A former Las Vegas city councilman’s lack of development experience could undermine his proposal to use millions of dollars in taxpayer subsidies to build a housing project for senior citizens and reap a seven-figure development fee.
Officials with the Nevada Housing Division said staff members decided a company backed by former city councilman and current state GOP Chairman Michael McDonald, a business owner, doesn’t meet the qualifications for millions of dollars in tax credits needed to build 60 housing units near Vegas Drive and Decatur Boulevard, the proposed first-phase of a project that could have nearly 200 units. The decision is being appealed.
“They didn’t think the developer had enough experience,” said Charles Horsey, housing division administrator, of the initial decision.
Stefanie Sharp, an attorney who works with the housing division, said the initial decision isn’t available for public review but confirmed that McDonald’s lack of experience played a role.
“That was the primary area, to my knowledge,” Sharp said.
McDonald overcame earlier concerns from the City Council, which in April approved about $3.9 million in subsidies for the proposal, by adding affordable housing developer Frank Hawkins, also a former council member, as a consultant on the project.
The duo is seeking tax credits awarded through the state to help cover the remaining cost of the $11 million first phase of the project, which would include 60 units.
The proposal also includes a $1.3 million development fee, according to a summary provided to the council. The summary also stated that 40 of the 60 one-bedroom units would be rented at a reduced rate of $494 a month, with market rate units going for $750.
“Frank Hawkins has a 100 percent batting average,” Mayor Carolyn Goodman said in a recent interview when asked about the project. “To have him join in with Michael’s effort really said an awful lot.”
But so far state officials remain unconvinced McDonald’s plan should qualify for tax credits despite Hawkins’ involvement.
“He is a consultant, not a developer. We can’t use his experience,” Horsey said of Hawkins, who has successfully developed several affordable housing projects in Las Vegas.
McDonald did not return messages seeking comment on the project.
The proposed project has been a source of friction since at least April when the council, acting as the city’s redevelopment agency, voted 6-1 in favor of the proposal despite a recommendation from city economic and urban development director Bill Arent to deny McDonald’s proposal. Councilman Bob Coffin voted against it.
Arent’s recommendation to deny was based on a city report stating the subsidy equated to about $97,975 per affordable housing unit, based on the amount the city was poised to provide the developer. Not only is that level of subsidy greater than other affordable housing projects, it is higher than the $72,000 median value of homes in the area of the proposed project.
In addition to the cost of the subsidy and the fact a developer is seeking taxpayer help to build affordable housing at a time when the real estate bust has made existing housing the cheapest it has been in decades, the backgrounds of McDonald and Hawkins raised eyebrows as well. Each man has had run-ins with the state Ethics Commission.
In 2001, the commission found that McDonald violated rules by urging the city to enter a business deal that would have benefited his boss.
In 1995, Hawkins was found to have failed to disclose a loan from a business with issues before the council and for benefiting from a golf tournament that had participants with businesses before the city.
If the housing division staff’s denial of the credits holds up through two more rounds of appeals, and there are no court challenges, McDonald’s development agreement would be terminated and the city could use the money it approved for it elsewhere.
Sharp said there is no hard deadline for a final decision on the tax credits, but officials will work as swiftly as possible because other developers in the state could use the tax credits if they aren’t awarded to McDonald’s proposal.
Contact reporter Benjamin Spillman at firstname.lastname@example.org or 702-383-0285