The City Paper’s interview with Metropolitan Development and Housing Agency executive director Phil Ryan, development director Joe Cain and spokeswoman Julie Oaks began on the roof of 15-story Parthenon Towers, the agency’s newly renovated public housing development for senior and disabled residents.
The location was MDHA’s choice, and it was a good one. The view was spectacular, even on a hazy, sweltering day: Centennial Park, the city’s grand playground, simultaneously majestic and egalitarian, in the immediate foreground; then Vanderbilt’s jumble of architectural eras and styles; further out were Midtown and The Gulch; all the way to downtown Nashville, which is quite simply more impressive than it used to be.
From this particular vantage point, Nashville looked like a model city, in the 21st century sense of that term. The unspoken message from MDHA in choosing this venue seemed to be, This is what we do.
That is absolutely true and real, despite a rough few months for MDHA during which its dual — and critics say sometimes oppositional — roles as a provider of affordable housing in Nashville and condemner of property have been laid pretty bare.
It started in May, with a Washington Post investigation on stalled housing projects paid for with federal tax dollars from the U.S. Department of Housing and Urban Developments. The package story, called “Million-Dollar Wasteland,” highlighted the Woods at Monticello, an affordable-housing development in North Nashville. MDHA had spent $1.7 million in federal money but had yet to build a single home.
Then, of course, was the $30 million jury decision against the agency in its two-year eminent domain lawsuit against real estate developer Tower Investments. The suit revealed a series of controversies and brought scrutiny to the agency in general and Ryan in particular.
The agency had some hopeful news on Monticello, at least. Last week it announced a request for proposals for construction of homes there. Cain said some of them are expected to be complete as early as April of next year.
But to critics, the Tower decision was part of a pattern of increasingly expensive, drawn-out eminent domain disputes during Ryan’s tenure. It was a symptom of a dysfunctional agency, one that had shown no regard for the taxpayers who fund it. MDHA lacked transparency. It had lost sight of its mission as a public housing authority, and was concentrating too much attention on placating developers. It was merely a tool to exercise mayoral will and would not answer to Metro Council or Nashville residents.
“There’s a joke among council members that MDHA stands for Mayors Don’t Have Accountability,” said outgoing District 6 Councilman Mike Jameson.
Jameson has been among the most vocal of those critics in Metro government. Two years ago, he blasted the mayor and the agency for attempting to derail the development of a park (now under construction) on the East Bank of the Cumberland River. The park had been identified as a top priority for riverfront redevelopment since 2007, when, after years of study and $450,000 in consultancy fees, the city adopted the Riverfront Concept Plan.
He said MDHA lacks necessary transparency and accountability. Whereas other agencies and departments present line-item budgets for council approval, MDHA gets the vast bulk of its money from the federal government — primarily HUD — so it does not seek council approval, nor does it release its full budget to the public as most other city agencies do. According to the state comptroller’s office annual audit — the most comprehensive available source for MDHA financial information, though it still does not show line-item expenditures — the agency had $116 million in operating expenses, with $105 million coming from federal sources.
“The concern among council members has historically been that mayors — and not just including the current mayor — are able to use MDHA for development purposes that perhaps not intentionally but effectively bypass the scrutiny of the council,” Jameson said.
Ryan disputes that.
“I would say that sometimes the city hires us to do projects or pieces of projects,” he said. “They’ve done that for more than 70 years. MDHA’s been involved. And council’s always involved. But you do have an executive who leads the city. We’ve responded to all the mayors over that 70 years who are then backed up by the legislative body, the council. They set the policy; they set the tone. And we try to do as they ask.”
Jameson, along with many other council members, would speak out against the agency again later in 2009 for its mishandling of convention center predevelopment funds. In 2008, the council approved MDHA use of tourism tax dollars for eminent domain proceedings at the site of the proposed convention center.
Nothing specifically called for public relations, but the agency issued a $75,000 contract with the firm McNeely, Pigott and Fox. MP&F ran through that money in 11 weeks. Ryan reset its pay cap at $900,000. Soon, a WTVF-Channel 5 investigation revealed that MP&F had been charging the agency for attending council meetings, providing talking points for Dean’s speeches supporting the convention center, email blasts encouraging citizen support for the center, phone calls and meetings with The Tennessean prior to a pro-convention center column by Gail Kerr, and even for writing pro-center comments on news sites and Facebook. By August 2009, the firm had run up more than $450,000 in charges.
All of that happened, in effect, outside the purview of the council and mayor’s office. Soon after, the city hastened the formation of a planned convention center authority, which took over development oversight from MDHA in late 2009. Ryan said his agency was simply trying to promote the wishes of city leaders during a major phase of downtown redevelopment.
“I think we — most of our work is in the core and in the central part of the city,” Ryan said. “We don’t do as much in the fringes. But I would say we speak and are in touch with those council people in the core frequently. It’s often weekly. We try to reach out and give the council people good customer service, just like anybody else.”
In a statement emailed to The City Paper, MDHA board president Chase Cole agreed.
“It is important to remember that often we are engaged by the city to perform important work under the direction of the mayor’s office,” Cole wrote. “All of this work has been approved previously by the Metro Council. Those who prefer conflict in public affairs, however, would not be pleased with our respectful, consensus-oriented approach to dealing with the mayor’s office, the council, the business and nonprofit communities, our residents, our employees and others with whom we interact.”
Doug Collier, president of the Service Employees International Union Local 205, who has in the past called for Ryan’s resignation, said the problem goes beyond a lack of council oversight, which he acknowledged isn’t required in all cases. He said there isn’t proper MDHA board oversight.
“Of all the board meeting minutes I’ve requested, I’ve never seen one instance where the board voted an MDHA proposal down,” he said.
A November 2009 audit of the agency’s handling of the Music City Center project by KraftCPA found three occasions in which the agency approved contracts of more than $100,000 without presenting the amounts to the board, three where MDHA adjusted contracts by more than $50,000 without board approval, and one $104,000 contract that the agency didn’t present to the board — all against MDHA’s own policies. That last contract went to C.H. Johnson for public relations work on the convention center hotel. Another WTVF-Channel 5 investigation found that it also went over budget, eventually running up a $315,000 tab.
“I am surprised at the assertion that our board does not engage in proper oversight,” Cole wrote. “Much of our work is done in committees, so a casual, infrequent observer of our board meetings would not likely be aware of the tough questioning, refocusing and input on matters that come before the committees.”
Collier and the SEIU have also criticized the agency for its years-long freeze on cost-of-living pay increases for its nearly 300 employees, 100 of whom are SEIU members, while maintaining a $10 million-plus reserve fund. Ryan, who’s been in his position since mid-2002, earns $152,000 per year from “a variety of sources,” he said. His office later confirmed he is paid mostly through federal funds. He’s taken two raises since starting the job at $120,000.
Oaks said the reserves provide a vital “rainy day” fund, kept in place so the agency can stay afloat in case of government shutdown or federal cutbacks — the latter of which are likely coming after the recent congressional deal to raise the county’s debt ceiling. As she pointed out, the agency last year gave its employees a $1,500 across-the-board bonus. Last week, the board approved a 4 percent bonus of up to $2,000 for all employees.
Ryan said the idea of eminent domain does not sit well with him.
“It makes us uncomfortable as a concept,” he said. “It’s always the last resort. Always the last resort.”
MDHA’s recent track record with eminent domain might also be making him uncomfortable. In 2008, responding to public outcry and bad press, the agency dropped its proceedings against Joy Ford, who fought MDHA’s condemnation of her Music Row recording studio to make way for the Lionstone Group’s proposed Roundabout office building. Ford, MDHA and Lionstone ultimately settled on a partial land swap.
“In that case with Music Row, we didn’t use [eminent domain] in the end,” Ryan said. “We brought the two parties together to work it out, and last I checked they were both happy. It was a compromise.”
Tower Investments is a different story. Unless MDHA can mount a successful appeal, it will be bound by a Nashville jury’s late July verdict, which awarded Tower $30 million for the five-acre parcel of land the agency condemned in 2010. That would bring the project within $2.5 million of busting its budget. MDHA paid Tower $14.8 million for the land in 2010, just $20,000 more than the developer had purchased it for in 2007.
The weeklong eminent domain trial came after two years of wrangling, with two judges (Judge Barbara Haynes recused herself earlier this year, after Tower insisted her daughter’s employment at Miller and Martin, which represents MDHA, left a conflict of interest) and $1.6 million in legal fees for the agency.
MDHA’s argument looked good at first appraisal. Tower had purchased the land in 2007 knowing, or at the very least making an educated guess, that it was going to be used for the convention center. It did nothing with the land, maintaining it as a parking lot for three years. (Use of the term “parking lot” during trial was debated in pretrial negotiations. Tower’s lawyers wanted it banned, arguing that it belittled the property. MDHA’s lawyers argued that it was actually a parking lot. Judge Joe Binkley allowed the term but stipulated that it not be overemphasized.)
In the meantime, there was a real estate recession, despite which Tower was claiming the value of its property had more than doubled. MDHA tried to suggest Tower was seeking to bilk the city, and that MDHA was acting as a responsible steward of tax dollars.
But Tower managed to shoot a number of holes into that argument. It had four appraisers to MDHA’s one. MDHA’s appraisers were using smaller, more depressed and less developable properties to garner comparable sales. One of them, at 210 Fourth Ave. S., the most recent of MDHA’s comparables, was a distressed sale. It was days from foreclosure when it was sold in September 2009.
And Tower had adjusted its asking price to account for the recession. The company originally wanted $44 million, or $180 per square foot, but had whittled that down to $30-$35 million. Tower argued the new downtown zoning code, adopted in February 2010 (just before the property condemnation), lifted height restrictions on the property. It was now five uninterrupted acres of potential multiuse high-rises, and Tower was giving up quite a bit, it argued.
Despite the verdict, Ryan maintained MDHA’s position. He said MDHA’s price — or at least its price range — had already been confirmed when the two parties assembled a jury of real estate experts for a consensus appraisal in August 2009.
“At Tower’s insistence we had a jury of appraisers, where they picked experts and we picked experts. And they set a value at $16.1, which confirmed, we thought, our approximate appraisal value,” Ryan said.
Court documents show that neither Tower nor MDHA accepted that number. In September of that year, Tower appealed it, arguing for a jury trial. MDHA also wanted a jury trial, believing that a jury would affirm the $14.8 million price. This July proved Tower correct, at least for the time being.
“What we don’t control are juries. And lay juries at that. We don’t control the judicial process,” Ryan said.
But that’s not the end of MDHA’s legal troubles. Downtown Platinum LLC, which owned two properties on Seventh and Demonbreun, is fighting the $1.77 million it got from MDHA. And Joe Chambers, owner of the Musicians Hall of Fame who was given $4.8 million for the Sixth Avenue property, is also challenging his buyout.
Housing — public and affordable — is supposed to be MDHA’s primary concern. The string of recent improvements to various public housing complexes, as well as additions of workforce housing at Rolling Mill Hill, for example, serve to prove that.
But even as a spiraling economy and high unemployment have led to increased demand for public housing — the wait time is often a year or more — Nashville has seen a net loss of 600 units from 2000 to today.
“The demand far outstrips the supply. You can live here for 30 percent of whatever your income is. The average income [at Parthenon Towers] is about $10,000 per year, which is less than $1,000 per month. So someone can live in this space for $200-300 per month, all utilities included,” Ryan said.
The agency has been hard at work to improve what’s still here.
Last year, MDHA completed installation of 280 solar panels, which cover most of the roof at Parthenon Towers. And the 24 variant-refrigerant-volume heating and cooling compressors there, Ryan said, would help reduce the building’s energy costs by $1.65 million per year.
“We have it paid back in under 10 years for all our improvements,” said Ryan. “And it’s not only solar. It’s the VRV.It’s lightbulbs. It’s water. Low-flow water. It’s a whole package of how you treat energy, water and air. That’s our goal.
“This has made us the largest solar power unit in Davidson County,” he said. “We have these on three of our buildings.”
Which is not to mention living improvements. Ryan showed The City Paper a model unit at Parthenon, which has been undergoing floor-by-floor renovations. MDHA has installed new air-conditioning units, appliances and furniture.
“You’re in a space that, before we did this work, was [not] air-conditioned,” Ryan said. “Could you imagine this environment without air conditioning? This was built, I think, when LBJ was president. So one thing we had to do was refurbish. These are big sites. We have seven of these high-rise sites that house a huge number of Nashville’s poorest elderly and disabled folks. So it was critical. And we spent a lot of effort and energy on that. And this is space, I think you’ll agree, that anybody wouldn’t mind living in.”
Elsewhere, it’s been expanding formerly cramped apartments. At the J. Henry Hale Apartments, the agency has increased the average size of a two-bedroom unit from about 550 square feet to more than 1,000. The units are now wired for cable and Internet as well.
These improvements are the result of $29.9 million in federal stimulus grants that MDHA has allocated to renovations on 14 of its public housing projects — either completed or in process. Six complexes — Cheatham Place, Andrew Jackson Courts, Edgehill Apartments, Napier Place, Sudekum Apartments and Cayce Place — still await renovations. Those six house about 47 percent of the total population living in public housing.
In the same period that it lost 600 public units, MDHA has overseen the addition of 2,215 Section 8 subsidized units and 5,450 units that fall somewhere in the affordable to “workforce” spectrum. That latter category includes MDHA’s newly opened Nance Place apartments — a $9.5 million, 109-unit building at Rolling Hill Mill. Workforce apartments and houses are intended for middle-class residents, and some rent for as much as $1,500. (At Nance Place, residents are restricted to 60 percent of the average median income, and listed rent tops out at $889 for a three-bedroom apartment.)
Still, workforce housing, as well as MDHA’s subsidies of luxury buildings — usually in the form of tax-increment financing — have stoked concerns that the agency is failing to serve truly high-need residents.
“What we’ve done downtown with the high-rises has proven there is a residential market downtown,” Cain said. “And it’s been successful. And now it’s spewed out, and people see there’s also a demand for affordable housing.”
According to Ryan, without those incentives, downtown may not have much residential development to speak of. Between 1963 and 1993, zoning code didn’t allow any new residential development. In 2004, when developer Tony Giarratana broke ground on the Viridian condominium tower, which received $6 million in tax-increment financing, there were fewer than 10 “ownership units” in all of downtown.
“You’ve got to remember housing is a continuum. Everybody needs a place to live. You have different products in different places,” Ryan said. “Right in the Central Business District, the real estate prices are exceedingly high. It costs a lot to put in a unit. It’s harder to have an affordable unit right in the heart of the city … The short of it is Nashville is very successful. There’s a lot of great things going on. We’ve done our part to help that success.”