The Housing Authority: Bidding Rights, It’s Only the Taxpayer’s Monies – IV of V

As if clustering and questions of insubordination aren’t enough to give rise to possible irregularities within the Housing Authority, the latest twist in this saga is the taxpayer’s expectation of best value for their money. The spokesperson for the El Paso Housing Authority, Al Velarde challenges the veracity of the allegations by consistently stating that it is either a “few disgruntled employees” or “a competitor” that is causing the current commotion. During Friday’s July 18 Greg Freyermuth Radio Show on KTSM 690AM, Al Velarde called in to address the allegations brought forth on the radio program. During his comments, Al Velarde referred to “competitors” as part of the bad publicity that his employer was getting. On the surface, the use of the language may seem innocuous, as most competitors would be happy to see their counterpart experiencing a public relations fiasco. The problem arises when we accept the fact that the El Paso Housing Authority is in fact a government agency that should have no competitors. After all, the money that the Housing Authority uses for its projects is taxpayer money, not privately raised funds. By referring to the opposition as “competitors”, Velarde tends to insinuate that there is more to this problem then just “a few disgruntled employees”.

The government as a safeguard against abuse of the people’s money introduced procurement laws. By requiring public agencies, i.e. government agencies to go out and bid on a project, the people are assured some measure of best value for the taxpayer’s funds. The restrictions imposed on government agencies generally require the agency to go out and request a bid from the public in order to accomplish a project. The bidding is usually publicly handled and bids submitted are generally public information. This allows the public to look at and analyze any proposal a government agencies receives in order to avoid issues of graft or kickbacks. This system also allows the business community the opportunity to bid on any government project. Non-profits or public companies are usually not required to go out to bid on money expenditure because the funds they expend are private funds, not public monies.

Fortunately for the public, discerning a public entity, one that derives a substantial income from taxpayer monies is not difficult at all as government agencies are readily recognizable from non-profits. Although non-profits may operate as pseudo-government agencies, bidding requirements do not generally restrict them. In the case of the Suncrest project, the issue of bidding seems, on the surface to be a non-issue, after all the project is styled as a project owned by the Paisano Housing Redevelopment Corporation and Investment Builders, Inc. For all intents and purposes, Investment Builders, Inc. is a for profit corporation whose Registered Agent is Ike J Monte III, according to the Certification of Account Status issued by the Texas Comptroller of Public Accounts. Paisano Housing Redevelopment Corporation, on the other hand is non-profit corporation as per the Texas Comptroller.

An examination of the Amended Articles of Incorporation submitted by Paisano Housing Redevelopment Corporation filed with the State of Texas on August 21, 1996 reveals that the Corporation is in fact a non-profit. According to Article 4 of the Revised Articles of Incorporation, Paisano Housing Redevelopment Corporation is operated and supervised by the “Housing Authority of the City of El Paso, a governmental unit”. By their own admission, Paisano is unequivocally stating that they are owned and operated by a governmental agency. Likewise in a letter signed by Rudolf Montiel in his capacity as both President and CEO of the Housing Authority; he also states that the governing body of the Paisano Housing Authority is the appointed Commissioners of the Housing Authority itself. This examination leaves no doubt that the Paisano Housing Redevelopment Corporation is both owned and operated by the Housing Authority of El Paso, which is a governmental agency.

Although it appears that this arrangement seems to be perfectly legal and in some ways encouraged by the State of Texas, the issue of an equitable playing field for all concerns still remains in contention. But the most troubling aspect of this is the procurement laws. According to Federal statues, public contracts for purchases of products or services shall be procured by an open competition between vendors. As it has been established already, the Paisano Housing Redevelopment Corporation is owned and operated by the Housing Authority, which would seem to indicate that it is subject to bidding regulations as a government agency. The question remains are they a minority owner in this project, meaning that the bidding rules would not apply to them as the for-profit is actually the majority stake holder, or is the Housing Authority the majority stakeholder?

An apparent contradiction begins to emerge here, one is a letter signed by Ike J. Monte on Investment Builders, Inc. letterhead dated February 26, 2003 where by he authorizes himself the right to execute documents on behalf of Suncrest Townhomes, Ltd., the proposed project entity. This surely indicates that Investment Builders, Inc. is the true owner and therefore the issue of procurement laws is moot. Or does it? Further investigation of the application submitted for the Suncrest Townhomes, Ltd. shows an attached document that seems to contradict this assessment. The document, a flow chart labeled “Tab 1B” details the organizational structure of Suncrest Townhomes, Ltd. According to the flowchart, Paisano Housing Redevelopment Corporation owns “0.0051%”, while Investment Builders, Inc. owns “0.0049%” leaving “99.99%” for something titled Syndication Limited Partners. According to sources familiar with the Tax Credit System, which is what is under contention in this issue, Syndication Limited Partners are sort of a “mortgage company” that funds the project. According to the sources, the 99.99% just indicates the equity these investors own in the project and protects their interest. Without more concrete information it is difficult to discern their true nature but it appears that they have no control over the direction the project takes, except to safeguard their investments. That leaves two entities with the power to control the direction the Suncrest Townhomes, Ltd. takes and the contracts it enters into. Assuming that in fact the Syndication has no control over this entity, then it becomes apparent that Paisano Housing Redevelopment Corporation is the controlling partner. As has already been established, Paisano is a defacto governmental body, which leads us to the bidding issue.

According to the documents made available by the Texas Department of Housing and Community Affairs, approximately 10 proposals were submitted for the El Paso metroplex region for Tax Credits. Once all the applications were submitted through a rigorous vetting process and scored by the State of Texas, only five proposals from El Paso scored among the top ten positions. Suncrest Townhomes, Ltd. scored in the eleventh position. In fact, one of El Paso’s proposals, Diana Palms, scored first among all the proposals. Yet none of these higher-scoring projects were considered for funding, while the Suncrest Townhomes, Ltd. was recommended for funding. According to the Texas Department of Housing and Community Affairs, Suncrest Townhomes, Ltd. was given preferential treatment because of its partnership with a non-profit organization, the Paisano Housing Redevelopment Corporation, or the Housing Authority of El Paso.

Although it may be unfair, the preference given to Suncrest Townhomes, Ltd. is not in contention. What is in contention is the apparent partnering of a for-profit organization with a governmental agency that does not give other developers the opportunity to bid on taxpayer-funded projects. Al Velarde, spokesperson for the Housing Authority of El Paso has publicly stated that Investment Builders, Inc. came to them, indicating that this somehow absolves the Housing Authority from their obligations. Others have stated that this is an issue between a non-profit and a for-profit company and therefore there are no bidding requirements. As demonstrated earlier, this is, in reality, an issue between the Housing Authority of El Paso and a for-profit company, Investment Builders, Inc. as the paper trail seems to indicate. As a government entity, it is incumbent upon the Housing Authority to apply the bidding regulations to this project, yet it appears that it hasn’t.

The Housing Authority of El Paso continues to add more and more controversy to their repertoire. There is no doubt that this issue is much more than just a few disgruntled employees. Not only is there a contention regarding the possible clustering of public housing, possible insubordination by employees of the Authority and now we seem to be adding a possible unfair competition and possible circumvention of the bidding laws to the mix. Considering the seriousness of the allegations and the large amounts of taxpayer monies, it is now imperative that the community demands an investigation of this agency. “Rogue agency” may not be enough to describe this entity, which seems to think that it can operate without regards to its mandate. What is most disconcerting of all is that we are not yet finished with the possible problems that this Agency seems to be offering our community.

Author’s note: This is a five part series that started on Friday, with Sunday’s piece, yesterday’s piece, Today’s piece and Tomorrow’s conclusion titled: Of Complex Structures and Taxes or Is That Liens?, After all Its Only Tax Money We Are Talking About

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