On Borrowed Time
When last we visited the mother of all neighborhood-to-standards projects back in February, the redevelopment plan for Fourth Ward/Freedmen's Town was little more than an excuse to evict a bunch of poor people from some prime real estate.
The slow but steady demolition of the city's oldest African-American neighborhood was driving the elderly and working poor from their homes and further depleting the city's already pathetic stock of low-cost housing. Meanwhile, Houston Renaissance, Inc., the nonprofit "master developer" hired by the city to deliver 600 new townhouses, condominiums and single-family homes to the Fourth Ward, including 255 units for buyers of limited financial means, had so alienated Mayor Lee P. Brown that he canceled a meeting with advisers to discuss future support of the organization.
Seven months later, Renaissance's relationship with Brown has gone from bad to worse. Last week, at a City Hall press conference, the mayor ordered not one, but two audits of the nonprofit, which has received $8.5 million in public monies from the city and the quasi-governmental Houston Housing Finance Corporation to buy land in the Fourth Ward.
Buried between the lines of the one-page statement from which Brown cribbed his comments last week was the message that Houston Renaissance has milked its last dollar from the taxpayers' teat. While the mayor made assurances that the city would proceed with the creation of a special taxing district to pool funds for construction in the area, Brown conspicuously chose not to invite a single representative of Renaissance to the press conference. Indeed, Brown didn't even bother to notify the group's board of directors before his announcement that both the city and the Houston Housing Finance Corporation would be combing through its books.
In a transparent attempt to throw some sunshine on what has to a bad omen for Houston Renaissance, the nonprofit's secretary/treasurer, Pat Kiley, said Brown's press conference was a welcome event.
"That's really the first public support for the Fourth Ward redevelopment project we've seen out of the [Brown] administration," Kiley said. "That press conference was absolutely critical to us, and even though we were not invited and not mentioned beyond the fact they want to audit us, I take it that we are still the vehicle authorized to do this project."
Brown is clearly not convinced the nonprofit has put forth its best effort to keep the promises made by Renaissance founder Julio Laguarta in October 1996, when City Council approved the organization's bid to rebuild the Fourth Ward. If the mayor has decided to relieve Renaissance of its status as master developer, the audits he ordered from the city and the Houston Housing Finance Corporation, expected to be completed in a few weeks, won't do much to change his mind.
A review of Renaissance's internal accounting records, which were obtained by the Press through the Texas Public Information Act, revealed that, if not for the enormous public subsidies it received, Houston Renaissance would have been forced out of business long ago. Unlike other nonprofits, which produce little or no revenues and therefore operate with some restraint, Renaissance conducts business as if money were no obstacle, engaging in the kind of free-wheeling waste and self-dealing that shows an arrogant disregard for the taxpayers who are picking up the tab.
In June 1996, Renaissance began discussions with a Florida-based consulting company, The Boyd Group, to manage the Fourth Ward project. Despite being awash in taxpayer-funded debt, Renaissance sprang for first-class airfare to bring the firm's owner to Houston for interviews. A couple of months later, Renaissance agreed to pay The Boyd Group $21,000 per month to set up an office in the Fourth Ward and handle the daily operations of Houston Renaissance.
As it turns out, The Boyd Group isn't a group at all, but one person --Robert Boyd, a former executive with Hines Interests, Ltd., and a friend of Harris County Commissioner El Franco Lee. Boyd, who until recently received an additional $6,000 a month to cover the cost of food, lodging and regular trips home to Florida, has yet to hire anyone, nor has he moved Renaissance's operations to the Fourth Ward. He offices rent-free at the north Houston headquarters of the Associated General Contractors, where AGC executive director Pat Kiley, Renaissance's secretary/treasurer, and his assistant, Irona Bennett, provide administrative support.
Though he is clearly not performing the work The Boyd Group was hired to do, Houston Renaissance continues to pay Boyd $21,000 a month. So far, Boyd has been paid more than $270,000 for about a year's work, and his contract with Renaissance still has two years left before it expires.
Boyd's is just one of several consulting agreements that have proven more valuable to the consultant than to Houston Renaissance. In May 1996, for example, Renaissance hired fundraising consultant Heather Bowen to spearhead a campaign to raise $1 million in private contributions. Before her contract expired earlier this year, Bowen had raised less than $100,000. Meanwhile, Renaissance has paid her more than $70,000 in fees.
Renaissance's contract with Denis Calabrese, while hardly the most egregious example, illustrates how the nonprofit's board members have benefited financially from the Fourth Ward project. Calabrese quit the board of directors in 1996 to become Renaissance's public-relations consultant. His one-year contract was actually a $3,000-a-month retainer, so Calabrese was not required to submit invoices before he was paid. Accordingly, Renaissance's records offer no clue as to what work, if any, he actually did.
Such cavalier spending habits are difficult to reconcile in an organization that has nearly $3 million in loans from the Houston Housing Finance Corporation scheduled to come due at the end of this year. Moreover, unless the construction of at least ten affordable homes is under way by December, Brown could order city housing officials to demand repayment of Renaissance's $3.4 million city grant.
Spawned in 1994 by Julio Laguarta, a bankrupt real estate developer and crony of former mayor Bob Lanier, Houston Renaissance has been its own worst enemy.
The nonprofit's first misstep was to appoint itself economic and social saviors of an African-American neighborhood first settled by freed slaves without first checking with residents. Since then, Renaissance's all-white-male board --Laguarta, Kiley, Calabrese, attorney Barry Snowden, architect Frank Kelly and former Metro chairman Holcombe Crosswell -- have been viewed as arrogant and racially insensitive.
Reluctantly, Renaissance agreed to work more closely with a coalition of Fourth Ward activists and ministers. Yet, board members seem unable, or unwilling, to dispel the widespread belief that Bob Lanier hand-picked them to rebuild the Fourth Ward, then exerted his influence to force City Council to award them the contract over grassroots organizations based in the community.
Not surprisingly, the resentment generated by the organization has fueled speculation that Houston Renaissance's board members are somehow profiting from the publicly funded Fourth Ward project. It hasn't helped that, in the case of the nonprofit's founder, Julio Laguarta, the allegation is true.
In December 1994, Laguarta began paying himself "management fees." Over the next 14 months, almost every penny of private donations raised by Renaissance --roughly $100,000 --ended up in Laguarta's pocket. Oversight was nonexistent: Laguarta signed his own checks, which ranged from $3,000 to $26,000, and he didn't bother to submit invoices or other documentation to support the payments.
Laguarta eventually resigned from the Renaissance board to become the nonprofit's executive director at a salary of $10,000 a month, plus $3,000 for expenses. Since filing for bankruptcy in August 1996, Laguarta's sole source of income has been Houston Renaissance. Since forming the organization, he's been paid some $760,000 in fees and brokerage commissions. Though his consulting gig was terminated last fall, Laguarta's pay days are far from over: As long as Houston Renaissance continues to buy or sell Fourth Ward land, Laguarta is guaranteed a 6 percent commission on each transaction.
Another original board member, attorney Barry Snowden, has parlayed his role as a Renaissance director into a regular paycheck, while directing some of the nonprofit's other work to one of his law firm's biggest clients. Snowden has handled a range of legal duties for Renaissance, including negotiating the terms of the city's $3.4 million grant. During those talks, according to a November 8, 1996, interoffice memo from an assistant city attorney, Snowden promised to examine "potential conflicts of interest" involving Renaissance board members.
A month later, Snowden reported that Laguarta, Renaissance's executive director, was a member of the Houston Planning Commission, an apparent violation of a city ordinance that prohibits elected or appointed officials from benefiting from city contracts. Snowden's proposed solution? He asked the legal department to waive the city's conflict-of-interest provisions so Laguarta could remain on the commission while collecting fees on the city contract. (Laguarta was eventually forced to resign from the planning board by the Lanier administration.)
Snowden sought to keep his own potential for ethical breaches quiet as long as possible. It wasn't until May 1997 that Snowden disclosed that, while he represents Houston Renaissance, his law firm, Morris, Lendais, Hollrah & Snowden, provides legal counsel to another Renaissance contractor, Stewart Title Co. This arrangement raises a couple of issues.
First, whose interest will Snowden, who is still on Renaissance's board, serve should the nonprofit and Stewart Title become engaged in a dispute? His own interest, by virtue of his firm's relationship with Stewart Title? Or the interest of taxpayers, to whom Houston Renaissance is accountable?
It is not a trivial matter: Renaissance has chosen to award Stewart Title the exclusive franchise on Fourth Ward title insurance and escrow work. That's an unusual arrangement, particularly in an area like the Fourth Ward, where the original property lines and utility easements have been blurred by time. Most developers would choose to employ several title companies, if only to make sure title research is completed quickly and sales contracts are not unnecessarily delayed.
A second issue is Stewart Title's tax-deductible $25,000 contribution to Houston Renaissance in December 1995. The donation, made as Laguarta was starting to negotiate the purchase of land in the Fourth Ward, comes close to violating the state insurance code, which prohibits direct or indirect payment to any person or company "for doing the business of title insurance, or for soliciting or referring title insurance business."
Snowden did not return phone calls seeking comment. However, according to Pat Kiley, "in the interests of disclosure," the Renaissance board has agreed to report the nonprofit's relationship with Morris, Lendais, Hollrah & Snowden on a revision of its own recently completed audit. Kiley did not offer an explanation why the nonprofit's auditors weren't supplied with that information the first time around.
Then again, Houston Renaissance has never grasped that, as a taxpayer-funded organization, higher ethical standards must be maintained. Instead, the nonprofit has repeatedly sought ways to undermine safeguards that protect the public's interest.
For example, Kiley and the Renaissance board stonewalled the Press's request under the Texas Public Information Act for five months, claiming the law did not apply to them. Perhaps the reluctance to allow its records to be scrutinized is not so surprising --any nonprofit "charity" that pays its executive director $270,000 a year while failing at its mission should be at least a little embarrassed.
Last week, a day after Lee Brown's press conference, Houston Renaissance board members gathered at the Associated General Contractors offices for their monthly meeting. Apparently, the group was in full damage-control mode. Even though one item on the agenda was "media inquiries," the board refused to allow reporters to attend. Kiley explained that, under the state's open-meetings law, Renaissance was not "legally required" to let the media sit in on the proceedings.
However, one representative of the public, City Councilman Orlando Sanchez, was invited to address the board. According to Sanchez, board members sought to pin some of the responsibility for their nonperformance on Brown, who, since taking over for Bob Lanier in January, has made a point of distancing himself from Houston Renaissance and, until last week, has had very little to say about the Fourth Ward project.
"As they correctly claimed, this was a city-driven initiative, and just because it's a new administration, I don't think the mayor can go, 'Well, I really don't care what happens,' " Sanchez told the Press. "I don't think that's the mayor's attitude, but at this point, if the city is still committed to the project, the administration needs to step up to the plate and show some leadership and find out where the hell they want to go with this. Or, tell them, 'Okay, give us back our money,' and turn the project over to the private sector."
Indeed, after seven months of silence, Brown seems prepared to make some kind of decision, probably after the city and Houston Housing Finance Corporation complete their audits. If Houston Renaissance has a shred of credibility left with the mayor after that remains to be seen.
E-mail Brian Wallstin at firstname.lastname@example.org.
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