Scandal

The Affordable Housing Project to Nowhere

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Hercules

The small city of Hercules, California, has scrapped plans on a $100 million affordable housing project that has turned out to be an unaffordable way of providing no housing at all. At the local branch of Patch.com, reporters Bob Poertfield and Jackie Ginley have taken a detailed look at the story of the city's good intentions marred by corruption and conflicts of interest:

State auditors and federal investigators now are trying to unravel what went wrong with the Hercules affordable housing program, Sycamore North and other redevelopment projects in the town.

A key question will be how a financially strapped community committed more than $100 million to an affordable housing program and its related infrastructure, spending nearly $50 million before the money ran out – including $30.2 million on the affordable housing segment of Sycamore North and $17.9 million more on other projects and assistance to benefit low-income residents – without producing a single unit of affordable housing.

Another question will be why Hercules' biggest affordable housing advocate, former City Manager Nelson Oliva, embarked in 2005 upon a spree of borrowing, spending and building that has nearly bankrupted the town.

Oliva, it turns out, was the sole proprietor of NEO Consulting, Inc (which also operated under the name Affordable Housing Solutions Group), which became the city's "de facto housing manager for the better part of the past decade." Oliva became the city manager in 2007, at which point he claimed to have divested ownership and management of NEO to his teenage daughters. His contract with the city required that he not be otherwise employed while city manager. But in 2008, Oliva listed himself as president of NEO in corporate filings. NEO's invoices to the city tripled after Oliva became city manager.

"It's easy for me in hindsight to look at this and say it was a poorly conceived project that was poorly managed," says Frank Fox, a Philadelphia developer whom Hercules hired in February to sort out its real estate transactions. "Cities should not be in the development business."

Read HerculesPatch's ongoing coverage of the crisis plaguing the city here

Reason on local government here.