An Interview with Al Velarde, HACEP PIO

I first read about this issue on the El Paso Tribune, a local politics-oriented website operated by Martin Paredes. He had written a series of articles that expressed concerns about a housing development on the Westside -- Suncrest Townhomes. Suncrest Townhomes, it appeared, was a housing development partnership between the Housing Authority of the City of El Paso (HACEP) and Investment Builders -- and there was another organization involved called the Paisano Redevelopment Housing Corporation.

A few issues that were raised by the Tribune articles, and then later by the local media, Mayor Joe Wardy, and City Council, included: the clustering of low-income developments in contained areas; the exacerbation of public school overcrowding by the Suncrest development; and the lack of deference the Commissioners of the HACEP showed to Mayor Wardy. The Authority was called a "rogue agency."

After watching accounts of the dispute on television and reading articles in the El Paso Times and El Paso Inc., the details of the dispute were still unclear. What was clear, was that there was a dispute -- even a lawsuit -- but policy issues surrounding the dispute had not been explained, discussed, or debated.

However you feel about this issue -- based on the information you have -- this interview is a must read.

This interview was conducted on August 21, 2003 at the Housing Authority of the City of El Paso offices at 5300 E. Paisano Drive.

NPT: Tell me about the Suncrest Townhomes Development.

VELARDE: The development is a low-income tax credit development in which Investment Builders Inc. of El Paso approached the Housing Authority (HACEP) to partner with them in order to apply for the tax credits from the State. The reason Investment Builders asked us to partner is because by partnering with our non-profit -- which is the Paisano Redevelopment Corporation - it allows them to compete in what is called "the non-profit set aside" at the TDHCA (Texas Department of Housing and Community Development).

That is important because the rules that govern the issuance of tax credits state that they are going to give preference to people who apply, who partner with non-profits who get involved in rural developments, who get involved with at-risk developments, or who get involved with elderly developments. Those are the four set asides that are going to be given preference. In other words, the state says, we're going to fund those first.

NPT: Through the tax credits?

VELARDE: Right, through the tax credits. As long as they have a passing score. What is left over then will go towards what is called the "general set aside." And that is for any builder who wants to build a tax-credit property, but is not interested in either partnering with a non-profit or building in one of those preferred set asides.

Investment builders came to us with a site plan; they came to us with architecture already done; they came to us with the site; they came to us with everything ready to go. All they were for us was to agree to be their partner. We negotiated a deal in which the Housing Authority was going to get significant revenues at zero investment.

On top of that, they indemnified us, so should the development lose money the Housing Authority does not incur the liability. Pretty good deal.

We did not procure anything. And that's when we checked with our legal counsel. It's perfectly legal for us to accept this partnership.

NPT: This is not a procurement?

VELARDE: It's not a procurement. The best analogy that I can give you is somebody comes to you and says, "Hey look, I got this great shirt. It's a Geoffrey Beene. It's worth fifty bucks and it isn't going to cost you anything. Do you want it? It's your size." Are you going to say, "Well wait, let me see if someone else will give me something for free, where I'm going to benefit." That's the analogy.

Flip side. Next year, the Housing Authority does intend to pursue our own tax credits. One of our reasons for getting into this (Suncrest) is to experience it. We're gaining valuable experience. Now, next year, at that point in time we are going to have to get an architectural firm to draw up the designs; we're going to have to get the developer to prepare the land; we're going to have to find a builder to build it. And then we'll manage it.

At that time, because we are going out and seeking these services, we are now procuring these services and now we have to bid. That's all the difference in the world.

So, you are going to go buy that same Geoffrey Beene shirt. You know you want this shirt. You're going to check JC Penny's; you're going to check Foley's; you're going to check Dillard's. And you're going to buy it for the best price, because now you are the one going out and looking for that shirt.

NPT: Is that why it's advantageous for the Housing Authority to pursue its own tax credits at some point?

VELARDE: Right. We do want to. It follows our mission. It follows our mission of providing affordable housing for the people that we serve. Right now, with this partnership with Investment Builders, it's basically their development.

To qualify under the QAP -- which is the qualifications for the tax credits -- they have to give us 51% ownership, but it is Investment Builders' development.

NPT: Tell me more about the Paisano Redevelopment Housing Corporation, and its relationship to Investment Builders and the Housing Authority.

VELARDE: HUD (US Department of Housing and Urban Development) back in the mid-1990's realized that it was not possible for HUD to finance all of the activities for housing authorities. So what HUD has done is they have not only recommended, but they have mandated housing authorities to become involved in non-profit ventures. To create a non-profit subsidiary, so that non-profit can pursue revenues without having to rely on HUD funding. So, that is in the law.

So back in 1996, the Paisano Redevelopment Corporation was founded. It is a subsidiary non-profit business of the housing authority. Now, it sat dormant for some time. And what we merely did -- we didn't create the Paisano Redevelopment for this thing. It was already there, since 1996. We merely activated it. And now Paisano Redevelopment is the non-profit organization that is partnering with Investment Builders (to build the Suncrest Townhomes).

NPT: Its corporate board is shared with the Housing Authority?

VELARDE: Right. The Housing Authority Board makes up the corporate board (of the Paisano Redevelopment Corporation).

NPT: That model sounds similar to the Greater El Paso Housing Development Corporation, which was a subsidiary of the Greater El Paso Chamber of Commerce. Didn't they used to partner with private developers?

VELARDE: I don't know. But, this is something that is not uncommon. In fact, the Housing Authority of El Paso is the last major housing authority in the state of Texas to get involved in tax credits. San Antonio has been doing it for 10 years. Dallas has been doing it for many years. Houston, Ft. Worth. All these housing authorities. Austin has been doing it for many years.

So, this is our first entry into the tax credit. San Antonio is well on its way on doing their own developments. Most of these housing authorities did it the way we are doing it. They partnered, they learned -- because it is a very difficult system to learn. You don't automatically get these credits. You have to apply for them. And it is competitive.

So, they partnered. They did much what we are doing here. Learning the system, learning the process, and they eventually break out on their own and seek out the tax credits on their own.

NPT: They're picking their own shirts?

VELARDE: Exactly. They are now picking their shirts. And it works fine.

And the reason why a tax credit works, is because -- where it differs from the government housing projects of the past, where HUD gave you X dollars, you build a government project -- and those were the projects. But because HUD says this is something that the government is giving these people -- they say, they don't need carpet, they don't need anything fancy. They get a refrigerator; they get a basic stove; they get the basic necessities and nothing more.

Tax credit property, on the other hand, is a private investment. And the private developer -- or person who is building it and managing it and owning it -- has to sell it or rent it or lease it to people who want to live there. In Suncrest, for example, Investment Builders is going to put in, I think, $82,000 per unit, when it's all said and done.

When you say $82,000 and compare that with a market home, a first-time-buyer's home -- which averages something like $60,000, $65,000, maybe $70,000. So, they're investing $82,000 per unit.

NPT: What does that mean?

VELARDE: It means it's going to have covered parking. It's going to have two swimming pools. It's going to have a Jacuzzi. It's going to have a completely furnished recreation center. It's going to have playgrounds. It's going to have all of the amenities that you'll find in a class A market-rate resident complex.

It's going to be as nice, if not nicer, than Ryan's Mills and Ryan's crossing, which are right next door. What it is, it's made affordable because by issuing the tax credits the state or government is not giving anybody a single buck, they're not spending tax dollars. They're giving tax credits.

So, now Investment Builders, they turn around and they put these tax credits on the market. Private investors will purchase these tax credits. By purchasing them, they are in fact investing in the development. They use those tax credits to get tax breaks on their income. And they also provide the investment to build the development.

So, that's how it works. The government is not giving a penny to anybody. They're just allowing people to take tax credits.

NPT: It sounds complicated, for the average person to understand.

VELARDE: Yes. A lot of people think the government is giving us tax dollars. That's why I think you've seen and read where Tropicana Homes is saying, Suncrest is wasting money because they're putting $82,000 into a unit, where we're only spending $60,000.

When you think of it in terms of tax money, paying for that, sure it might be a concern, but the fact of the matter is that there's not a government dollar being spent on it --
it's tax credits. And Investment Builders chose to build a high-quality development to attract leasers to this development and to lease it up as quickly as possible, so he could get a return on his investment.

And again, there is not a tax dollar being spent, so it's not like there's a tax dollar being wasted. Like you have kids, you have tax credits for your kids. You're able to apply those tax credits on your income tax. Well, those people who purchase these (Suncrest) tax credits and invest apply these tax credits on their corporate taxes or whatever taxes they have. That's how the system works.

NPT: You said the investors also get a return.

VELARDE: Yes. They are also the owners of the property.

NPT: So, they get the benefit of the tax credits and ownership?

VELARDE: They would be 99.9% owners of the property. And the Housing Authority and Investment Builders would be 0.1% owners for 15 years. At the end of 15 years, the investors are out, and then the property reverts to the Housing Authority and Investment Builders. That's how it works.

NPT: Who will be living at Suncrest?

The average income of people who live in public housing is $7,500 a year. People who use Section 8 housing earn $8,500 a year. (At Suncrest) we will have a low-income component.

For $13,350 and below -- that is your people making 30% of median family income for El Paso, of course, there will be 27 units available for them. You go up to the next level, the 40% -- which is $17,800 to $22,250 -- we'll have 15 units for them. Up to 50% -- which is the $22,250 per family -- we'll have 8 units.

The biggest block is 74 units for people who are at 60% of median income, which is up to $26,700 a year. I would probably say the majority of El Pasoans, especially young El Pasoans just beginning a career, fall into this area.

And then we'll have 16 units at 90% which will be completely market rate. So, they'll be paying $700 per month. You could rent an apartment there.

I don't know what the rent is next door (at other apartment complexes), but I know it's pretty comparable. The poorest people will be paying $218 a month and it goes up from there.

People are paying rent according to their income.

NPT: Based on what you're saying, it looks like Suncrest will be a mixed income community within itself.

VELARDE: Exactly. So, all of this information that is getting out is misinformation.

NPT: Does that speak to the issue of "Clustering?"

VELARDE: For the clustering issue, of course, I have the map right there.

You can see clearly where "clustering" is taking place in El Paso -- the Downtown, Central Area, and Lower Valley. Whether they have a home or they live in an apartment, those are the predominant low income areas.

On the Westside, you'll see four black dots. Those are the four public housing communities. The red dot is the migrant farm worker development. The red and the black, we are going to be just up the street from those two. But, our concern -- while we understand that there are below-market-rate units within that neighborhood -- they exist, there is no denying that -- the fact of the matter is that you have very high-rate market units there. You have some very expensive homes in that immediate vicinity.

What you have going on in that area is a truly mixed income community, which is really the ideal area to put it in.

You can't find any area downtown that is not clustered already. So, you can x-out downtown. Lower Valley -- again, you can x-out. Under the same logic that the city's using, the majority of the Lower Valley is low-income. Northeast -- with the exception of North Hills and then the area off of Alabama, near the Mountain -- again is a fairly low-income area.

So, you have the Eastside and Westside left. Where are you going to put it (Suncrest)? When you're talking about clustering, where in El Paso can you put anything that's low-income and not have some kind of clustering take place? You can't.

NPT: Are you also looking at other areas?

VELARDE: We are looking at other areas. This particular development, again, just happens to be on the Westside. We are not blind to the fact that we need to place them in different areas. But, the fact of the matter is in El Paso it's very difficult to find a plot of land within the city that's not going to have significant numbers of low-income people living around it. Because, the majority of El Pasoans are low-income.

So, we don't buy the "clustering" issue.

Where we are building Suncrest, there is one public housing unit and a migrant farm worker unit. One is a USDA (US Department of Agriculture) funded development; the other, of course, is HUD. And that's it within that quarter of a mile that the city is saying (is being "clustered").

As far as tax credits, about the same. There are only four tax credit properties on the Westside; there are a total of 54 tax credit properties throughout the city. So, you don't have a lot of tax credit properties out there either.

NPT: Are any of those other tax credit properties also Housing Authority developments?

VELARDE: No. Those belong to private developers.

NPT: How about the issue of overcrowding public schools?

VELARDE: Again, we are not blind to the fact that Morehead is overcrowded. We are not blind to the fact that Hornedo and Coronado are overcrowded. And Franklin is overcrowded. But, that's where the growth of the city is going. The same thing occurs on the Eastside. And Montwood is overcrowded. Hanks and Americas are overcrowded.

Now, what are the schools that are not overcrowded? Bowie. Jefferson. They're not overcrowded. They are about 99% populated by low-income. So, are we going to build there because the schools are low-income? That would be clustering. That's not an option.

We certainly hope that the schools can address that issue (overcrowding). They need to, because whether we build there, somebody is going to go into that piece of land.

The land that we're putting our development on -- we're putting in 160 units -- is zoned for up to 25 units per acre. Which means approximately 500 units can go there. So, if Suncrest isn't put there, somebody is going to go there, and they could very easily put 500 units in that same piece of land.

So, I would think the schools would welcome Suncrest, because at the very least, we're having a lower impact on their schools than what could go there.

NPT: There seems to be some confusion as to what relationship the Housing Authority has to the City of El Paso. Could you clarify that?

VELARDE: The Housing Authority is an independent political subdivision of the State of Texas. We are not a City department. We are not governed by the City. We are not controlled by the City. We do not follow the orders of the Mayor.

What we want to happen, is to work closely with the City so that we share the same vision. And that we work together so that we address the housing issues together, rather than bumping heads with each other. That's the idea of how the State has set this up.

The question surrounding the appointment of these new commissioners, and what we are contesting -- certainly the Mayor is going to say differently -- the State is very clear. It says that the Mayor can appoint 5, 7, 9 or 11 commissioners to the board. It is very clear that it says that the Board of Commissioners of the Housing Authority have all powers vested in them -- for the Authority itself.

What do those two statements mean? What do they not mean?

Well, the first one -- the Mayor may appoint 5, 7, 9 or 11. Yes, he can, upon vacancies. Nowhere does it say, suggest, or insinuate that he can change the composition of the Board. In that second statement, we find that the Housing Authority Board has all powers invested in it. What you can take out of that is that it is the Board's authority to decide whether to change the size of the Board. If the Board says we do want to change our size and add Commissioners, then it is the Mayor's job to add Commissioners.

That is our contention. And we think it is pretty clear.

In San Angelo, the mayor tried to use the law to do exactly what Mayor Wardy is doing. And he (the Mayor of San Angelo) did. And when he did, HUD came down on them and said we will not recognize the new board members. We will not recognize this board -- until there is an answer by the Attorney General. There is no answer by the Attorney General's office.

NPT: Still, today?

VELARDE: Right. The Attorney General has not come back. So actually, likely what will happen is that the lawsuits taking place here will likely create that answer. But it is our contention and it is our belief, that the State Legislature never intended to give the Mayor of any city the authority to control a (housing authority) board.

And in effect, what Mayor Wardy is doing by appointing six commissioners is trying to forcefully take over the Housing Authority, I believe, for the purpose of torpedoing Suncrest. That is the main reason why he has the urgency to replace this board.

He's going to get two picks. He gets two replacements in February. And so, he will have his input on that board. He has, right now obviously, a necessity to make immediate change. That's why he has pursued this route.

The question that is somewhat difficult to answer is, why then, if he needs to take control of the Housing Authority by appointing six members, does he not also try to remove the current members? Because, he does have the power to remove them "for cause."

Our response is that he hasn't done that because he doesn't have good cause. The Housing Authority is the highest rated housing authority in the country.

NPT: Is it still the highest ranking housing authority?

VELARDE: For 2002. Mr. Montiel (HACEP President/CEO) is taking this organization from red to black. We're probably the only government organization in this city right now that is not hurting financially. The Community College is laying off people. UTEP is cutting back classes. The government organizations are hurting and we're not. We're very financially secure. Mr. Montiel turned that around; and our Board turned that around.

We are providing services and achieving our mission. We have difficulty understanding, why then, it's so important for our Mayor to change the composition of this Board -- to add six commissioners. Why six today?

NPT: Why the urgency?

VELARDE: Based upon what we have seen, our belief is that Tropicana Homes is putting the pressure on the Mayor and on Anthony Cobos (Dist. 8) to torpedo this deal (Suncrest) so that they can benefit. How this pressure is being applied, we don't know.

Prior to the change in administration we had support. Our former mayor was supportive of it. Anthony Cobos didn't have any problems with it. We had support from Congressman Reyes. Now, he never did pull back and oppose it. He just had questions. That's one thing. There was no opposition to it. Everything was running smoothly.

The minute we had the change in the administration, and then the instant that the TDHCA said who was being recommended for funding -- Suncrest was, Tropicana's developments weren't -- that's when the opposition began. And that's when Bobby Bowling stepped up and began opposing the Suncrest development.

When we had the hearing here in El Paso, Demetrio Jimenez, who is Bowling's employee, was there and he had every opportunity to stand up and say, Suncrest is a bad idea. He didn't. He didn't oppose it. Because at that time, nobody knew who was going to get the tax credits (from TDHCA).

But, at the first hearing in Austin, that's when Mr. Bowling came. I will share this with you. He did have a conversation with me, outside that hearing. And in that conversation he showed surprise that we were there, because this was after the resolution was passed by the City. The City passed the resolution to oppose the development.

And Bobby Bowling seemed to think that because the City opposed it, that the Housing Authority wasn't going to be there. So, he was visibly upset that we were there. And in his discussion with me he said, by being here you guys have just turned up the heat -- when I get back, I'm going to go public with the bidding issue. And he's the one that's primarily alleging the bidding issue.

That's when all this El Paso Forum (online discussion) business started. That's when all this started popping up. Demetrio Jimenez himself popped up there and had a couple of strings (postings) on there.

We started taking a huge credibility hit from this. And, of course, that's when the politicians -- the Mayor and Cobos also started opposing it publicly, very strongly, to our surprise. Because, again, we didn't have the opposition before.

NPT: Who else has publicly opposed the Suncrest development?

VELARDE: At the second hearing before the TDHCA, the people that got up there and opposed us were Teresa Caballero -- who, of course, is out to demolish anything that she thinks her father succeeded in; but more importantly she is Tropicana Home's attorney. Of course, Bowling was there. Demetrio Jimenez was there. Martin Paredes was there. And that's your El Paso Forum. And then, the El Paso Tribune is a related online publication.

Teresa Caballero writes for the Tribune. Demetrio is their cartoonist. And, of course, Martin Paredes is the chief editor. They were the primary speakers. There was one former Housing Authority employee who is disgruntled, for whatever reason. I don't know why. She spoke against it. And you had Luis Sariñana who spoke against it. I don't know what his involvement is. But he was there -- former city representative. That was it.

But, I just thought it was kind of interesting to see that it's the El Paso Forum that is opposing this publicly. And who makes up the El Paso Forum?

It's just interesting to see that.

NPT: The 8th Court of Appeals has stayed the appointment of the six new commissioners to the Housing Authority Board. What's next?

VELARDE: The Court of Appeals needs to set a hearing date. It hasn't been set, that I know of. In the meantime, we're continuing to operate as we have always been operating. And we move forward.

We hope that we can repair the damage that has occurred between us and the City, because we know that it is important for us to work with the City.