's director of communications, said it's true that all entities receiving funds now need to be audited, but the more pressing issue was that earlier in the year the Trust didn't know how much it would be getting from the property tax.
    In black areas, some activists raised a bit of a row because three major social programs serving black youths -- TACOLCY in Liberty City and Teen Upward Bound in Opa-locka, as well as Quarterman's MEYGA -- had lost funding. TACOLCY had particularly been in the spotlight, with its leader forced to resign last year because of questionable spending practices.
    Cardenas at the Trust says many areas -- including Homestead and Florida City -- claimed they weren't being treated fairly. She points to a Trust map showing the locations of after-school programs funded by the Trust throughout the county, including quite a representation in the impoverished Liberty City/Brownsville areas.  

        Money Comes in Three Weeks from Deadline

    In July, the Trust received increased estimates of higher property tax revenues, meaning it had more money to dole out. At its July 13th meeting -- less than three weeks before the money ran out, MEGYA and the other two entities were approved for a three-year cycle of funding, with the understanding that each of the three agreed to "accept administrative and fiscal support services as required by the Children's Trust."
    MEGYA's share: $111,600 per year. Much of that goes to pay salaries of the staff overseeing the kids. She said the Trust has provided accountants to help her with audits. “I did everything they told us to do.”
    Cardenas says the Trust is urging groups like MEYGA to seek several sources of funding, so they aren't utterly reliant on the Trust. Quarterman says she's certainly trying. She also gets a small amount from the county, but that shrank in the past year, and she's been unsuccessful so far in finding other sources. “Right now, I'm just glad to get another year that I don't have to put my home up” to pay expenses.

     UPDATE: After initial publication, the Children's Trust asked that this clarifying note be added from Stephanie Sylvestre, chief operating officer: "While MEYGA was not successful in the competitive solicitation, they were selected as one of three agencies to participate in a new capacity building program with The Children's Trust. As part of that participation, they received funding, fiscal and programmatic supports and assistances from certified public accountants and mentors [who] are paid by the Children's Trust."

                 Needs More Space to Serve More Kids

    With more than 600 units in Liberty Square -- and many of those units having more than one child -- there is a huge need for children's services, particularly after school, when bored kids can tend to hang out on corners with the wrong type of role models.
    At one time, she had 69 children in the crowded space, but then she was required to get a state license from the Department
of Children and Family Services, which stated her square footage could support only 30 kids. 
    "I'm hoping we can get some space at a park or somewhere, because it devastates me to turn down kids. … That's why I'm fighting so hard." 
     She's been talking to the staff of City Commissioner Keon Hardemon about being able to use part of the recreation center in the nearby African Square Park.
     UPDATE: Kiara Garland, Hardemon's public information officer, said in an email: "Our office does not decide what entities provide service at each park. That is the responsibility of the administration."

             Tough Love and Treating with Respect

     On a recent morning, this reporter arrived at the cramped MEYGA space. Quarterman was busy talking to a boy. A fellow student had just stolen some paper from him in the classroom. Quarterman told him this was a serious matter, she was going to deal with it, "but right now I need you to calm down and go back to class."
    Which he did.   

    She told the reporter that she had established a private school during the day because some kids in her after-school program had learning disabilities. "They weren't functioning in regular schools. They needed a smaller environment."
    Since many Liberty Square kids were already low-performing in the nearby public schools, she's essentially treating the worst of the worst.
    "Our kids have emotional problems. They're not making it in school. You touch them, they're angry." The key for her and her teachers is when a problem comes up: "You don't downplay it, like it's nothing to talk about. No one is addressing their issues."
    She also believes in tough love: “When one of the kids messes up, everybody doesn't go on the field trip. That makes everybody behave better. Everybody treats each other with respect.”
    Earlier that morning, a 10-year-old girl had "an episode. She didn't want to come to school. I told the teacher: Go pick the girl up. Because otherwise she's going to do the same thing over and over. ...
    "Half of these kids call me mommy. 'Don't call me mommy.' 'Well, can we call you aunty?' 'No, you can call me Miss Samantha.' But the only reason they say that is they want to be a part of something."

                                     The Y Generation

       She calls these kids the "Y Generation. Why are you here? You have no purpose. They need an outlet, someone who's going to be in a place to help them. ... I came up with a program to do a play theater -- talent shows, just to get them involved. ...
    "They're smart. They can figure out computers, but ... they need some type of guidance. They don't know what they want to do. Parents will say my child can't do that. And I say, 'All right, we're not going to say that anymore because your child believes what you say.' "
        There are plenty of problems in Liberty Square and the surrounding area, but she thinks the media tends to exaggerate. "This area is not as bad as you think. It has a lot of episodes, don't get me wrong. But a lot of those people aren't from this area. It's outside people who bring crime to this area. ... We do have a gang issue over here, I won't deny that. But the murder and all that – it's people from the outside coming in."
    Still, all those stories about crime make it so people don't want to come to Liberty Square. "I have some sorority sisters: 'We want to come help.' But when I told them where, they say they can't come here."

    She hopes that a new Liberty Square makes "a different brand for the community. We're right next to the expressway. We're close to the beaches. This is a gold mine right now."


Monday, September 21, 2015

Affordable housing: A bus stop dispute costs $20 million

Updated 3:25 p.m. Sept. 21. With note from FHFC at bottom.

By John Dorschner
    Imagine you could choose a good place in Dade for affordable housing -- a place near a lot of jobs but without many inexpensive apartments.
    Imagine the choice was between 700 block of West Flagler -- a short walk from downtown and not far from Brickell -- or 3600 NW 36th Avenue, on the edge of Allapattah and Brownsville, a considerable distance from large work centers though on major transportation routes. 
     Last Friday, in a meeting in Coral Gables, a powerful but little known entity, the board of the Florida Housing Finance Corporation, followed its own detailed criteria and decided on the Allapattah location, based on the definition of what constitutes a bus stop.
    The board controls the little-publicized but highly valuable low income housing tax credits -- money usually put up by America's corporations to lower their tax bills.
    The board's decision was to allot $20-million-plus to either 745 Rio at Flagler, which wants to build at 700 W. Flagler, or Pinnacle Heights, which wants to build on NW 36th Avenue.

           Usually only criminal cases get publicity

     The tax credits rarely attract public attention. An exception was the recent spate of stories concerning recent criminal cases involving Carlisle Development Group and Biscayne Housing Group, accused of stealing $7 million in tax credits by using phony accounting.
    Even without fraud, payoffs can be substantial.  Both Pinnacle and Rio at Flagler told the housing board they were seeking developer fees of about $3 million.
    Dade's needs for affordable housing are clearly huge. About 495,000 households in Miami-Dade spend more than 30 percent of their income on housing -- that's too much for low-income families to have enough for groceries and other necessities, according to federal guidelines.
    Doling out the funds for affordable housing, however, is a complex manner.

    UPDATED PARAGRAPH: In Florida, developers go through an application process in which their submissions are scored on a variety of measures, including how close the projects are to mass transit, grocery stores, medical services and the like. Larger applications that qualify and tie in the scoring are then selected via a lottery, with FHFC generally  funding two projects a year in Miami-Dade.
    On Friday, the board, appointed by Gov. Rick Scott, was asked to decide a legal dispute: Miami-based Pinnacle accused Rio at Flagler, which is owned by a national firm, Royal American Development, of misstating the nature of a local bus stop. Pinnacle objected because if Rio lost, its own project would rise in the lottery standings and get funded.
     The specific issue: FHFC scorers award two points for projects being close to a regular bus stop. Six points are awarded for proximity to a "Public Bus Transfer Stop." 

Lawyer Michael Donaldson faces board of the powerful Florida Housing Finance Corp.
    Rio claimed it was entitled to six points for being a bus transfer stop, which by FHFC definition is a place where at least three bus routes stop at certain periodic intervals. Pinnacle said it should be entitled only to two points for a regular bus stop.
    Hanging in the balance was about $20 million in funding.
    An administrative law judge ruled in Pinnacle's favor.
    On Friday, Michael Donaldson, a Tallahassee lawyer, appeared before the board to appeal, declaring that the stop did indeed qualify as a transfer location. He brought along a large photograph of the bus stop sign.
    Route 6, Donaldson acknowledged, did not qualify because it did not stop at that location frequently enough. But Route 208 through Little Havana did, as did the two Route 11s listed on the bus sign.
    Donaldson maintained that the two Route 11s were different routes, as listed on the sign, because one went to the Mall of Americas and the other to FIU.
    Hugh Brown, an FHFC lawyer, said staff had checked with Miami-Dade's transit department, which stated Route 11 was one route, not two.
    Donaldson objected: "There is the real world, and then there is the Florida Housing world." He said the board had the authority to override the judge's decision and make a commonsense decision. “I've been dealing with bus stops for years, and I've never seen a situation like this.”

    Board members agonized for some minutes. Several noted that the FHFC always followed local governments' statements and definitions. To do otherwise in this case would start "a very slippery slope," said John Hawthorne.
    The board decided to disqualify the Rio bid, leaving Pinnacle the winner.
    In the public comment period, Doug Mayer, president of Miami's  Stone Soup Development, told the board that it would be fairer to smaller and nonprofit developers if the board abandoned their lottery system and awarded funds based strictly on a scoring system, such as Maryland and Virginia do.
    About 100 attended the Gables meeting, many of them affordable housing developers who sat through the hour-long meeting, then chatted with board members and staffers.
    The board generally meets once a year in Miami-Dade.

     Updated note: After morning publication, FHFC's communications director, Cecka Rose Green, sent an email saying the original version of this story placed too much emphasis on the use of the lottery: "The lottery is the last of several criteria used to rank the applications (when there is a scoring tie). ... There is a complete application process that is scored prior to a lottery coming into play."

Thursday, September 17, 2015

A basketball star and a project: The horrendous maze of affordable housing

Updated Sept. 18 at 4 p.m. to reflect correct number of units planned for Wagner Creek. See note at end.

By John Dorschner
    Although virtually everyone agrees Miami-Dade has a crying need for affordable housing, developers often find it horrendously difficult to negotiate the complex funding maze. 
    Case in point: An Overtown project, Courtside Family Apartments, which took eight years to cobble together a bunch of funding sources, even with former Heat star Alonzo Mourning as a partner-cheerleader for the effort.
    "It was a soap opera," said Matthew Rieger, chief executive of Housing Trust Group, a Coconut Grove developer that worked with Mourning's nonprofit to get funding.

Matthew Rieger

    Rieger uses the same phrase to describe working on a 73-unit apartment building in Miami's Health District. His company literally won a state lottery to get valuable tax credits to fund the project, but because of rising construction costs he needed to scramble to get the deal done by Sept. 30 or risk losing funding. 
    The needs for the units are huge. About 495,000 households in Miami-Dade spend more than 30 percent of their income on housing, according to the Shimberg Center for Housing Studies at the University of Florida. Federal guidelines say that's too much for poor or median income families.
    The worst off are 121,390 poorer Dade renters -- those earning less than 60 percent of average median income -- who paid more than 40 percent of their income for housing in 2013, according to the Shimberg Center. That leaves precious little for food, utilities and other necessities.
    Rieger said the situation in Dade is "desperate -- and multiplied by 10. ... The need for affordable housing here is more than almost anywhere in the country."
    The concern is not only humanitarian. Urban planners, such as Miami's Elizabeth Plater-Zyberk and Andres Duany, say spreading affordable housing around affluent neighborhoods is the best way of reducing Miami-Dade's stultifying traffic jams.
    Rieger puts it this way: "Frankly, it's unacceptable that the richest country on earth can have glass high-rise buildings on the water and the people who clean them have to drive two hours to them and two hours from them." 

     The major source of affordable housing funds comes from tax credits established by the Reagan administration in 1986. Large corporations can get a dollar-for-dollar reduction in their tax bills by helping build low-income rental housing. In this state, those funds are doled out by the Florida Housing Finance Corporation, an independent state agency with a board appointed by the governor.
      Making it more complicated: There are 9 percent tax credits, which pay for almost all of a structure; and 4 percent tax credits, which pay for considerably less. 
      That's just the beginning of the maze.  There's something called the Sadowski Trust Fund for affordable housing, set up in Florida in 1992 (but recent years often raided by the Legislature for general funding); Miami-Dade's surtax on commercial property sales; the SHIP program and other sources.

                     The Eight-Year Courtside Saga
Courtside Family Apartments at NW 4th Ave and 17th Street

        The saga of Courtside Family Apartments started eight years  when Mourning's nonprofit company, AM Affordable Housing, partnered with Housing Trust Group to work on affordable housing.
         In 2008, helped by Mourning's reputation of working with the disadvantaged, they obtained from the county a 65-year lease, virtually free, for four acres at the Culmer Center, at NW 4th Avenue and 17th Street.
       Their plan envisioned a six-story, 84-unit building that would be the first of three phases (the second will be for seniors, the third is still uncertain). About 11 percent of the Phase One units will be for extremely low income (below 30 percent of area median income), with the rest being for those who earn below 60 percent AMI. Projected cost: $22.8 million.
       Twice, the partners tried for the gold standard of funding affordable housing -- the 9 percent tax credits awarded by the Florida Housing Financing Corp. Twice they failed. One problem: FHFC wanted affordable housing built in decent locations, close to grocery stores, libraries and such. Culmer/Overtown has been depopulated in recent years, and many services like grocery stores had closed. "Unfortunately, that kind of infrastructure comes after people start living there," Rieger said.
    (Such lack of infrastructure didn't stop some aggressive developers, who created highly temporary grocery stores to try to fool the FHFC into approving their applications. More on that in a later article.)
    The Courtside developers' efforts turned to the city of Miami, hoping to get a community redevelopment loan. But the area's city commissioner, needed to back the deal, was Michelle Spence-Jones, who was suspended from office after being charged with attempting to solicit a bribe from a developer. She was replaced for a while, then beat the charges in court and returned to office. 
    Amid all this turmoil, it wasn't until Commissioner Keon Hardemon was elected to the District 5 seat that Courtside was able to get $7.5 million from the city's Southeast Overtown/Park West Community Redevelopment Agency.
    Meanwhile, the county's deadline for Courtside using the Culmer property was running out, and the developers needed the help of Miami-Dade Commissioner Audrey Edmonson to make sure they retained the contract on the property.
    Eventually Courthouse received $9 million in the four-percent tax credits through FHFC (which unlike the nine-percenters are not subject to a competitive process), $3.3 millon from City Community Capital, $1.75 million from the county surtax program, with the developers making up the difference.
    The groundbreaking ceremony was held on June 22.
                             "Winning the Lottery"
    Compared to Courtside, the 11-story Wagner Creek plan  near the University of Miami Hospital had it easy. It literally won a lottery to get nine percent tax credits through the FHFC. 
Wagner Creek rendering

    The FHFC has been using a lottery system in recent years because the competitive scoring system used in the past often led to extensive delays caused by losers' appeals and lawsuits.
    The lottery system also has sparked criticism. Generally, only two affordable housing deals in Dade get funded annually -- out of about 100 applications.
    Doug Mayer of Stone Soup Development, a small Miami company that develops affordable housing in partnership with nonprofits, complains that large companies have an unfair advantage in the lottery system because they can afford to submit many applications, increasing their chances that one or two will be approved.
    Rieger said that's a "legitimate concern." In the last round, his company, which has done $2 billion in real estate transactions nationwide, submitted 15 to 20 applications for tax credits in Florida. "I played the numbers game. I know what the rules are, and I use those rules."
    It's an expensive process. Each application must be accompanied by a $25,000 check. If the applicant wins the lottery but doesn't have a "quality application" or isn't able to build the project, it loses the deposit.
    Another $10,000 to $25,000 is spent in creating each application, including architectural and engineering fees, the deposit securing the land if the funding comes through, and the overhead of the staff to prepare the proposal, Rieger said.
    Rieger suggested smaller developers partner with larger companies to increase their chances of success. 
    By winning a $16 million tax credit for the Wagner deal, the  Housing Trust Group should have had clear sailing to finish the project.
    In this case, there was a catch, said Rieger: South Florida's construction market is suddenly booming, and many skilled laborers who were eager for work a year or two ago are now fully occupied.
       Construction cost estimates came in about $3.5 million more than budgeted. Rieger says they worked hard to cut that increase by about half. They've also received an $850,000 loan from the city from home loan proceeds and are talking with the county housing department about receiving surtax funds. 

       The public funding is intended to cover most costs of the 68 affordable housing units. Another five apartments will be rented at market rate. "Who knows? Maybe some doctors won't want to make a long drive home after a night shift,"  Rieger said.

              Commissioners Push for Affordable 

    Rieger is encouraged by announcements from commissioners Xavier Suarez and Barbara Jordan to find a way to get developers of large projects to be required to contribute to the county's Affordable Housing Trust Fund.
    Rieger added, "the devil's in the details, of course," meaning whether large developers would be required to contribute significant funds for affordable housing.
    Suarez and Jordan announced their intentions several weeks ago, but neither has yet proposed a formal ordinance. A similar effort failed several years ago.

              Builders Oppose Mandatory Payments

     Truly Burton of the Builders Association of South Florida recently told Miami Web News that her organization was opposed to any mandatory payments or use of "inclusionary zoning," in which developers must include a percentage of affordable housing in their buildings.
     She said the builders group wants to work with the commission. “Being creative and flexible is really important.”
      The association believes there “should be market-based incentives” to make housing available to regular working folks, who are at 80 to 140 percent of area median income. Presently affordable housing is concentrated on those below 80 and/or 60 percent of AMI. An average $300,000 condo doesn't work for those earning up to 140 percent AMI, and it's crucial they have enough housing, Burton said.
       Rieger said he's also been working with Miami City Commissioner Francis Suarez to discuss the need for affordable housing. "Without these kind of people, we're never going to get to the place we need to be." 

        NOTE: The original version of this story stated incorrectly that the Wagner Creek apartments are planned to have 64 units, which is what the company lists on its website. Rieger clarified after publication that the project will have 73 apartments, with 68 of them being affordable housing and five rented at market-rate.

Wednesday, September 16, 2015

Jungle Island: What happened to grand transformation?

Includes updates with Jungle Island responses. 1:25 p.m.
By John Dorschner
        On Sept. 11, 2014, Jungle Island announced a massive transformation to spend tens of millions to "elevate"
the struggling theme park into "an iconic landmark for eco-adventure."
    A year later, none of the much-acclaimed high-end changes have come to pass.

      In a midday email, John Dunlap, Jungle Island's president, said he had made several improvements -- including ballroom and beach upgrades -- but none were the big-ticket items that he emphasized a year ago.
      Here's what this reporter wrote for Biscayne Times' October 2014 issue: "The changes are definitely happening, Dunlap insists. The new beach area and the orangutan restaurant will be 'done by the first quarter, come hell or high water,' he promises. The costs for all the changes he is talking about will run into 'the tens of millions.' Dunlap says most of this is already funded."
Thinkwell, a California consulting company came up with his design for Jungle Island's new entrance.
       The Miami Herald ran the planned make-over on its front page headlined: "Jungle Island plans giant transformation."
        A meandering waterway was meant to be deepened so people could swim in it or drift along in inner-tubes, part of "a series of pools, waterways, falls and other aquatic adventures," including "snorkeling, swimming 'with' tigers or simple lazy swimming, all under the peruse of the local wildlife," according to a press release.

One of the animal shows at the present Jungle
      A first-class restaurant was to be built overlooking the orangutans. Cabanas would be placed near the front entrance and the beach. Kids could zoom along on overhead zip-lines. A high-end "destination" type restaurant, serving craft beers, was planned near the entrance to attract visitors from nearby downtown Miami and South Beach. 
          Mid-day Wednesday, Dunlap stated in an email that he's been hard at work updating the park: 
          "After refurbishing the Treetop Ballroom and its adjacent meeting rooms, we focused on our new private beach concept, Parrot Cove, which is now complete and has been a Jungle Island fan favorite all summer long.
           "It was important to us that we create a remarkable experience in this location before moving to the next phase of our master plan," Dunlap wrote. "Parrot Cove features new chaise lounges, private cabanas, tiki bar offering food and retail items; along with new water-based adventure activities including the seasonal Rainforest Riptide obstacle course, and jetpacks and flyboards through our valued partnership with AquaJet Miami.
          "For the convenience of our park guests, we also added food & beverage options, including the new Bait Shack at Parrot Cove, and the repositioning of our main food outlet at the entrance of Jungle Island, now called Island Burger. For the weekend crowd, we introduced the Bayfront Esplanade, a convenient venue in front of the Serpentarium where park guests can order an ice-cold draft beer," Dunlap wrote.
          The Orangutan Restaurant, which was originally to be finished in the first three months of 2015, "continues to be a high priority and is in Phase II of the plan," Dunlap stated.
                   "Considering Options" in June

      In June, Miami Web News reported that Jungle Island owner Bern Levine was "considering options," including selling the park. "We hired an investment bank months ago seeking partnerships."
    For that June report, Dunlap issued a statement that after the announced transformation, "the natural evolution of this process is to bring in equity capital partners along with the existing ownership to help invest in these future plans. ... At this time, nothing yet has been formalized." 

                                    HUD: No New Reports
     Jungle Island was built on Watson Island with the help of a $25 million loan from U.S. Housing and Urban Development,  with the promise that it provide 603 jobs, many of them for low-income workers in nearby impoverished areas.                               
        In 2012, HUD received a report that Jungle Island employed only 431. In 2013, Dunlap took over, slashing staff and out-sourcing many jobs.

    In email last week to Miami Web News, Gloria Shanahan, HUD spokeswoman in Miami, said her agency hasn't received any more recent report on the Jungle's employment status.
     Dunlap responded Wednesday afternoon: "The reality is that with the redevelopment of Jungle Island over the next several years, we will be creating many new jobs that will support the transformation of our landmark attraction into a world-class destination."
     The HUD issue is critical because, as Miami Web News has reported in other stories, there's a severe shortage of affordable housing in Miami, and the federal agency's budget has been reduced in recent years.

Thursday, September 3, 2015

Fair Housing Push for Highly Segregated Miami

Updated 10:51 a.m.
By John Dorschner
    With conservatives warning the move could ruin traditional neighborhoods, the Obama Administration has  cast a rule intended to reduce discrimination in housing -- a huge issue for Miami, one of the most segregated cities in America.
    The move is intended to clarify and strengthen the impact of the 1968 Fair Housing Act, which created broad brush strokes never fully implemented.
    “Unfortunately, too many Americans find their dreams limited by where they come from, and a ZIP code should never determine a child’s future," said Julian Castro, secretary of the Department of Housing and Urban Development in his July announcement. "This important step will give local leaders the tools they need to provide all Americans with access to safe, affordable housing in communities that are rich with opportunity.”
        Keenya Robertson, chief executive of Miami-based HOPE, Inc., which performs fair housing services for Miami-Dade, said recently that
Kennya Robertson
the new guidance orders first local governments to make a detailed analysis of housing discrimination, measuring impediments to equality, then forming a plan to enforce the fair housing law.
    At present, local jurisdictions are "all over the place" about how they measure and take action, Robertson said. "There was guidance [before] but no real strong outline." Under the new rule, "essentially the teacher" -- the federal government -- "grades your paper."
    Conservatives see the matter far differently. The right-wing National Review called the rule "easily one of President Obama's most radical initiatives, on a par with Obamacare in its transformative potential. In effect, [the rule] gives the federal government a lever to re-engineer nearly every American neighborhood."
                              Too Jewish? Too Caucasian? 

    Marc A. Thiessen, a fellow at the conservative American Enterprise Institute, said he was in favor of Americans of all races having the freedom to live where they want, but "apparently, President Obama thinks your neighborhood may not be inclusive enough," so he created a rule "to force communities to diversify.
     "The federal government should have no say over whether your neighborhood is too Jewish, or too Caucasian, or has too many married couples," Thiessen huffed.
     Robertson said she was puzzled by the criticism since the rule is intended merely to get local governments obey a law that's almost a half-century old. "To me opposition makes no sense."
Michael Liu
Michael Liu, director of public housing and community development for the county, said in an email: "There are many facets to this new rule and we are studying it carefully." He emphasized his department "is committed to the goals of fair housing."
    Updated paragraph: Among other things, the rule -- technically called Affirmatively Furthering Fair Housing -- has a long ramp up time. Robertson said that the guidance doesn't take effect nationally until 2017 and Miami-Dade doesn't need to deal with it until 2020, when the county has its next HUD
"consolidated planning period."
     Miami-Dade is heavily segregated, according to a 2011 study, The Persistence of Segregation in the Metropolis: New Findings from the 2010 Census, by John Logan of Brown University and Brian Shults of Florida State, available HERE.
    Of the 50 major metropolitan areas with large black populations, Miami ranked as the seventh most segregated. What's more, Miami has been getting progressively more segregated since the 1990 census, according to the Logan-Shults analysis.
    Miami's disparities can be clearly seen on a map, using 2010 census data, created by Dustin Cable at the University of Virginia. Orange dots are Hispanic, green dots non-Hispanic blacks, blue dots non-Hispanic whites. (Full map available HERE.) 

Portion of Miami-Dade. Miami Beach is the island mass on the right. Source: Dustin Cable, University of Viriginia

    In South Florida, the 27-year-old nonprofit HOPE Inc. is the watchdog for fair housing. With a staff of nine -- two in Broward -- it sends volunteer testers (generally one black, one Hispanic or non-Hispanic white) to rental properties suspected of discrimination.
    One recent case, filed in federal court in April, involved the Nile Gardens Apartments in Opa-locka, which is 65 percent black. Three times, according to a federal lawsuit filed in April, HOPE sent testers to the complex. In each case, Hispanics were welcomed and shown apartments, while black testers that showed up within minutes of the Hispanics were told they had to come back later or nothing was immediately available.
    The lawsuit, filed by Randall Berg and Dante Pasquale Trevisani of the Florida Justice Institute, also alleges that blacks already living in the apartment complex are harassed. "Blacks are not allowed to have dogs, Hispanics are allowed to have dogs. Blacks are not allowed to sit on their porches, while Hispanics are allowed to sit on their porches."
Nile Gardens Apartments in Opa-locka. Photo from Google Maps.
    Attorneys for Nile Gardens, Edwin Cruz and Juan Carlos Zorrilla of Fowler White Burnett, responded in court filings that about 35 percent of the tenants are black and that Nile Gardens  maintains "a non-discrimination policy and ... routinely rent to African American or black tenants."
    In its defense, Nile Gardens noted that several of the testers dealt with a maintenance worker, Felipe Alvarez, who wasn't authorized to show or rent apartments. Its lawyers found several testers' accounts of dealings with Alvarez to be "highly unlikely."
    No date has been set for trial.
                      A Hundred Complaints a Year

    Updated section: Robertson, HOPE's chief executive, said her staff gets about 300 calls a year from county residents, about 100 of them dealing with fair housing issues. She said her office doesn't report how often her testers find discrimination because they're not doing surveys but rather targeting properties trying to "identify discriminatory practices. Evidence of differential treatment is not always of discriminatory treatment, so we don't report all differences as discrimination."
     Roberson said her focus is "enforcement, not research."  While it doesn't do its own surveys of discrimination trends it participates in and conducts market surveys initiated by other entities. End updated section.
    Liu, the county's director of housing and a former federal HUD official, said in an email that his office is constantly working on discrimination issues:
    "As an example, within the last year we worked with HUD ... to ensure that through a formal 'voluntary compliance agreement' that we will indeed meet the regulatory requirement that at least 459 units of our public housing inventory will be Uniform Federal Accessibility Standards’ (UFAS) compliant, by a firm deadline of January 2019. In fact, we are ahead of schedule.
    "We continue to learn more about how this this new rule interacts with other laws related to delivery of resources and services to minorities and those of low income, and policies associated with other financing resources for affordable housing," Liu wrote. "We will always work closely with HUD, legal counsel, and other stakeholders to ensure fairness and compliance in our administration of our programs."
         Supreme Court Surprises with 5-4 decision

    Nationally, the Fair Housing Act got an unexpected boost in late June when the Supreme Court issued a 5-4 decision (with Justice Anthony Kennedy the swing vote) involving a Texas case in which the majority ruled that housing discrimination didn't need to be intentional for it to violate the Fair Housing Act.   
    President Barack Obama hailed the decision in a July radio address: "The Court recognized what many people know to be true from their own lives:  that too often, where people live determines what opportunities they have in life.
    "In some cities, kids living just blocks apart lead incredibly different lives," the President said. "They go to different schools, play in different parks, shop in different stores, and walk down different streets.  And often, the quality of those schools and the safety of those parks and streets are far from equal – which means those kids aren’t getting an equal shot in life."     

     Thiessen of the conservative American Enterprise Institute decried Obama's move, but warned: "Republicans need to be very careful. Democrats want the GOP to rail against this rule and see it as an opportunity to paint the Republicans as the party that wants to protect the wealthy, white suburbs and keep out poor people of color."