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Miami Herald - July 23, 2006

"House of Lies" (part 1)

Housing agency is an ATM for developers

In the nation's least affordable city, the Miami-Dade Housing Agency lost millions to developers who built nothing, stranding the poor in decrepit and unsafe homes


The dirt lot that cost taxpayers $764,000 sits on a grungy corner just outside Miami, strewn with slashed tires and beer cans and an official white sign, now covered by weeds, announcing Miami-Dade's promise to the poor:

Riverside Homes. Miami-Dade Housing Agency Funded Project.

Here, behind a sagging chain-link fence, developer Oscar Rivero promised to build 24 houses for low-income families. Across town he promised 54 more, but that lot, too, is barren, occupied only by a contractor who uses the spot to hose down cement trucks.

For these two affordable housing projects, the Miami-Dade Housing Agency paid Rivero's development companies almost $1.6 million -- but not a single house was built.

It was the beginning in a series of ill-fated government deals that shook the foundation of public housing in one of the poorest and most distressed communities in the nation.

In the past five years, the Miami-Dade Housing Agency squandered millions of dollars on failed projects, pet programs and insider deals even as thousands of families languished in rotting and unsafe homes.

Aided by the agency's longtime director, a cadre of developers made out, raking in millions of dollars for homes that have never been built. From Little Havana to Liberty City, they took the money but left only empty lots, with broken baby cribs and bags of trash where houses had been promised.

Overall, the Housing Agency pledged more than $87 million to put up 72 developments for the poor, including apartments, houses and complexes for the elderly. The expected payoff: more than 8,300 new homes.

It was the centerpiece of the most ambitious affordable housing push in decades, and desperately needed in a county with a hurricane-battered housing stock, runaway home prices and a workforce stunted by stagnant wages.

But about 40 percent of the projects funded between 2003 and 2005 have been canceled. Others are delayed for months, even years. Only 14 projects -- less than one-fifth of what was pledged -- have been completed.

Worse: Even when houses were built, some developers under the watch of the Housing Agency bypassed the poor and sold to real estate investors who turned quick profits.

''That's terrible,'' said former U.S. Rep. Carrie Meek of Liberty City, who sponsored breakthrough legislation that created Miami-Dade's affordable housing construction fund. ``I wanted to leave a legacy in this community. This undermines it.''

Bus drivers, nurses' aides and construction workers suffered -- no place to live, no help from the government.

Ozie Porter saved $5,000 earning $10.44 an hour as a cafeteria cook. At 54, the longtime public housing resident is ready to buy her first house.

She found a rare three-bedroom priced for low-income buyers at $179,000 and took a tour in late spring, sweeping into the foyer under a crystal chandelier.

''Can you imagine,'' Porter asked, ``walking through that front door every day?''

She turned to the builder, but the news wasn't good: More than 100 families were lined up to buy the house.

Porter pleaded: ``Don't do that to me.''


The Miami Herald spent seven months investigating every major building program at the Housing Agency, examining hundreds of project files, federal records, invoices, budgets, construction correspondence and government databases.

At every step, The Miami Herald found, the agency became an unchecked cash machine for developers and consultants -- and failed the families it was meant to serve. Consider:


Miami's skyline glistens with sleek buildings, its suburbs with terra cotta estates, but for thousands of poor families who scrape by in the city's underbelly, home is a cramped rental apartment on the outskirts of town.

With pockets of intense poverty and an immigration rate that no other community has seen since New York in the first decade of the 20th century, Miami is the nation's least affordable city, The Miami Herald's analysis of census numbers shows. Here, Fernando Santana gets by earning $3 for every pineapple he sells from the back of his truck parked on a dusty corner of Little Havana.

The Housing Agency was supposed to become a vital lifeline to residents like Santana and to thousands of families hunting for a safe, clean, stable place to live.

It is an agency flush with land and money.

In 1983, Miami-Dade became the first county in Florida to pledge construction loans to developers willing to build affordable homes. The money would come from taxes paid on commercial property sales.

The surtax program, fueled by tens of millions of dollars, was a lifesaver for some families.

But in 2002, the Housing Agency began engaging in a risky practice: Funneling money to developers long before they started construction.

The advances for at least 11 major building projects over four years undermined the county's ability to produce housing and recoup loans from deadbeat developers.

County officials say the practice violated the Housing Agency's own policy, which prohibits cash advances so taxpayers' dollars aren't lost on projects that end up dead.

Yet, in one of the most questionable cases, the agency -- under orders from director Rodriguez -- cut a $500,000 check to Rivero's development company for a project never built: Riverside Homes, off Northwest 85th Street on the fringes of Little Haiti.

The money was transferred even though records show Rivero had not started construction, did not have builders' risk insurance to protect the county from liability and had not paid the required $10,000 commitment fee to the Housing Agency.

''We had never done it like that before,'' said Tawana Thompson, who has run the construction loan program for nine years.

Thompson said her boss, Rodriguez, ordered a series of advances. She said the Housing Agency usually requires receipts, invoices and canceled checks documenting payments to contractors for construction before any money is paid.

Rodriguez did not return The Miami Herald's calls.

Today, four years after the Housing Agency advanced Rivero $500,000 -- and later paid another $264,000 -- the lot that was supposed to have ''`big, family-size units'' has become a dumping ground with an expired building permit notice from Miami-Dade County tacked to the fence.

''They've been saying they were going to build something here for years,'' said Miguel Gonzalez, who lives across the street in a freshly painted yellow house.

Even with that project stalled, the Housing Agency gave Rivero's company $816,000 in 2004 for another building venture in Little Havana. Instead of spending the money on construction, however, records show Rivero told the Housing Agency he was going to use most of the tax dollars to pay down private debt.

Rivero, 36, an attorney and chairman of the Miami Parking Authority, is part of a small group of developers and consultants involved in some of the Housing Agency's most questionable projects.

In a written response to The Miami Herald, Rivero said, ``The developments are progressing and I have full intention of repaying the funds allocated with all applicable interest.''

But that hasn't happened. Rivero's loans are in default; the county filed suit this month.

Besides the $1.6 million, the city of Miami's Department of Community Development paid Rivero's company $530,000 for one of the two stalled building projects. The city's program is run by Barbara Gomez-Rodriguez, Rene Rodriguez's wife. They are now divorcing.

While the money flowed to Rivero's projects, some staffers at the Housing Agency raised concerns.

In late 2005, after Rivero requested another $179,000 for Riverside Homes, Housing Agency loan officer Ana Sofia Rodriguez wrote in an e-mail, ``The draw request is composed of soft costs only, again . . . construction for the project has not progressed as proposed.''

She questioned the way Rivero planned to use the money:
''This is a tragic case of wasted time and money, neither of which Miami-Dade County can afford,'' said Sushma Sheth of Liberty City-based Miami Workers Center.

And the dollars have continued to flow, with Rivero awarded money again this year for three new projects.

The County Commission approved them in a sweeping package with money for dozens of other builders. Earlier this year, as the Housing Agency prepared to squash the projects, Rivero relinquished the money.


One of the most questionable recipients of surtax money is the Housing Agency itself.

State law is clear: The money can be used only to build or rehabilitate housing for the poor.

Yet when the Housing Agency wanted a new headquarters in 2003, it dipped into the surtax fund to put $5 million into the project. Three years later, nothing has been built.

The Housing Agency also has tapped into surtax money to cover budget cuts, partly because it doesn't receive any money from the county's general fund.

In 2005, when the federal government slashed the agency's funding, the Housing Agency drew on surtax dollars to cover a $9.6 million budget shortfall.

With the approval of county commissioners, officials promised to pay the money back over 10 years, saying no construction project will lose out.

''We didn't worry,'' said Housing Agency Finance and Administration Director John Topinka. ``We know from experience that it takes several years for [building] projects to be completed.''

Other questionable expenses taint the program.

Just this year, the agency got permission to use surtax money to pay $830,000 to a consultant for another two years of management for one of the Housing Agency's most delayed and troubled projects: the rehabilitation of the Scott/Carver public housing, which after six years is a wasteland of boarded-up buildings.

In another program, the Housing Agency used surtax money to pay a for-profit real estate company $50,000 to run ''homebuyer education'' workshops for the poor. But The Miami Herald found the agency paid thousands of dollars for people who said they had no idea their names were being used.

Another $200,000 went to the local Black Business Association for helping minority-owned contractors become certified with the county. But the association double-billed the Housing Agency, The Miami Herald found.

All the while, the Housing Agency has allowed building projects to linger for years through repeated delays.

Case in point: In 2001, the agency awarded the Allapattah Business Development Authority $1 million to help finance the construction of 30 townhomes on a bustling corner just off the Airport Expressway.

Five years later, the project still isn't done.

The nonprofit group, known as ABDA, got the money even though its last affordable housing project, Ralph Plaza 1, was delayed by lawsuits, liens and a contractor who was jailed in an unrelated kickback scheme.

So far, the Housing Agency and its board have allowed ABDA to repeatedly push off the due date for its new project, Ralph Plaza II. ABDA also has proposed raising the price of its town houses from $112,000 to $145,000, passing on the costs to the poor.

In all, it's taken ABDA a decade to build the 44 apartments -- about four a year.

With so many affordable housing projects delayed or dead, advocates for the poor question why the county hasn't stepped in sooner. County Manager Burgess made a series of changes in recent months, but problems have festered for years.

''It's disgusting,'' said Lida Rodriguez-Taseff, an attorney who has represented low-income families with housing disputes.

The worst part, she said: ``Nobody blinks an eye.''

Staff writer Susannah Nesmith and database editor Tim Henderson contributed to this report.