Housing audit ruffles officials

12/18/2002

Some members of Toledo City Council yesterday lashed out at the former Finkbeiner administration, saying they felt pressured to approve three downtown housing projects that now have put taxpayers on the line for up to $16.4 million in unpaid bills.

“I think the [Finkbeiner] administration acted like a snake-oil salesman,” said Councilman Wade Kapszukiewicz. “We were sold a bill of goods.”

During a news conference Monday, Mayor Jack Ford and city Auditor Dan Hiskey released reports by the Toledo accounting firm Spilman, Hills, and Heidebrink that sorted through thousands of city documents pertaining to the three downtown housing projects that began in the late 1990s - Museum Place, Commodore Perry, and Hillcrest Hotel.

So far this year, the city has paid $865,602 toward the debts of the three struggling apartment projects, on top of $1.08 million already paid since 1999. City officials have said the city eventually will be repaid.

Toledo developers Bill Hirt and his son, Oliver, renovated buildings for Museum Place and the Commodore Perry projects. Wisconsin-based Alexander Co. has developed the Hillcrest, the project that received the least criticism from the Spilman group.

The Spilman group was not directed to determine whether the developers were culpable for problems with the project. But in reviewing the city's role, the firm found the process riddled with problems that ranged from missing paperwork to lack of oversight and questionable or risky financing packages.

Hours after Mr. Ford's news conference, in which he suggested he might ask for a state investigation into the handling of the projects by his predecessor, former Mayor Carty Finkbeiner fought back, insisting council was behind the projects “100 percent” and noting that Mr. Hiskey was among his top staff members at the time.

Yesterday, he also noted that five of the eight major housing projects downtown have proved money-makers, and that such projects are always a risk.

But council members yesterday said they repeatedly questioned such a risk at the time, especially the Commodore Perry deal approved by an 8-4 vote Jan. 6, 1998.

By that time, Museum Place had been troubled with renovation problems that were costing an unexpected $1.4 million. Still, the Hirts were awarded the Commodore Perry project.

“Sure, we had questions, but [former Economic Development Director Barry Broome] sugarcoated everything - `Everything is fine,'” Councilman Louis Escobar said.

Some council members said the audit has revealed terms of the deal that were not known at the time, including the fact that several floors would be turned over to the Hirts.

Councilman Gene Zmuda, who voted against the deal in 1998, said he was not aware that certain floors had been “taken out of the deal.” - meaning that the revenue would not be dedicated to repaying the debt.

“The facts that [the administration] gave us ended up not being the reality for the projects,” Mr. Zmuda said.

But others said they recall the floor transfer as part of the deal and questioned that, too.

“My understanding of it was that any revenues would be used to pay off the debt service, but that any revenues above and beyond that would go to [the Hirts],” Councilman Peter Gerken said.

He said council members want to know what rights the city has to recover its losses.

“I remember when the Commodore Perry was sitting empty and you didn't have anybody volunteering to do it,” said Councilman Bob McCloskey. “If there was another way, I don't know what it was.”

Mr. McCloskey recalled that the Finkbeiner administration “recommended to us these were great deals. I'm not an expert on every aspect. We hire the people who are supposed to be the experts.”

He said William Hirt had a great reputation as a redeveloper of older properties.

Councilwoman Tina Skeldon Wozniak, also a supporter of the Commodore Perry deal, said she has learned in the briefings on the audit that council didn't know everything there was to know.

“What I don't want lost sight of is the fact that we still need downtown housing projects,” Ms. Wozniak said. “There were certainly things that have changed from what we thought we were supportive of.”

Betty Shultz, who voted against the deal, said she

“I asked more than one time where those dollars were. I never got an answer, or one that was satisfactory,” Mrs. Shultz said.

Council President Peter Ujvagi said the problems with Museum Place and the Hillcrest have been mitigated somewhat by having private developers make financial sacrifices for the project. He said that hasn't happened with the Commodore Perry.

“My understanding is a portion of the top floor has been sold and the proceeds taken out of the project,” Mr. Ujvagi said.

He said council was told the project would generate $1 million a year. Instead, it has lost money. “Were the numbers presented to us real to begin with?” Mr. Ujvagi asked.