Publicly funded nonprofits that are supposed to build low-income housing have failed to pay more than $77,000 in taxes and fees on properties across Charlotte.
Delinquent bills date back years, yet city officials who oversee groups said Thursday they were unaware of the missed payments. As the debts accrued, the city continued to pay the organizations for their work.
Some city leaders have long questioned whether the groups actually build enough housing in the city's poorest neighborhoods to justify their cost to the public – often donated land, loans and annual subsidies.
Charlotte faces a shortage of housing affordable to low-income families, who often wind up living in by-the-week motels, doubled up with relatives or sleeping in homeless shelters.
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The tax revelation comes as City Council members debate whether to continue paying the community development corporations.
It also raises new questions about how well the city monitors the nonprofits and developers it pays to build affordable housing. In recent months, Observer reports have found problems with two other government-subsidized projects.
The city last week launched an investigation into the Northwest Corridor Community Development Corp. after a former employee accused the board of an improper land deal and conflicts of interest.
The city recently halted funding to Northwest and two other groups and gave Northwest until today to respond to the allegations.
Representatives from the three groups said they have either addressed the city's concerns or are working toward resolving them.
But four of the five community development corporations owe back taxes on a total of 79 properties, according to county records. Some of the tax bills date back as far as 1997.
The biggest debtors are the City West Community Development Corp. and Northwest Corridor. City West owes more than $52,000 on 32 properties on the city's west side. Northwest Corridor owes nearly $19,000 in taxes on 36 of its 41 properties along Beatties Ford Road, northwest of uptown.
The organizations have had turnover in their leadership, and their current heads said they did not know how the bills got so high.
Harriette Mahoney, who chairs the City West board, said the group is disbanding and will sort out how to pay its bills.
“It takes longer to clean up a mess than to make a mess,” she said. “We're cleaning up a mess.”
Stanley Watkins, head of the city's neighborhood development department, which monitors the organizations, said his staff does not look at tax payment records.
“We look at taxes when we're actually involved in a real estate transaction,” he said. “Otherwise we don't actively monitor whether their taxes are up to date.”
Councilman Edwin Peacock, a Republican, said the delinquent tax bills call into question whether the city should continue to support the groups.
“We don't have an adequate monitoring system in place,” he said.
Help for poor neighborhoods
Since the mid 1990s, the city has employed community development corporations to help revive poor neighborhoods. The groups are generally based on the city's westside.
They operate as independent organizations under volunteer boards and typically have paid staffs of two to three people.
But almost all rely heavily on the city for funding. City officials split $800,000 a year in local and federal money among the organizations. The city also has provided them with millions of dollars in loans for affordable housing projects.
The Observer reviewed tax bills for 92 properties owned by the community development corporations. The records show that three of the corporations have not paid the bills on the majority of the property they owned. Only one group, the Lakewood Community Development Corp., does not owe back taxes.
The properties with unpaid tax bills range from completed townhomes to boarded-up houses and vacant lots strewn with litter.
In some cases, properties were tax-exempt, the records show, but lost that status because the organizations failed to build affordable housing on the parcels within a required five-year time period.
The Belmont Community Development Corp. owes more than $4,000 in taxes and fees on 10 properties in the neighborhood just northeast of uptown. Reginald Jones, the group's executive director, said his group plans to pay the delinquent tax bills.
He partly blamed the unpaid bills on confusion over the organization's acquisition of 10 city-owned lots in 2007 and 2008. Jones said he assumed that city officials would pay the back taxes on six of the parcels, but they did not.
“Any taxes we are responsible for, we don't mind paying,” he said.
Ongoing council debate
The city's neighborhood development office oversees the community groups.
Watkins, who heads that office, said the city performs audits on them every two years. Since 1999, when that monitoring began, Watkins said, the groups have had repeated leadership and financial problems.
He said he brought those reports before City Council, but the council's choice has been to maintain their funding.
“Council has had an ongoing debate about the future of CDCs,” he said, with one option being the consolidation of the various community-based organizations into a bigger entity. “The policy decision that was made was to continue with these guys as independent organizations.”
City Council members appear divided over the issue.
Mayor Pat McCrory, a Republican, said he has lobbied against the groups since he became mayor 14 years ago, but “we never had the votes” to end the city's relationship with them.
He said they continued to receive funding because they hold political influence in their Democratic-leaning districts.
Democrats denied McCrory's claims of political favoritism.
They said some of the groups have been successful in increasing the city's stock of affordable housing, luring private business investment to distressed neighborhoods and providing social services.
Democratic councilman James Mitchell's district includes the Northwest Corridor group, as well as two others. He points out that Northwest was responsible for bringing a Food Lion to Beatties Ford Road, and Friendship is working on a homeless shelter for women.
In council discussions, he has argued to keep the small community-based organizations.
“One big CDC cannot service the entire needs of the city,” he said. “There were unique community issues that you had to be in the community to understand.”
But Mitchell said he was not aware of the tax bills. He said the city has to provide more structure to the groups – including a requirement that they partner with a developer on housing projects – and that city officials should monitor tax bill payments as part of their audits.
Councilman Warren Turner's district includes City West, which owes the biggest tax bill. He said he was surprised by the amount, but he has known for a while that the organization was in trouble. When Turner, a Democrat, asked questions about City West last year, he said, staff told him a solution was being worked out. He believes the city staff should have made the problems clear to the council earlier.
“Don't tell me what you want me to know. Tell me what I need to know,” he said. “The warnings were not strong enough.”
Turner believes that, in a sense, the organizations were set up to fail. Most have no track record in housing development, for example, he said, and that would be better handled by a developer.
“I personally think we gave them a chore that they weren't cut out to do,” he said.