Close Quarters

Questions about conflicts of interest and motives cloud a $77 million city housing deal

The Southeast Texas Housing Finance Corporation, which serves a ten-county area, won't even consider a project unless the nonprofit has negotiated a PILOT with taxing authorities. "If the local jurisdictions say they're willing to give up the revenues," says Ron Williams, deputy director of Southeast Texas, "then it's okay with us."

Apparently, though, the city of Houston has no plans to follow that trend. Brown has never even responded to Morales's advice to adopt a PILOT. Clemons did not return calls for comment, and the mayor referred Houston Press questions to housing department director Margie Bingham.

In a written reply, Bingham said that requiring nonprofits to pay even a portion of their taxes would be "counter-productive" to the city's affordable-housing mission. She noted that a recent change to the exemption statute will require nonprofits to provide social and educational programs for residents.

Clemons wants a loan to buy six apartment complexes, including The Rubicon in southwest Houston.
Deron Neblett
Clemons wants a loan to buy six apartment complexes, including The Rubicon in southwest Houston.

"The intent of the new law will foster more accountability for agencies receiving the tax exemptions," Bingham argued. If Clemons's project is approved before the law goes into effect in January, he would not be required to provide the programs for residents.

The statute change had the support of many housing advocates, including the Texas Association of Community Development Corporations. Reymundo Ocañas, the group's executive director, said that requiring nonprofits to offer GED classes, day care, job training and other programs for residents will "shore up the intent" of the exemption. "The state doesn't provide enough money for these kinds of services," Ocañas says. "This is the smart thing to do, because you're giving up taxes, but you're also giving people a chance to get ahead. If it's just an apartment unit, is that really the best use of tax dollars?"

That's a question City Council hardly considered when it approved two nonprofit exemptions earlier this year. But those were modest deals compared to the Pleasant Hill project, which is expected to come before council in October.

According to Clemons's preliminary plan, the exemption for the six complexes will cost taxpayers more than $1.5 million a year. And while the public benefits of the project seem negligible, Pleasant Hill stands to gain considerably: The nonprofit intends to award itself $3.5 million in "developer fees," payable up front from the HHFC loan.

On the other hand, that loan is far from a done deal. Earlier this year, Pleasant Hill tried to get a jump on the project by requesting a $4.2 million loan from HHFC's cash reserves. Apparently, though, Clemons's colleagues weren't convinced Pleasant Hill had the experience or financial wherewithal to pull off the venture. The loan request was unanimously rejected.

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