The Golden ARCHES Project - Part 1

Revised: January 2019

 

By Sarah Owens and Michael Livingston

The Oregon Housing Department (OHCS) says, when the Oregon Legislature gave it an additional $10M in Emergency Housing Assistance (EHA) and State Homeless Assistance Program (SHAP) funds back in 2016, it gave them "the opportunity to look creatively" at ways to respond to the housing crisis and the lack of shelter for homeless Oregonians.

Translated:  this was some serious money that could make a difference.  

So, staff and local Community Action Agencies (CAAs) ('cause that's who gets all the homeless assistance $$ coming out of OHCS) developed a proposal to allow these new funds to buy real estate -- something that previously had not been allowed at all --  specifically SHELTER facilities or transitional HOUSING units.  The proposal was discussed and approved by the Housing Stability Council on October 7, 2016 and details were  finalized and shared later that month.

Being able to use EHA and SHAP funds for acquisition was a very big deal, see, because of the amounts involved, and the potential for inexperienced social service providers to make costly mistakes.  The need for caution and oversight was well understood. 

Longstanding OHCS rules require CAAs to stick to their EHA and SHAP "work plans" and budgets, or seek approval to amend them.  The new acquisition process didn't change any of that.

What it did do, however, was require preliminary approval of the acquisition project -- separate and apart from work plan amendments and budget change requests.  Makes sense, doesn't it? To  get a project approved before requesting funding for it?   

So, to purchase a shelter facility or housing units using these new EHA and SHAP funds, CAAs had to submit an application, complete with "an extensive Business Plan"  that included, among other things, demonstrated ability to maintain and manage the property, a five-year operational budget with projected revenue, the availability of agency reserves for replacement and operations, and a projected timeline showing that the property would be purchased and clients/tenants in place by June 30, 2017.

Which is exactly what three CAAs much smaller than MWVCAA (Klamath Lake Community Action Services, Oregon Coast Community Action, and United Community Action Network) managed to do -- all by or before March 1, 2017.  But not, as it turns out, MWVCAA.

There's plenty of excuses and blame to go around, but they don't matter.  The agency screwed up.  Jon Reeves was asleep at the wheel.  The Board wasn't paying attention.  Everything was left up to one, newbie manager with zero management experience, Jimmy Jones, who would later admit the purchase was "executed clumsily and with a great deal of optimism, when a healthy dose of skepticism would have better served us."

So, the end of the biennium came and went, with no business plan from MWVCAA.  Their project should have lost out, shouldn't it?  But obviously, it didn't, or we wouldn't be talking about it.  So, for reasons we cannot fathom, in flagrant violation of OHCS's expectations, OHCS staff cleared about $.5M in EHA and SHAP funds for MWVCAA to use to acquire the old office building on Commercial Street, knowing nothing more about the project  than what had been been shared in a few casual emails.  The closing took place on June 28, 2017.

Amazed such a thing could happen?  Don't believe it?  Write to us, and we'll send you the documents we received in response to our public records request.  It's all there, in banal email after banal email.

"I know that you’re anxious to get that money spent, so are we.”

The MWVCAA project was staffed by the same OHCS Homeless Services Section staff who had worked on the other acquisition projects, including the section manager.  But the MWVCAA project was more complicated (and costly) than the others, raised more questions, required more scrutiny, and the review process was apparently unclear, even to OHCS staff.  Checklists, review standards and deadlines were never developed, forms were confusing and in need of revision, and too few management signatures were required.  In other words, the process was just an unbelievable mess.  In the end, all that mattered was getting "that money spent" by June 30.

Let's be clear, there was every opportunity, between March 2, when MWVCAA first asked about using EHA funds as a down payment for a day shelter, and June 28, when the funds were cleared, to remind MWVCAA they hadn't submitted a business plan.  On March 24, OHCS reminded the CRP Director, "[Y]ou can't request funding for something that hasn't been approved.  For instance, if you want to fund a day shelter, you won't be eligible to be paid for your costs until that activity is authorized."  (Emphasis added.)  On May 24, the manager of the OHCS Homeless Services Section raised what should have been a red flag when she wrote to the CRP Director: 

Vicki and I have discussed your acquisition project proposal and my understanding is that you are now looking for another property to purchase by June 30th...I am concerned that there is not time to locate, secure additional funds, complete the purchase and have ready for client use a shelter or transitional housing facility within the next 5 weeks.

1255 Broadway

The "acquisition project proposal" that the manager was referring to was, initially, to use EHA funds to buy the building at 1255 Broadway (formerly the Center for Community Innovation).  But just when MWVCAA thought they had a "done deal" on the building, a tenant/shareholder with veto rights decided they didn't wish to share a building with a homeless shelter.  So, MWVCAA came up with a new proposal.  This new proposal was to buy the building as planned, but rather than move the ARCHES Project, they'd move their administrative offices from Center Street to the Broadway location, and put The ARCHES Project at Center Street.  

This new proposal, which OHCS rejected politely as "really difficult to defend as a legitimate use of the funds", reveals a couple of things.  One, it shows MWVCAA's determination to secure any kind of a deal by June 30.  Two, it shows the extent to which the ARCHES Project's day shelter was simply the means to an end.  It was immaterial to MWVCAA whether or not they could have their shelter ready for client use by June 30 (they knew they couldn't).  All they wanted was the building. 

By mid May, MWVCAA was stuck.  EHA funds couldn't be used to acquire office buildings, only homeless shelters.  No homeless shelter, no EHA, and no EHA, no office building.  They'd boxed themselves into a corner by allowing the Madison Street lease to end June 30 and having no Plan B.  So, even though they'd just told OHCS the day before that they couldn't buy "the old Coldwell Banker building" because they hadn't found a "partner to come along and provide us with another [$]300K to make that work for us", they were now telling OHCS, "We have signed a purchase agreement on the Coldwell Banker building...We anticipate moving our day center operations there on June 15."

Both statements were, of course, untrue (as late as June 22, the MWVCAA Board of Directors was told that they were still "working toward a contract"), but the lies kept the deal alive, as intended.

That was the last time before the real estate deal would close that OHCS inquired about MWVCAA's intent or ability to have their shelter ready for client use by June 30, even though it was a requirement of the EHA funding.  It apparently didn't occur to OHCS that one can't just open a day shelter in an office building, that there might be regulatory or permitting issues to overcome (there were), or that renovation construction costs and delays might pose a problem (they have).

At midday on Monday, June 26,  OCHS staff announced, "Done, done, done.  The funds will go out Wednesday and post overnight.  They'll be in MWVCAA's account Thursday."  OHCS had never seen the MWVCAA business plan (there wasn't one), and didn't even know the building's purchase price ($2.1M), or whether the purchase was financed (yes, by the seller).

"Need some items for my file"  

In Part 2, we'll discuss what happened after OHCS discovered they'd allowed MWVCAA to side-step the acquisition-approval process.