Taxpayer-funded Uptown Lofts, which should be complete by January, will cost about $18 million - an amount one businessman who conducted price comparisons claims is way out of whack with similar projects.
The Lafayette Public Trust Financing Authority got called out in a big way during a special meeting Wednesday by several local businessmen, one alleging all five board members are complicit in a gross misuse of taxpayer dollars through Uptown Lofts, LPTFA's mixed-use development close to completion on Congress Street across from the IberiaBank building.
LPTFA initially loaned $1 million to the project, which was originally called Joie de Vivre, and in January assumed control of it from the grossly mismanaged Acadiana Outreach Center. It is scheduled to be complete by January 2013 and will end up costing about $18 million. But that price, argued Lafayette businessman Tim Supple, is about $10 million too much.
Supple said he has discussed the Uptown Lofts project with five Lafayette contractors, three architects, two appraisers and several real estate developers, and all agree: the project's $18 million price tag is way off. Supple argued that LPTFA could have built 125 three-bedroom, two-bathroom homes for the low-income population and provided them $400 for the monthly mortgage. In 15 years, they would be homeowners in stead of renters, he said.
Supple even went so far as to do a price comparison with a similar project in Covington called Brookstone. "The one in Covington is not low income' housing, and of course high quality and more amenities," Supple tells IND Monthly. "So it should cost more." He explains that the average cost per unit for Brookstone is around $97,000, or $107 per square foot, whereas Uptown Lofts cost $245,000 per unit, or $272 per square foot. "So Brookstone ... built 128 units for $12.5 million and LPTFA built 73 units for $18 million.
"And that's not even the worse part," Supple continues. "The investors in Brookstone actually own 85 percent of the Brookstone Partnership. LPTFA, who through the tax credits, put up all the construction money, owns 0 percent."
LPTFA's response to Supple? He didn't factor in that a small percentage of Uptown Lofts' space (6 percent, according to The Daily Advertiser) is commercial units.
Say what? Six percent of the project cost $10 million?
View Supple's cost analyses [here](extras/Joire De Vive Cost breakdown.xlsx) (keep in mind Uptown Lofts was originally Joie de Vivre) and [here](extras/128 units Brookstone Park Cost.xls).
Supple and others also questioned why there was no public bid process. Although he acknowledged the project did not go through the public bid process, LPTFA Chairman John Arceneaux responded that bids were requested by Acadiana Outreach Center, which offered five contractors the opportunity to participate. Only three did.
What didn't come up in Wednesday's meeting is that while the original application to the state for the low-income housing tax credits listed Bennett Builders, The Lemoine Co. was selected by the Outreach Board. After several pricing exercises, Bennett Builders, then a Baton Rouge startup that had been securing other low-income housing tax credit jobs in the market, was re-engaged and awarded the contract.
"Everyone we've talked with agrees the price is about twice what it should've been," says Supple. "For the money spent, you could've built 150 units instead of only 70. You paid $240 per square foot, but based on all the contractors I spoke with, they estimate it should only have cost between $115 and $125 per square foot. Uptown Lofts could've been built in River Ranch for these numbers."
Development consultant Greg Gachassin addresses concerns of residents in the Uptown Lofts neighborhood (the project was called Joie de Vivre at the time) in May 2011 at LITE.
Though he mentioned no names, Supple did reference the embattled former LPTFA Chairman Greg Gachassin, the development consultant on Uptown Lofts who faces state Ethics Board charges for doing business with LPTFA while chairing its board, and for continuing that business relationship after his resignation in Nov. 2009. Gachassin is making about $1 million just for his work as a consultant on the Uptown Lofts project.
"You just want us to just ignore this, because you all sure have," Supple said. "You don't want to talk about the guy who used to chair this board and now is going to make a million in fees off this project - that's our problem. Going forward, we're asking for this public board to be transparent."
Supple's brother, Jeremiah, also spoke during Wednesday's meeting. For Jeremiah, all five members of the LPTFA board are to blame.
"Something is wrong here, and you guys are all complicit," Jeremiah said. "We need an investigation, not by you, but an independent auditing firm to see why the cost for this is twice what it should be."
To live in Uptown Lofts, residents cannot earn more than 60 percent of the area median income. For Lafayette, that means a single resident must earn less than $25,740 annually; a family of four must be below $36,720.
About $15 million of the project's funding is coming from the federal Low-Income Housing Tax Credit Program. The Louisiana Housing Corporation, formerly the Louisiana Housing Finance Agency, is the entity responsible for awarding the federal tax credits, and it's also the entity responsible for oversight - possibly the only one.
For Tim and Jeremiah Supple, that's the big question: Who is responsible for overseeing the proper use of these federal tax credits?
Jeff Degraff of the LHC's public information office says projects that have been awarded low-income housing tax credits are monitored during their construction by the LHC, and once they are complete, the units are regularly inspected by the LHC Compliance Department for the length of time required by the IRS.
Once the project is completed, the LHC reviews all costs before giving final authorization for the tax credits, Degraff says. If the final costs are not in line with what was originally submitted, he says the LHC retains the right to rescind the award.
Through a memorandum of understanding, the Department of Housing and Urban Development, the Treasury Department (IRS) and Justice Department ensure low-income housing tax credit properties comply with the Fair Housing Act. LIHTC, pronounced "lie-tech," is a dollar-for-dollar tax credit for affordable housing investments. Created under the Tax Reform Act of 1986 as an incentive for private money to help develop low-income housing, LIHTC now accounts for approximately 90 percent of all affordable rental housing in the U.S. Tax credits are more attractive than tax deductions because they provide a dollar-for-dollar reduction in a taxpayer's federal income tax, whereas a tax deduction only provides a reduction in taxable income.
Most investors in LIHTC projects are corporations, which benefit more from the 1986 tax reform rules than individuals.
The Supple brothers and others asked for an investigation into the project, but LPTFA declined to launch one.
"This project is in direct competition with the private sector with public funds and tax taxpayer money," Jeremiah told IND Monthly after the meeting. "Based on the information provided, the cost per square foot appears to be over twice that of similar projects in Lafayette. This is enough for who ever is accountable to the taxpayer to further investigate this deal."