What The Post found
For years, the West Palm Beach housing department overpaid for housing repairs, even when they doubled or tripled from the original estimate. In about one-third of the cases The Post examined, the repair costs exceeded the value of the house. On top of that, paperwork proving the need for the repairs or whether the work was done at all was sometimes missing.
Who gets the help?
A property owner, usually someone who lives in the home, meets with a city housing specialist to determine whether they are eligible. Different programs have different requirements. Income is one. Some programs award grants, some help is structured as a loan that either doesn’t have to be repaid or has very low monthly payments.
Before work can proceed, the city or a city consultant typically surveys the house, drawing up an assessment might or might not include what the homeowner originally wanted.
Contractors submit bids.
The city selects the best bidder. It most commonly pays the contractor directly, using money from either U.S. Housing and Urban Development or state-run programs such as a Florida Housing Finance Corp. program called SHIP. HUD is taxpayer-financed; SHIP money comes from certain Florida real estate sale taxes.
What the state found
- The homes of several West Palm Beach property owners received more project money than the amount authorized by the city's own rules.
- In 10 cases, the amount of money spent was at odds with what the city reported.
- Mandatory information was missing in certain files. Rental developments that got state money weren't documenting that tenants met income guidelines and the city didn't make them do so.
- No one could identify which employees were working on the state program. The city-hired consultant overseeing it spoke just once to reviewers and did not show up for a final interview.
Source: SHIP Program Review, 2013
What HUD found
- West Palm didn't allocate repair money properly, failed in multiple instances to track it and didn't accurately report project information to HUD.
- In one case, the costs charged to HUD included buying a property that according to county property records had not been sold.
- The city paid $13,950 for lead testing; neither auditors or the city could find evidence it took place.
- In six cases, the project address reported to HUD didn't match the address in the city files.
Source: HUD Office of Inspector General, 2013
The bucks stopped everywhere.
For years, taxpayers have footed the bill for a series of remarkable West Palm Beach housing repairs: $700 to buy and screw in 23 light bulbs, a $232 closet shelf and a $900 flagpole. A doorbell repair cost taxpayers just under $200 when a replacement costs $22. Replacing a bathtub totaled $3,900.
West Palm Beach city housing managers blessed it all.
Tucked away on the third floor of City Hall, West Palm’s housing department repeatedly has bungled oversight, approved inexplicably high prices and ignored waste, a four-month Palm Beach Post investigation found.
Between 2008 and 2014, hundreds of thousands of dollars that might have helped property owners in struggling neighborhoods fix leaking roofs or other major repairs instead paid for bloated costs and in some cases, such high-end touches as etched glass doors.
HUD and the state’s housing authority last year each questioned how work was handled.
But The Post’s investigation revealed that problems went deeper than those cited by HUD and the state. Among the findings:
- When contractors asked, the city gave. In roughly one-third of 104 home rehabilitation projects reviewed by The Post, the cost of repairs at least doubled from the original agreed-upon price, typically when new repairs were added. Altogether, original costs swelled by $1.5 million.
- The city at times poured more money into repairs than the house was worth. In one case, the city spent $65,629 to repair a house valued at $53,292.
- In multiple cases, the city overpaid for materials or labor. For example, at $9.30 an hour, screwing in 23 reasonably priced light bulbs at one house would have dragged on for a week and a half — two hours per bulb — to hit the $700 price approved by the city for the chore.
- Contractors won bids to repair homes even when their costs doubled or tripled the city's own estimates for specific repairs: The city's projected cost of replacing a single light switch at one house was $179. The contractor priced the work at $400. But the contractor still had the lowest overall bid of any company, and so won the job.
- Paperwork showing that work was needed — or done — is missing and may never have existed. For instance, roughly $13,000 was awarded to contractors to eradicate termites in six homes. Records showing termites existed were not in city files, and there was no indication the city required them. In three cases, there was no proof extermination took place. But then, records were hit or miss: In one case, the city failed to record $13,966 in repair money.
The city acknowledges long-running problems and is committed to getting the department on track, spokesman Elliot Cohen said.
After the May ouster of a consulting firm hired to run the housing department, Mayor Jeri Muoio hired a former U.S. Housing and Urban Development Miami director, Armando Fana, to lead the city’s housing efforts.
“We’ve hardly hidden the fact that record-keeping in our housing department going back almost 10 years has been unacceptable and we’ve been up front about it,” Cohen said. “The issues you are asking about are just examples of what we’ve been saying publicly over and over, namely that the way the department had been running is unacceptable.”
Hotel bills paid
Homes getting the money were not concentrated in the city’s most troubled neighborhoods, but were spread throughout the city, mainly the north end.
Homeowners, many of them elderly and living on scant incomes, rarely had final say on repairs. They might come to the city asking for specific help — fixing broken windows and air conditioners, for instance — but the city, not homeowners and not federal officials, decided what work needed to be done, and at what cost.
Typically, the city pays the contractors. Homeowners never see the money.
For five months, Susie Childress didn’t even see the inside of her house.
The disabled 46-year-old had asked for help repairing her two-bedroom, one-bath home in 2012.
At the time, it was valued at $18,630. Before the city and its contractor were through, though, repair costs totaled $101,980, including an extended hotel bill.
That’s because the work was so extensive, and dragged on for so long, that Childress was sent to live in a motel for almost half a year, according to city records. The bill for keeping her there: $9,700.
Virtually every interior wall in Childress’ 832-square-foot home was ripped to the studs and replaced. The contractor bought 3,200 square feet of drywall to do it.
Dollars poured into the bathroom. Replacing the tub cost $3,900. A shower curtain rod and seven-piece ceramic accessory set — two towel bars, soap dishes, one tooth brush holder and toilet paper holder — came to $375. Replacing the toilet cost $600. A vanity went for $650; a mirror, $225.
Those prices include labor and installation, not just materials. But a Post analysis of costs for those and other items shows that either materials costs skyrocketed or, to achieve such a high price, labor took an unusually long time.
Take the $600 toilet. If a similar toilet had been purchased at the retail cost of $178, the contractor garnered a 10 percent profit and the plumber was paid federal prevailing wages, it would have taken two eight-hour shifts to install the toilet.
By the same token, there were two ways for a $1,500 refrigerator bill to add up: Either the appliance was purchased at almost triple the going retail price for a popular brand-name model — or it took 12 eight-hour days to install it.
Back for more
When contractors came back to the city for extra money to pay for extra home repairs, the city went back to federal and state taxpayers to pick up the tab.
And contractors came back frequently.
The original $59,007 budgeted to repair Childress’ home shot up by 67 percent in just 12 months. But that was not unusual. The Post found 29 homes where the amount budgeted to pay for repair costs rose by 100 percent or more — often much more. On average, the repair costs for those homes grew by 678 percent.
Four topped 800 percent.
Of course, unexpected expenses can pop up in any significant remodeling. In one example of unforeseen cost hikes, building a stucco laundry room with shelves was estimated to cost $3,700.
But that was just the beginning. The contractor needed another $1,890 to cut an opening in the kitchen wall to find water lines, install a camera in a sewer line to find the sewer main, run water lines from the kitchen to the laundry room, replaster the kitchen wall and repaint it.
Ballooning buzzer
The biggest rehabilitation costs didn’t always come from unexpected expenses, though. They were approved early on by the city.
City workers or consultants first drew up the scope of work and cost estimates. Contractors submitted bids.
In files examined by The Post, a contractor could submit costs for specific repairs that far outstripped the city estimate, but still get the job if they had the lowest overall bid.
It’s why the city awarded work to one contractor even though his low bid called for buying and installing four battery-powered smoke alarms at $200 per alarm. The city’s estimate was $44 each.
It’s also why the city approved paying $232 to buy and install a wire closet shelf and $300 to an electrician to “verify” — not fix — the function of a light switch.
At one point, fixing an 89-year-old woman’s doorbell was going to cost $75. The final bill: $199.
The contractor could have bought a wireless doorbell at Home Depot for less than $22. It’s a best-seller there. But this doorbell job called for repair, not replacement, and the contractor’s city-approved price for working on the house came to $74 an hour for labor — a reduced cost.
Such hikes can reflect a city’s failure to come up with realistic estimates for work in the first place.
“They will just throw a number at it,” said Michael Cook, a cost estimating specialist and lecturer at the University of Florida’s ME Rinker School of Construction Management. “I have seen it happen thousands of times.”
Not spending money on careful upfront estimates leaves the door open to savvy construction companies looking to make a few extra bucks, Cook said.
“The front-end costs will be inflated or they will use their business acumen and justify a huge increase on the back end. It’s a business strategy,” he said. “They will roll the dice and count on a huge change order.”
Big bills, big benefits
Pricey change orders benefited West Palm.
For two years, federal officials sent letters chiding the city for not spending its allotted housing money. If hundreds of thousands of dollars weren’t spent by certain dates, HUD warned, the city would lose the money.
Earlier this year, in a series of moves that at best were missteps and at worst crimes, The Post reported that dates on critical legal documents were changed and in two cases, withheld from public view by the city’s housing consultants. Those dates showed the city was scrambling to spend $289,000 in home repair money to avoid losing it to HUD.
A 79-year-old woman was one of the recipients.
A low income senior living in an aging house, she met the criteria for assistance. She asked for help with painting, window and kitchen repairs.
She got much, much more.
After work started in 2013, the contractor, JD Anderson Construction, went back to the consulting firm that then ran the city’s housing department, Community Redevelopment Associates.
The contractor sought approval for installing new kitchen cabinets, removing the bathroom toilet and vanity, demolishing a bathroom wall, tearing down a kitchen wall, then rebuilding walls and reinstalling a toilet, vanity sink and tile. In addition, the contractor wanted $1,800 to treat for termites.
The justification: The contractor said he found holes in the kitchen walls, leaking pipes and rotten wood from termites.
Community Redevelopment Associates green-lighted the extra work.
It was an unexpected decision. Eight months earlier, CRA had hired another consultant to survey the property and decide what repairs were needed.
The CRA-hired consultant found that the walls appeared to be in good condition. Wood flooring had recently been installed, and there was no mention of termites. And the consultant found no need to replace kitchen cabinets.
Camouflaged holes
Asked how the consultant could have missed holes in the walls, JD Anderson President Joseph Anderson said the holes and termites were visible only after they had pulled the kitchen cabinets from the walls. And, he said, the cabinets were pulled from the walls only after the homeowner requested new ones.
The final repair bill for the $42,194 house: $41,451.
Not only was that amount 67 percent higher than the original low bid, it was 40 percent higher than the highest bid for the work.
But sharp hikes in repair costs could help the city meet key HUD deadlines. Home repair money for three homeowners grew by a combined $66,428 as an October 2013 HUD spending deadline neared. Another homeowner, originally awarded $4,500 for roof repair in 2010, got another $44,150 for extra repairs — a 981 percent increase — the day of the deadline.
Free spending was by then commonplace. “Some of the markups I was seeing were astronomical,” said one former employee who spoke on condition of anonymity.
Costs varied, but a cultured marble vanity was an option in one home, as was a granite countertop and $64 marble door strips. One homeowner was approved for French doors and roof barrel tiles over the entryway.
One flagpole, no permits
At the other end of the spending spectrum, Daniel Margolis spent thousands less than the original repair estimate.
But the bargain-basement bills came with strings attached.
A Korean War veteran and successful New York real estate broker, the now-deceased Boca Raton retiree’s vision of affordable housing for homeless vets led him to City Hall in 2009.
Like most home repair files examined by The Post, paperwork documenting exactly what happened next is spotty.
But on paper, Margolis appears to have applied for an $81,900 federal loan to rehab a small apartment complex and secured an agreement not only for the money, but permission to ignore federal requirements that the work be competitively bid.
Instead, Margolis, a licensed contractor, got both the loan and a green light to do the work himself.
Among the first things he sought to buy with the federal tax dollars: a $2,000 flagpole.
Margolis told housing officials that he would be the construction supervisor on the extensive project — plumbing, electrical, knocking down walls, installing window air-conditioning units, landscaping, painting and drywall — “to see that the … work will be done in a good workmanlike manner.”
There’s no evidence Margolis profited. Other than an electrical subcontractor, there’s little evidence anyone was paid at all.
The cost of the flagpole, which can be had for as little as $80, was later downsized to about $900.
Total repair payments were adjusted downward, as well, to $53,617.
Two years later, a city housing official wrote that Margolis never pulled permits to install the flagpole — or build a stormwater drain, restore a parking lot from asphalt to striping and most importantly, repair the roof, a critical job that by law requires a licensed roofer.
Margolis, in an email to the city, simply said he never needed the permits because, “We did all the work ourselves.”
Turnover, no answers
With one exception, no one now in City Hall is in a position to explain the bloated costs, ballooning loans or why files miss key information.
HUD officials repeatedly ran into problems with finding someone — anyone — who could respond to their questions.
That’s because two city managers served during the period examined by The Post, as did two mayors: Muoio and her predecessor, now-Congresswoman Lois Frankel. The housing department burned through eight directors in eight years before the city hired CRA to run it in 2012.
After CRA took over, many housing employees left. CRA was fired in May after The Post began asking about signatures and dates on crucial HUD documents that appeared to have been doctored.
That has left just one city official who had at least some oversight of the housing department since 2008, the time frame examined by The Post, Deputy City Administrator Dorritt Miller.
It’s not clear how much detail Miller, as an administrator, would have been privy to. While HUD warned Miller about the city’s failure to spend housing money by federal deadlines in 2012 and 2013 letters, it was only at the end of last year that the agency’s inspector general released a report critical of how the money was spent.
Still, there were red flags the city missed, most notably the sheer dollar volume of increases to original home repair costs:$1.5 million since 2008.
And all of the increases were documented in official city records filed with the clerk of the court. In almost all cases, the paperwork described the money as being needed to pay for “improvements to the property” — work on the house.
Further, in 2011, the city’s own auditor raised cost questions. Among the concerns in her 40-page report: Some projects looked more cosmetic than needed repairs.
Today, city officials seem happy to put the housing department’s troubles in the rear view mirror. Both the mayor and the commission have expressed support for Fana. Repair contracts are being tightened, he told commissioners this month, and contractors who fail to measure up will have no place with the city.
Even if West Palm at last gets its housing department on the right track, taxpayers will still be paying. HUD, citing city failures to spend and track housing money, last year asked for $3 million back. It recently agreed to a compromise. The city will give $1.5 million to HUD, which will then give it back to the city to be used only on housing projects.
But that $1.5 million will come out of the city’s operating budget, diminishing the amount available to pay for such things as roads and police.
The existing repair projects have themselves taken some surprising twists. One home repaired for more than $36,000 recently sold for $194,000.
The roof of an 89-year-old woman cost the city more than $20,000 to repair. In May, she reported it was leaking.
The apartment complex Margolis rehabbed belongs to a nonprofit he founded. It has failed to pay property taxes, placing the complex in jeopardy of being sold at a tax auction.
And at the corner of Sapodilla Avenue and 11th Street, the unpermitted $900 flagpole is noticeably tilting.
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