On November 19, 1990, Mark Tully of the Boston law firm Goodwin, Proctor and Hoar, hosted a meeting with two executives at the bank, John Fridlington and Jack Patterson. James Scripture of the FBI also attended. The meeting came in the wake of Mike Smith’s departure from the bank the previous August, and the criminal referral filed by the FDIC against Smith. It was backdropped by ever-increasing losses at the bank. .
During the FDIC audit in August, there had been a slight falloff in the number of delinquencies, but then Fridlington told Gonzales about Duarte’s checkbooks and the massive losses that had just cropped up in the Worcester branch. Concerned that that they might have another Smith on their hands, Louis Gonzales thought that enough was enough. He told a discouraged Dick Covell that the bank was in apparent violation of minimum capital requirements and that, by definition, the bank was deemed to be engaged in an unsafe or unsound practice. Covell was particularly apprehensive about the possibility of the FDIC filing a cease and desist order and the required public disclosure that would ensue. Gonzales also filed a report of an apparent crime against Michael Smith, and that brought in the FBI. Read the full story here
Monday, December 28, 2009
Wednesday, December 9, 2009
A lot of people put in applications at the Hilltop Apartments on Village Hill when it opened three years ago, drawn by assurances from its developer, Community Builders, that its apartments would remain affordable. Hilltop has many nice apartments, the upper floors have terrific views, but it still has an institutional air to it. Long windowless corridors, no community space to speak of.
Bill “W” lives there, for now. He is a recovered alcoholic, works in food service in a supermarket. The pace is fast, he deals with the public directly, he works hard, puts in a full forty hour week and sometimes a weekend shift. He earns about $26,000 a year. For the last three years, almost since it opened, he has lived there. It was a big step up from a chaotic druggy rooming house on Green Street where he used to live. Community Builders engineered an $8 million rebuild of the old nurses quarters at the State Hospital, creating 33 apartments. Of the 33 units, 18 were supposed to be low income housing units, 8 would be for Department of Mental Health clients, and seven would be market level. The rents varied, based on your income and the square-footage of the apartments. The range of monthly rents in 2006 were $645 - $850 for a one bedroom apartments, $626 to $1050 for a two bedroom, and $1,050 for the lone three bedroom unit.
No more. About a month ago, he got a notice that his rent was going up. It has jumped every year, but this was a big one. It was $645 in mid-2006; starting in January it will be $855. This, according to my math, is about a 30% jump. Private landowners generally don’t bump people up that much. Bill has a portable section 8 that provides him a subsidy through the Franklin Housing Authority, so he doesn’t pay the full rate. FHA told him that it wouldn’t cover the increase, and that he would have to pay $120 more every month. That is a big hit. If he couldn’t pay the increase, he would have to move. He can’t pay it. Bill has been walking the straight and narrow for a long time; he has a full time job, he belongs to a home ownership program, but he knew he would be ineligible and out of the program with the new math. He’s earning more in his new job, so his subsidy shrinks. Now he won’t have enough disposable income to qualify for the home ownership program. So he is apprehensive about the future.
The Franklin County Housing Authority and the Northampton Housing Authority, I think, are just following the letter of the law and their guidelines, but the rules are often hard to understand. The housing authorities must certify that the rents asked are “reasonable”, but the rents at Hilltop that were “reasonable” in 2006 are less “reasonable” every year. . There are limits to the subsidy, and if a tenant wants to live in an upscale place, they are going to have to cover the increase out of their pockets. Lately there were rumors in the building that other people were getting raises. I walked around there the other night with one of the tenants knocking on doors. There was the disabled Vietnam veteran with PTSD wounded in the defense of Khe San is living in a truly tiny one bedroom apartment. The rent when he moved in was $800, the rent was now $950. They are clearly, in this case, taking advantage of someone with few options. There was the secretary at a State agency who is paying market-rate rents. Three years ago she was paying $825, now she is paying $950. I went through one building. and couldn’t find anyone with a one bedroom whose rent was less than $800. Yesterday’s ceiling has become today’s floor. Rents are increasing at a double-digit rate, while rental rates in Northampton’s private-owned apartments remain relatively flat.
Tenant Richard Langello, a cancer survivor who suffers from the after-affects of extensive chemotherapy came to the Hilltop open house in 2006 and signed a lease after being told that the apartment would remain affordable. Now the rents in the building seem little different than the unsubsidized rents in Northampton area apartments. Richard’s rent at first was an affordable $665, then it was raised to $747 the following October. He says they keep raising the rent before the annual recertification for section 8 takes place. Now management has told him that they will raise the rent for his apartment to $800 on December 1. His Section 8 was administered by the Northampton Housing Authority and he went down there and got the same message that Bill “W” got: pay the increase or move. He went home, warmed up his computer and Googled Community Builders: he found they have an excellent reputation nationwide, but he found some puzzling references in Registry of Deeds documents and asked if I knew anything about the building manager, Andrea Pichette.
I did. Andrea Pichette is married to Art Pichette, former partner with Pat Goggins. He who works for Wright Builders, and Wright Builders is breaking ground for new condos a stones throw from The Hilltop. It’s a small world up there. Community Builders Inc. nationally is clean as a whisker and a real leader in affordable housing, but here on Hospital Hill there are appearances of impropriety. No competitive bidding for contracts, one architect who seems to get all the business, political insiders benefiting from land sales.
The rental levels at Hilltop seem to be in conflict with the ordinances setting up a city’s 40R Smart Growth Overlay District, which keeps the units affordable for at least thirty years, and is supposed to be incorporated as a rider in the deed. Section 3 says that “for an affordable Rental Unit, the monthly rent payment, including utilities and parking, shall not exceed 30% of the maximum monthly income permissible for an Eligible Household. . .” On their current website, the annual income limit for a 1 bedroom apartment with 1 person in it is $26,580. If you take Bill “W”’s case, my calculations say his maximum rent is $816: his rent has been set at $885.
Lurking behind this might be some kind of cash flow problem. They need money, maybe for their share of the infrastructure costs. MassDevelopment builds some palatial driveways. They may have borrowed money to put up the buildings. MassDevelopment overpriced the commercial acreage and no one was interested, the commercial property development that was supposed to subsidize their infrastructure costs for the residential part of the development didn’t happen, and the private homes are not selling. It was an expensive rehab on the buildings, and maybe a portion of the $8 million that went to rehab these buildings came from loans, and now the loans are maturing. I’m going to find out, if I can. I am beginning to think that so-called “affordable” developments are a racket like all the other rackets: big benefits for builders, unions, banks and managers, and the taxpayers pick up the tab. $8 million plus infrastructure costs for 33 apartments is $240,000 plus up front for every apartment, and then when you get management costs you get rents that are, in some cases, more than privately managed buildings whose owners get no subsidies. What did all that state and federal money buy us? Oddly, enough, the ornate and puzzling rules mean that some couples living in 2 bedroom apartments at Hilltop seem to be still getting a good deal: $763 for a beautiful big apartment, heat included.