The East Lake Meadows public housing development was once one of Atlanta’s worst areas, so notorious for violence it was likened to a war zone and dubbed “Little Vietnam.”
More than two decades later, its replacement — the Villages of East Lake — is held up as the city's shining example of mixed-income housing built through public-private partnership. The crime rate has plummeted in the development, where half the residents pay market-rate rents, while the other half receive subsidies. And the nearby Drew Charter School, created as part of the vision, has earned accolades for student performance.
But not everything for The Villages of East Lake is proceeding smoothly.
Discord has arisen between the private partners who built and manage the development and the Atlanta Housing Authority (AHA), which is an investor in the Villages and provides public housing subsidies to low income residents. The developers want to refinance part of the Villages’ debt and use money generated in a new deal for a $17 million renovation, but they say the AHA has delayed consideration of their proposal for three years.
AHA CEO Catherine Buell said the board has concerns about the development’s finances. The Villages have operated at a deficit of about $13 million over a 20-year period. She said the complex structure of the deal, with funds coming from many sources, and additional debt being added to the project, also has given the board pause.
The standoff could mean residents will have to wait for needed renovations, such as new heating and air systems, plumbing and appliances.
Both sides agree the Villages have been successful and that, if two high-interest mortgages are refinanced, the debt relief could provide needed cash for renovations and upkeep.
But that’s where the agreement appears to end.
In a pointed letter, the president of the CF Foundation, a nonprofit partner in the Villages, accused the AHA board of moving the goalposts for reaching an acceptable deal, even though the AHA's own staff approved of multiple versions of the refinancing plan.
A decision last week by the AHA board to not take up the matter, for the fourth time in six months, “has created a crisis for families in the Villages of East Lake,” CF Foundation President Lillian Giornelli wrote.
The delay risks the partners’ ability to obtain a $5 million federal loan that’s a key part of its renovation and refinancing proposal.
Giornelli wrote that CF and its partners will “pursue all remedies available to us in law and equity” if the board doesn’t schedule a special meeting to consider the proposal by Wednesday afternoon.
Buell said the AHA board has no plans to call a meeting. Without further study, she said, the board doesn’t want to approve a complex deal that might not solve the problems.
But, the developers point out and AHA acknowledges, the Villages’ losses have been absorbed by CF and the partner nonprofit East Lake Foundation, not taxpayers. The project is not in any risk of default, the developers said.
The Villages of East Lake was revolutionary when it was developed in the 1990s and was in the vanguard of Atlanta’s plans to de-concentrate poverty by demolishing housing projects in favor of mixed-income communities.
East Lake was redeveloped by the East Lake Foundation, which was founded by noted Atlanta developer Tom Cousins and his wife Ann to help revitalize the East Lake Golf Club and the surrounding area. The development attracted a new YMCA, the Drew school, a new nine-hole public golf course and a First Tee golf academy.
The success of East Lake led to the creation of the affiliated national Purpose Built Communities nonprofit development group, which has established a similar mixed-income model in projects across the country.
The proposed financing plan would replace the existing mortgages with a lower interest loan. A pair of existing zero interest AHA loans would be carried over, but Giornelli said no new AHA funding would be needed and AHA would be in a better position to receive returns from the project, including a share of new developer fees.
AHA said they agree with the need to reduce interest costs. But Buell said the developers haven’t paid any principal back on the original AHA loans from the 1990s. Those loans, documents show, are due in 2036 and 2039, respectively.
“It’s a wonderful project, however 20 years into the project, the property is facing some real financial challenges,” Buell said.
The developers dispute that assessment. The AHA loans were intended to be loans in name only, they say, and were essentially a form of equity that included no interest or monthly scheduled payments. The debt was in essence a permanent piece of the financial structure, a unique design at the time, that was intended to be renewed when due, the developers say.
“We are confident that our understanding of the original transactions are correct, and we welcome the opportunity to have a substantive conversation with the Board,” said a statement from Carol Naughton, an East Lake Housing Corp. board member who was involved in drafting the original agreements for AHA.
Another potential factor hovering over the impasse is a rivalry among two fixtures in city politics.
Credit: HYOSUB SHIN / AJC
Credit: HYOSUB SHIN / AJC
The chair of Purpose Built Communities is former mayor Shirley Franklin. The authority and its board was reshaped in recent years by her successor, former mayor Kasim Reed.
The former mayors, whose relationship has been rocky for years, were on opposite sides of last year's mayoral runoff. Reed backed Keisha Lance Bottoms, who edged former city councilwoman Mary Norwood, who was endorsed by Franklin.
Both ex-mayors were present at points during last week’s AHA board meeting. Franklin spoke in favor of the refinance.
Asked if political differences between Reed and Franklin influenced the board’s actions, Buell said, “I don’t know.”
Credit: JOHN SPINK / AJC
Credit: JOHN SPINK / AJC
“What I will say is that, from a staff level, projects always have their advocates and sometimes those advocates are influential in various ways,” she said.
Reed did not respond to a text message seeking comment.
In the meantime, residents like Berdia Dodson may have to wait longer for needed repairs to their units.
Dodson, who has lived at Villages of East Lake for 17 years, said she’s proud of her home. But, she said, the apartment needs new cabinets and a dishwasher. The managers do their best to keep up with maintenance and fix things immediately when called.
“[I am] happy for what I have here, and I enjoy what I have here. It’s beautiful. But there’s work that needs to be done,” she said.
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