A House Divided

Two years ago, the Phillips Neighborhood Housing Trust--one of Minneapolis's largest nonprofit community housing organizations--imploded, leaving in its wake bills, personal vendettas, and low-income families scrambling for a place to live. Out of its ashes eventually rose the Housing Resources Clearinghouse of Phillips (HRCP). But just a few years into operation, HRCP is suffering the same fate as its predecessor. Last month HRCP's parent organization, People of Phillips (POP), froze funding and ordered the board to disband. And as HRCP goes down, so may 47 neighborhood homes.

When HRCP was formed in late '94, it inherited not only PNHT's properties, but its headaches as well. According to a 1996 report, financial hemorrhaging in PNHT's waning years had resulted in the physical neglect of its properties. In addition, PNHT staffers had not been collecting rent for months. "In order to prevent a recurrence of past events," said a 1996 report, "escrow accounts must be replenished, operating and capital reserves must be fully funded and, most importantly, the physical deficiencies of the properties must be corrected." The report was drafted by the HRCP board and Central Community Housing Trust (CCHT), a local nonprofit developer whom the Minneapolis Community Development Agency asked in May '95 to help HRCP deal with the PNHT legacy.

In April '96, the MCDA and the community groups reached an agreement allowing CCHT to assume control of 88 PNHT rental units in Phillips, while HRCP took responsibility for 47 homes. HRCP board member Carol Pass says the group's executive director, Doc Davis, was directed to "devise a strategy to safeguard the future of these homes."

According to both Pass and CCHT head Alan Arthur, Davis and other staffers were aware of the homes' precarious financial situation from the outset. "They had been told that the clock was ticking towards foreclosure," says Arthur. But Arthur maintains that while he urged quick action, there were no indications that HRCP staff was taking steps to prevent foreclosures. And Pass claims that Davis failed to keep the HRCP board informed.

While Pass maintains that she and other board members are stumped as to why Davis didn't heed Arthur's warnings, an explanation of sorts may be found in the events of last summer. In August, Davis had come under fire for ignoring HRCP board directives, failing to pay a contractor, and carrying on a personal relationship with his MCDA supervisor, Edie Oates ("A Phillips Affair," 9/18/96). After months of infighting, the HRCP board suspended Davis with pay last September. By then, however, Davis's activities had drawn the attention of the city attorney's office, which ordered an audit. In December POP's executive director, Don Vargas, informed the HRCP board that they had lost all credibility with funders and residents, and he ordered the group to disband.

Despite the troubles, however, HRCP staff is still suiting up and showing up. According to Interim Acting Administrator Kim McCarty, POP will assume HRCP's housing program. "We are technically employees of POP anyway. This is just a slight change in organizational structure," she explains. McCarty also takes umbrage at any inference that Davis is to blame for the current housing crisis, saying it was CCHT that "basically chose not to pay the mortgages" on the homes.

Arthur counters that CCHT's role in the PNHT/HRCP debacle was strictly advisory. "In July of 1995," he says, "we informed the [board] members that we would not come up with any money. We were brought in as facilitators only." According to Arthur, PNHT, which never dissolved, is still technically the owner of the homes, although his organization holds power of attorney. Arthur says that in October 1995, PNHT was losing so much money that all of the parties involved decided not to pay the mortgages. "It came down to either operating the properties for residents or paying the mortgages. We spoke to the lenders--First Bank, TCF, and Fannie Mae--and they agreed to work with us," he says.

POP officials now say that within a week or so, Fannie Mae will issue 26 "deeds in lieu of foreclosures" on homes in the neighborhood, and First Bank and TCF are also getting in line. Yet McCarty maintains that the situation is not as dire as it sounds. "[Foreclosure] can be a slow process," she says. She adds that her group wants to use NRP funds to help low-income families buy some of the homes. But Pass and others are not so optimistic. "It's 45 houses in the most depressed area of the city, and it's ripe for slumlords to move in. This is going to have a huge impact on the neighborhood," says Pass.

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