Did They Learn Anything? With the trashed-out Cherry Street Project nowhere near housing its first human occupant, Port Townsend City Council has gone big, very big. Last month they approved the purchase of 14.4 acres next to the first traffic circle at the entrance to the city. They envision an entire neighborhood of subsidized housing. It may have shops. It may have apartments. It may have row homes and townhouses. It may have a plaza. Michelle Sandoval said at a December City Council meeting that she would “love” a plaza, preferably with a Hispanic name.
Plaza Sandoval perhaps?
The former mayor may not get a monument-to-me anytime soon. The City still lacks over $4.2 million for the infrastructure that would open to development all 14.4 acres and perhaps be a meaningful step to extending city utilities to the Glen Cove industrial area. Construction of anything, if Cherry Street is any indication, is a long, long way off. They don’t even know what they will build or who will build it.
But there’s no need to wait to honor Sandoval and her decades of influence over the city’s regulations, taxes and vision—a combination of policies that have contributed greatly to the current housing crisis. There is an edifice available right now that could bear her name. She played a leading role in its entry into our fair town. She was its chief advocate. I’m speaking of the ill-fated, tax dollars-suck of a building called the Carmel House—the heart of the Cherry Street Project. Henceforth, so we not forget, let us recognize this shabby but iconic memorial to ineptitude and dysfunction as Casa Sandoval. In its current state it goes well with the deteriorated condition of most Port Townsend streets, another Sandoval legacy that took years to achieve and will be with taxpayers for many years to come.
Sandoval may be moving on after 20 years of elected power and influence, but taxpayers still have to pay off the $1.4 million indebtedness she and her City Council yes-people incurred. Sandoval the real estate broker will be showing houses in the neighborhood as taxpayers eat the costs of crunching and removing Casa Sandoval. They will be paying the extra charges for toxic materials mitigation inside the same building Sandoval the real estate expert led the charge to buy without ever requesting an inspection.
A Demonstration Project
Mayor Sandoval touted the Cherry Street effort as “a demonstration project.” That was early in the game, back in 2017, when taxpayers were told it would cost only a couple hundred grand and be finished and occupied in the Fall of that year. Projected costs have climbed into the millions. Almost five years later Casa Sandoval remains empty and suffers from vandalism and neglect. It has blighted the neighborhood and is now a safety hazard. Lawyers and insurers would call it “an attractive nuisance.” Kids easily get in there, where city inspectors have found holes in floors and walls large enough someone can fall through. Sometimes people who get into Casa Sandoval launch refrigerators out windows to see if they might fly.
So just what did Mayor Sandoval’s “demonstration project” demonstrate? Are the city councilors who got PT into the Casa Sandoval mess any smarter for the experience? Nope. They have no regrets and proudly declare that if they had it to do over, they wouldn’t do any thing differently.
Denial and Delusion
It’s the December 6, 2021 City Council business meeting. Council is being briefed (click for video) on the possibility of acquiring what is known as the 14.4 acre Evans Vista property. The state Department of Commerce will give them money, more than $1.3 million. With this land, they can do so much more than rehab a modest 70-year old building. They can build an entire neighborhood of affordable and workforce housing. But there’s still that unfinished Cherry Street Project hanging around, what Ariel Speser in her last days on council called “the elephant in the room.”
David Faber, now PT’s mayor, took the white elephant by its ivory tusks.
“I wouldn’t change a single thing about what we did,” David Faber proclaimed. “I am nervous,” he said, about “again” getting “the city significantly involved in a project that doesn’t necessarily have a perfectly clear end project yet—given the status of the Cherry Street project and so forth.” He did not want to get the city involved “in a long-term dragged-out morass.”
But, he would do Cherry Street all over again, the same way, no changes, no regrets.
Pamela Adams, who was in her last month of service on council and who strongly supported the Cherry Street debacle, stood with Faber and declared, “I don’t regret having trucked that, barged that over there.” (Casa Sandoval was barged across the Strait of Juan de Fuca and trucked from a landing next to the Pourhouse to its present hillside above the golf course.)
Ariel Speser, in one of her last meetings, acknowledged, “It is hard to think about this without thinking about the Cherry Street Project.” Ya think? She went on to dismiss the debacle. Failure, she suggested, was to be expected. “It is very rare that you have a successful housing project on the first try.” Since when? Is that a rule-of-thumb for private homebuilders as well as politicians?
Michelle Sandoval was “nervous” but “excited” about getting into another big “affordable” housing project. “We took a risk,” on Cherry Street, she said, “and we got a lot of grief.” (Oy, such a price to pay for wasting millions of dollars and five years in the midst of a housing emergency.) Everybody makes mistakes, she pleaded as if that excused the utter negligence demonstrated by City Council in buying a building without inspection, without a realistic construction estimate, without anyone to do the work—without any plan. This next project, she recognized, is much, much bigger. “It is going to be incredibly expensive.”Buckle up, taxpayers. Like duct tape, your money will be used to fix everything.
But everyone was relieved that “this time,” unlike the implicit “last time,” the city was doing “due diligence.” What exactly is this confidence-inspiring “due diligence” that washes away all sins and failures? Except for confirming compatibility with city zoning, conducting a cultural resources assessment, and snagging enough state funds to pay the asking price, there’s….nothing. The city has merely bought raw land with someone else’s money. It has no plans, no artist conceptions, no number or type of buildings, no street or landscaping schematics, no feasibility study to determine if the units once built can actually be offered and maintained as “affordable” and workforce housing–that magical and all-critical accomplishment known as “penciling out.” There’s no organization that can be held responsible for getting it done (or not), no builder willing and qualified to take on something so big, no reliable statement of projected costs. No money to build the thing.
Just like the Cherry Street Project.
A week after the 12/6/21 discussion, Council voted unanimously to purchase the Evans Vista property for about $1.3 million without any idea of what to do with it.
I will be writing more on the Evans Vista project. It is huge in scope and “incredibly expensive,” as Sandoval admits. This will probably be the largest project ever undertaken by the city. Let me now address those who will say that by doing this I’m trying to stop affordable housing, just as they criticized me for following, predicting and exposing the failures of the Cherry Street Project—er, Casa Sandoval. Port Townsend desperately needs affordable and workforce housing. Casa Sandoval has provided no housing whatsoever. It has absorbed resources and land and been a huge opportunity lost. Barging that building to PT was one of the stupidest things any elected body has done. The result is that the city’s largest housing project has accomplished nothing positive.
It could have been otherwise. That land where the vandalized hulk sits could have been, for instance, a terraced hillside of manufactured homes. Going simple and small, incrementally, being hard-headed, bird-dogging costs and saving money instead of indulging in a grandiose, wasteful gesture—a guilt offering for years of making PT exclusive and expensive—would have helped this city and a good number of workers who can’t afford to live here.
Because it came from the state, money for purchase of the Evans Vista property was free in the eyes of City Council. But that is how they have treated the tax dollars wasted on Casa Sandoval. Every dollar wasted is a dollar that could have but did not accomplish something beneficial.
That old adage about “those who fail to learn the lessons of the past are condemned to repeat them” rings out. City Council appears to have learned nothing. I asked the rhetorical question previously about what Casa Sandoval has demonstrated. Now I propose an answer: it has demonstrated that the City of Port Townsend is very bad at the business of building affordable housing. The cliquish, virtue-signalling, peer pressure-regulated proceedings of City Council have not produced sound decisions. There’s little reason to conclude that things will change under Mayor David “No Regrets” Faber.
The public needs to keep an eagle eye on what happens with the Evans Vista property. We’ll be here, and so will Casa Sandoval.
“Mom! They’re throwing a refrigerator out a window!” Teenagers easily gained entrance to the derelict Carmel House and trashed it. Almost every window has been broken. Furniture, light fixtures, random kitchen utensils, a door and, yes, a refrigerator were hurled through glass. I found shards of glass twenty yards from the building. There is broken glass everywhere. Rainspouts were ripped off and thrown over the fence. Drawers launched through the windows have been claimed by a cat as litter boxes.
Note refrigerator against fence behind cat claiming a new litter box.
A neighbor ran to her own window when her son yelled about a refrigerator going airborne. She saw two teenagers in the act. She has seen teenagers in the derelict building on two to three previous occasions and had called the city. A crew eventually boarded up an open ground floor window and pushed the rear fence closer to the building. That window had been wide open for two years. I had seen evidence that it was being used to access the building. The chain link fencing was never locked tight. There has always been an opening at the rear of the building, conveniently in a blind spot—a spot near the place in the trees with the piles of empty beer cans. Teenagers pulled the fence open and pushed in two large plywood sheets and went to work.
The neighbor (who asked that her name not be used) called the police as the kids rampaged through three floors of the building. The police arrived 40 minutes later and entered the building the same way the kids did. “Come out with your hands up,” the neighbor heard the police shouting. The kids were long gone. The neighbor and I found their fresh footprints in the muddy path leading out the back of the building, through the party site and further up hill.
The front doors have been open to the elements for five years, as if the city and Homeward Bound, the nonprofit that had the project for four of those years, did not care what happened to the building. Now the windows are open and a second level door on the back.
I have been in the process of writing a story on the Cherry Street Project and its lessons for the even larger 14.4 acre “affordable” neighborhood development City Council has bitten off. That article should be out this week. Cherry Street was supposed to be, as then Mayor Michelle Sandoval said in 2017, “a demonstration project.” She and the rest of City Council at the time loaded taxpayers with about $1.4 million in debt, and gave away tens of thousands of dollars in cash and services to a nonprofit that couldn’t even pick up construction trash. The latest cost estimate, as we’ve reported, calls for another $1.8 million just to rehab the old building. Looking at photos taken today, ask yourself, exactly what has the Cherry Street Project demonstrated?
Newly elected Mayor David Faber at a December 6, 2021 meeting said that if he had it all to do over again, he would not have done anything differently. Ponder that attitude, taxpayers, and keep your eyes posted for the upcoming story on “Casa Sandoval.”
Port Townsend’s most costly public housing project sits empty. Four and a half years after being floated here from Victoria, B.C., the 1950s building, known as “The Cherry Street project” or “The Carmel House” continues to deteriorate. The doors have never been closed, letting birds and inclement weather inside. Moisture protection for the bare plywood walls has all but peeled away. Rain spouts have fallen off. The stucco is cracking; chunks of it have fallen out. The remains of a homeless camp are still evident where parking and gardens were planned. Inside, city inspectors have “observed multiple hazardous conditions such as holes in walls and floors large enough for a person to fall into.”
City Council avoids the subject of this colossal failure. For fourteen months there has been no public discussion about what to do with a relatively small project (8 modest apartments) that will cost over $3.3 million upon completion, should that day ever come. What was billed as a quick and easy “affordable” housing project has turned, per square foot, into possibly the costliest residential project on the Olympic Peninsula. By contrast, at the same time city council was buying into this boondoggle in 2017, it could have spent less than half the amount the Cherry Street project would eventually gobble up to acquire a 36-bedroom completed, operating apartment complex forty years younger than the Carmel House. As it is, the Cherry Street project, if it is ever completed, could come in at around $700 per square foot.
The city gave valuable land and a lot of money to Homeward Bound Community Land Trust so it could turn this old building into habitable space. In July 2020 Homeward Bound defaulted on its loan from the city. The city had to take the land and building back. The loan was supposed to have been enough to get the old building rehabbed and ready to rent. As a result of the default, city taxpayers are now on the hook for more than $1.4 million in principal and interest on the bond that generated the funds to loan Homeward Bound.
Instead of cutting its losses and selling the land for the best price possible, on September 28, 2020, city council decided to hand everything off to another local nonprofit. The City Manager was instructed to give it debt-free to Bayside Housing. Even with such a sweet deal, Bayside didn’t happen to have on hand the money needed to finish the project. It wanted the three hundred grand left over from the loan, all that had not been spent by Homeward Bound. It also wanted a $500,000 Community Development Block Grant to get going.
The city didn’t offer any financial help. As we reported in June, Bayside asked the county for $1.6 million to fix up the old building and another $200,000 for various related project costs. It still also wanted $300,000 in cash from the city and that $500,000 block grant. Their request for this pile of public monies has not moved forward.
The city must now regret turning its back last October on a $1 million cash offer from Keith and Jean Marzan of Port Townsend. They wanted to bail taxpayers out of this mess and build affordable housing on the site. The Marzans believe they were treated with disrespect, if not contempt, and have no intention of offering their help again.
A New City Council Should End the Long-Running Fiasco
Three individuals responsible for this mess are leaving city council. Michelle Sandoval, Ariel Speser and Pamela Adams voted to authorize spending the funds to buy the building and transport it here back in April 2017. They also voted to float the bond and loan the proceeds to Homeward Bound. In the superficial council discussion on April 24, 2017, when council got the city involved, Sandoval spoke glowingly of the project, and how proud she was that council was spending public funds to import the old building and barge it across the Strait of Juan de Fuca. She wanted the city to throw in even more money than was being discussed.
City Council may wish this meeting would go down the memory hole. They approved the project and committed the city without ever conducting their own inspection of the building, or having seen any kind of construction plan or even a basic pro forma on how this could ever be a viable affordable housing project. The group to which they gave the project, Homeward Bound, did not then exist except on paper. It had no experience with any project of this nature. It had no staff and no funds. The city had to give them a $30,000 “organizational grant” so they could get a board of directors together and set up a website.
Sandoval is an experienced real estate broker. You would think she would have shown the same concern for taxpayers that one hopes she shows clients considering buying an old house. At that critical April 24, 2017 meeting, she spoke at greatest length and most emphatically to persuade the rest of the council to commit the city to the project. She wanted the city to jump on this as “low hanging fruit.” This project had “been a long time coming,” she said. “Bully for us,” she added. “My plea is that we put our skin in the game here [and] show the community we are willing to put our money where our mouth is. This is a great start. I’m really excited about it.” The link to the video of the meeting is here. Sandoval’s comments begin at the 6:51 mark.
“A long time coming”? Then where was the building inspection, the construction plan and estimate, the feasibility study to determine if Homeward Bound could execute the project, renovate the building, rent it at affordable rates and pay the city back? The internal project estimate done by Homeward Bound, revealed in an investigative report here, was condemned by the president of Homeward Bound as “completely bogus.”
This was a pet project of Sandoval’s. Minutes of meetings of the board of directors of Homeward Bound showed Sandoval sometimes in attendance and the meetings being held at her office. A Homeward Bound director reported to fellow board members that Sandoval would give $10,000 to the group. One of Sandoval’s realtors, Paul Rice, in 2019 addressed city council and requested another $1 million. He was speaking as Homeward Bound’s president. [Minutes of Homeward Bound directors and public meetings were once regularly posted on the group’s website, hbclt.org. They are now gone, as is Homeward Bound’s own account of how it fumbled the Cherry Street Project and why it defaulted on the city’s loan. More on this, below.]
Ariel Speser objected to looking into Homeward Bound’s finances and capabilities, as requested by former council member Robert Gray in the May 2018 council meeting that was considering extending the loan to the group. Councilors Amy Howard and David Faber sided with Speser. They “had confidence” in Homeward Bound, which, after a year, had not even moved the old building off its temporary wooden supports onto a stable foundation, had blown its original loan deadlines, and had come nowhere near having the building ready to rent in the fall of 2017, an important representation made to city council when it sought initial funding in April 2017 to bring the building here from Canada.
All city councilors, except for Robert Gray, voted at every opportunity to move forward with the project, give away land worth $600,000, incur a hidden interest subsidy of more than $400,000 and obligate taxpayers to repay a bond that will cost them a total of more than $1.4 million. They voted to extend the loan to Homeward Bound even though, as Gray pointed out, Homeward Bound’s own pro forma showed them going into default in two years! Gray wanted a delay so the city could undertake its own due diligence. He couldn’t get a second for his motion. The link to the May 7, 2018 council business meeting where this debate occurred is available here. Gray’s critique of the project’s finances and his observation that the project, under its own terms, was predicted to go into an early default, begin at the 8:24 mark on the relevant agenda item.
In a separate May 28, 2018 analysis, Port Townsend Free Press reported that Homeward Bound was guaranteed to default under the very terms of its loan agreement with the city. The way the loan was set up, and considering that Homeward Bound would have no income with which to make its first loan repayment—despite a two-year grace period—default was inevitable. Robert Gray and Port Townsend Free Press called it right: Homeward Bound broke its promises and stuck taxpayers with the bill.
Scrubbing History
Homeward Bound wants people to forget it ever had anything to do with the Cherry Street project. They have renamed themselves “Olympic Housing Trust” and scrubbed references to the Cherry Street Project from their website. They have not, though, changed their website’s URL, which remains hbclt.org. The image for their website is still a view outside through windows of the Carmel House. Their board of directors is the same cast, by and large, that was responsible for mishandling the Cherry Street Project. Kate Dean, chair of the Jefferson County Board of County Commissioners, from the very beginning has played a key role in Homeward Bound—creating and training and serving on its board of directors—and continues as a director of the [whitewashed] Olympic Housing Trust.
These folks have good reason to want people to forget their involvement in the Cherry Street project. On the one hand, the city set them up for failure. They had no experience or expertise with anything of this nature. The project never could work. It was unfair to dump such a huge, predestined failure on presumably well-intentioned, but spectacularly unqualified and incapable volunteers. That’s why we once wrote about “The Tragedy of the Cherry Street Project” [PTFP, 12/12/18]. On the other hand, this group was not always straightforward, to put it mildly, in its pursuit of public funds. That’s why we published the report, “Multi-Million Dollar Fraud on Taxpayers: The Cherry Street Project Unmasked” [PTFP, 6/27/20].
A Majority of the New City Council Does Not Own This Debacle
None of the newly elected City Councilors—Ben Thomas, Aislinn Diamanti, and Libby Urner Wennstrom—bear any responsibility for this mess. Council member Monica Mick Hager campaigned against the wastefulness and incompetence of this project when she ran for office in 2019. She has been the lone council member to push for cutting the city’s losses and selling the land and building to the highest bidder.
The other city councilor now serving who did not vote for this disaster is Owen Rowe, who came into office after the damage had been done. He did, however, vote to try to keep the project going by giving it to Bayside Housing. In city hall emails, obtained by Port Townsend Free Press through a public records request, he has complained about our reporting on the Cherry Street project. Yet he has never contacted us to point out anything we got wrong.
The current City Manager, John Mauro, had no hand in launching the project or providing Homeward Bound with a huge loan it could never repay. This is an albatross draped around his shoulders by his predecessor and a city council with different personnel.
It is time for the City of Port Townsend to admit failure, abort the Cherry Street Project, cut its losses and move forward.
The building is worthless and a money pit. As we have reported over the years, the 1950’s building can never be brought up to code and made habitable at any reasonable cost, and the costs continue to mount as construction prices soar and the building ages and falls apart. Have we mentioned the little problem about asbestos and lead contamination? It was a little detail withheld from the city by Homeward Bound until it surfaced inadvertently. We covered it in our report “Multi-Million Dollar Fraud on Taxpayers: The Cherry Street Project Unmasked.”
The land, however, is very valuable: 1.5 acres with utility connections fixed and upgraded at taxpayer cost. The city had valued the property when it gave it to Homeward Bound at $600,000. That was 2017, before a problematic old water line was fixed. In 2020 the Marzans offered $1 million. It may bring an even greater price today.
The empty eyesore of an unusable building remains the stumbling block. The city still has $300,000 from the bond that was not burned up by Homeward Bound. Those funds could pay for crunching the building and removing its remains.
Or the city could try to get someone to buy the building and take it away, just like the city did when it paid to have the Carmel House lifted off its foundation in Victoria, B.C. and barged to Port Townsend. Right. There may be a sucker born every minute, but that doesn’t mean another sucker can be found for this white elephant.
Back in 2018 when the city issued the bond that raised the money to loan to Homeward Bound, it opted to pay a higher interest rate so the bond could be repaid early without any penalty. It actually expected Homeward Bound to come roaring off a huge success with the Cherry Street Project, repay the loan in less than ten years, then charge into its next big affordable housing venture. The cost taxpayers have been and will continue paying for this bit of delusional thinking isn’t cheap: an additional $3,000 annually for a term of 20 years that started in 2018.
Time to get real. Tear the Carmel House down and cut taxpayer losses. Make the land available for housing. Sell it to the highest bidder and use the proceeds to pay off the loan early (no penalty, yay!). Stop wasting tax dollars and maybe do something concrete on the affordable housing crisis.
There Must Be Accountability and Consequences
What if there’s still not enough to pay off the bond? Accountability must be demanded; malfeasance must have consequences. Putting taxpayers into this deal was beyond breach of the fiduciary duty city councilors owe their constituents… it was reckless, gross negligence, and wanton disregard of common sense and prudent business practices.
No due diligence whatsoever was attempted. City council failed to support Robert Gray’s motion to give the city time to conduct its own due diligence because a red warning light was blinking brightly: Homeward Bound’s own numbers showed they couldn’t meet their obligations. Instead, the city council, with the exception of Gray, gladly and blindly accepted hearsay representations from Homeward Bound that a couple of people in banking and construction had looked over their numbers. Nothing in writing from those “experts” was presented to or demanded by city council before giving Homeward Bound a lot of public money. Those experts weren’t even present to take questions.
If directors of a private organization, for-profit or non-profit, had acted as did city council, there’s no doubt they would be facing personal liability.
Those councilors who pushed and voted for this project—Michelle Sandoval, Amy Howard, David Faber, Ariel Speser, Deborah Stinson, and Pamela Adams—should make up any shortfall out of their own pockets. Though legislative immunity presents obstacles, the city should take action to hold them accountable if they don’t act honorably and step up voluntarily.
Michelle Sandoval did say she wanted “to put our skin in the game” and “put our money where our mouth is.”
Sadly, we can predict (a) not one of them will accept personal responsibility and (b) the city will let them off the hook, unlike the taxpayers who have to pay for the damage done by city officials utterly failing their constituents. I am afraid we will be as prescient in this prediction as we were in foreseeing Homeward Bound’s default and the ultimate failure of the Cherry Street Project.
Port Townsend Free Press has been on this story from the beginning. We’ve been the only media to conduct any sort of independent investigation into the city’s largest public housing venture. Unlike our local papers, we’ve done more than reprint press releases and take dictation. You may access all our reports by entering “Cherry Street” in the search box in the upper right. The following sample of reports, based primarily on documentation from city files, provides a fairly compete behind-the-scenes picture of this debacle.
Bayside Housing wants $1.8 million from Jefferson County to complete and expand the Cherry Street Project. $1.6 million more than has already been spent would go into finishing the 70-year old Carmel Building, which has been sitting vacant and open to the elements for over four years. The total final cost of that building alone would exceed $3 million. In addition, Bayside wants $300,000 from the City of Port Townsend, and $500,000 from an unspecified block grant.
Bayside proposes to contribute $200,000 of its own money, for a total cost of $2.8 million for its new vision for the 1.5 acre property. Bayside’s proposal was submitted with supporting documents to the BOCC for its 6/21/21 meeting, and may be read at pages 457-462 of the correspondence file. Here is the cover letter:
The Carmel House would provide 12 bedrooms through 4 two bedroom units and four small one bedroom units. The total square footage of the building, as reported by the Port Townsend and Jefferson County Leader, is about 5,000 square feet. The Port Townsend Free Presspreviously reported that this “affordable” housing project was already one of the most expensive developments on the Quimper Peninsula. Under Bayside’s proposal, the cost would exceed $600 per square foot.
Bayside’s estimate of what it would take to rehab the Carmel House is $600,000 higher than the estimate provided by Homeward Bound Community Land Trust to the Port Townsend City Council in November 2019, when it said at least another $1 million was needed. Homeward Bound had been given the land and building in 2017 and a generous loan from the city. It defaulted in July 2020 and the city reclaimed the project. City taxpayers remain on the hook for the more than $1.4 million in principal and interest on the bond the city floated to raise the funds. Public records show that the loan to Homeward Bound contained a hidden interest subsidy of more than $400,000. Because Homeward Bound never paid a cent of its debt, taxpayers have been paying down the full indebtedness since 2018.
The project would be transferred free of any debt to Bayside. With the additional $1.6 million of county money going into the building plus the $1.4 million city-absorbed indebtedness factored in, the total cost of rehabbing the old building would come to more than $3 million. The city has already sunk over $500,000 in the building to bring it here from Victoria, B.C. and to put it on a foundation. That amount would be included in the $3 million final cost for the Carmel Building.
These figures do not include the cost of the land, valued in 2017 at $600,000, or other miscellaneous expenditures by the city for utility and project management work. In an October 2, 2020, report we calculated the cost of the project as of that date at $2,329,961. That was still $1 million short of the Homeward Bound’s estimated cost to complete, and is $1.6 million short of Bayside’s latest estimate of cost to completion. Our figure included the $600,000 value of land given by the city to Homeward Bound, which would again be donated, this time to Bayside Housing.
In addition to rehabbing the Carmel House, Bayside proposes to build two six room “boarding houses” on the property, at a combined cost of $850,000. That is the same number of rooms, newly constructed, as would be available in the old Carmel House, but for $2.15 million less.
Bayside is not proposing a contract, under which it would be responsible for completion of the building by a date certain and built to plans and standards approved by the county. It is simply asking for millions of dollars with the promise that it will provide “affordable” housing. Its contractor estimates that if the money is provided promptly the proposed project would be completed within the first half of 2022. Bayside’s letter does not identify the contractor or reveal whether it has gone through any sort of competitive bidding process.
Bayside submitted letters of support from Dove House, Jefferson Community Foundation and Oxford House, an international program of sober living communities. The organizations did not commit to any financial support.
At present, the land and the building are owned by the City of Port Townsend. City Council directed the City Manager in September 2020 to negotiate a handover to Bayside Housing of the Cherry Street Project. The City Manager ignored a $1 million cash offer from Keith and Jean Marzan of Port Townsend to bail the city out of the failed project, with the pledge that they would construct affordable housing at their own expense on the site. The City Manager told them he had been directed to deal exclusively with Bayside.
In a May 28, 2018 article we identified a 36 bedroom Port Townsend apartment building, built in the 1990s, on the market for $1.5 million. That now looks like an even better bargain. But instead of securing that property, or pursuing less costly approaches, such as manufactured housing, the city kept sinking more money into the old Carmel Building structure.
The COVID Funds: The County’s, Not the City’s
Bayside is seeking $1.8 million of the county’s “COVID funds.” The county received $6.3 million under the American Rescue Plan Act. These funds are restricted to being spent on five categories of projects: (1) public health, including COVID-19 mitigation efforts, behavioral health care, and public health and safety staff; (2) negative economic impacts caused by the pandemic to groups including workers, households, industries and the public sector; (3) to replace public sector revenue lost to the pandemic; (4) premium pay to support essential workers whose health is at risk from exposure in critical infrastructure areas; and (5) investment in infrastructure such as water, sewer, wastewater, storm water facilities, and broadband access and infrastructure.
The City of Port Townsend has not offered to spend any of its $2.744 million in ARPA funds on its Cherry Street Project. The City Manager has indicated that at least half the funds will be used to make up for lost municipal revenue. Bayside’s proposal does not seek any of the City’s “COVID Funds.”
The $1.8 million requested by Bayside would be close to a third of the county’s ARPA funds. Jefferson County would be bailing the city out of its troubled Cherry Street Project, after the city had already rejected a $1 million cash offer to do the same.
Red Flags
There are certainly legal questions about whether the county can simply give $1.8 million to a private entity for a construction project on land it does not own. Where are the legally binding guarantees, the enforcement mechanisms, the claw-back provisions, the security for county taxpayers? If Bayside fails to perform, what recourse is there? How is the county assured it is getting the lowest price from a qualified contractor without a request for proposal and a competitive bidding process?
Bayside’s executive director, Gary Keister, is a convicted felon, who served time in federal prison for a complex scheme involving bank fraud, conspiracy and money laundering. After release from prison he was involved with an illegal slot machine business that drew raids and enforcement action from Texas authorities and the Security and Exchange Commission. Port Townsend Free Press was contacted by two former Bayside employees who raised ethical concerns about Bayside’s operations. One former employee has filed a complaint with the State Attorney General about Bayside’s business practices and its conflict of interest with another business owned and managed by Kiester. We wrote about those issues here, here and here.
After those articles were published, we received from a man identifying himself as a former business associate of Keister a list of more than 60 lawsuits brought by or against Keister personally, or by or against corporations he owned or managed or in which he was an officer or director. The list was the product of a search of records of nineteen Washington county court systems conducted in 2013. Mr. Keister and/or those corporations were a defendant or third-party defendant in 36 of the listed cases, plaintiff in four. In the remainder of the listed cases he or his controlled or affiliated corporations were identified as a subject of judgment, garnishment, abstract of judgment or tax foreclosure.
Preliminary Talks, Conflict of Interest
Bayside’s letter refers to previous discussions with Kate Dean, Chair of the Board of County Commissioners. Dean has been a member of the Board of Directors of Homeward Bound since 2017, during the time that organization was the owner and developer of the Cherry Street Project. She was a Homeward Bound director when it defaulted on the city’s loan and remains a director to this day. Details of the discussions between Bayside and Dean were not disclosed. In a previous Port Townsend Free Press article, Keister was quoted as saying that Bayside was being pressured by Homeward Bound to get involved in the failed Cherry Street Project.
At the same time that Bayside is seeking nearly a third of the county’s ARPA money, other nonprofits and critical needs are competing for the same funds. Dean will be one of three commissioners deciding how to allocate those significant, but nonetheless limited resources.
Four years and $2.3 million in the rearview mirror. And still not one square foot of “affordable” housing out of the Cherry Street Project.
The Jefferson County Republican Party commemorated the project’s fourth anniversary, “and the benefits of one-party rule by Democrats,” with a little ceremony, a cake and a video on Saturday May 8, 2021. They gathered on the grounds of the decaying 1950s building barged here at great expense and trouble from Victoria, B.C. in May 2017.
I was there to cover the event for the PT Free Press.
I learned the place is not completely uninhabited. I saw the rats. A neighbor a couple years ago told me of the “really big rats, lots of them,” but on May 8, 2021, I saw them myself. The racoons, too. In the middle of the day they scurried about, disturbed by the presence of a couple dozen human beings milling around and taking pictures.
The homeless camp in the trees appears to have been abandoned. But a forest of poison hemlock has moved in. Stalks well over six feet tall cover about a quarter acre of land. On any other Port Townsend property, such a prolific display of uncontrolled noxious weeds would draw an army of inspectors, unpleasant, threatening letters and a bombardment of citations.
But the rules under which everyone else struggles never seem to apply to the Cherry Street Project. Not when it was in the hands of the bumbling and untrustworthy Homeward Bound Community Land Trust (Kate Dean, Chair of the Jefferson County Board of County Commissioners, has been a member of HB”s Board since the start of this tale). Nor now that the City of Port Townsend has reclaimed ownership of the asbestos and lead-contaminated hulk after Homeward Bound took taxpayers for a ride. They spent hundreds of thousands and defaulted on their super-generous loan from the city. Taxpayers are now on the hook for the more than $1.4 million charge the city carries on its books.
Taxpayers don’t even get a t-shirt. They just get to pay down the loan for twenty years with nothing to show but receipts and the inescapable cost of eventually crunching and clearing the building and reclaiming the land.
We’ve reported that the total cost of this thing so far tops $2.3 million. (See our articles below.) The last estimate predicted at least another million would be needed before the first “affordable” basement apartment could be occupied–by human beings.
Happy birthday to you, Cherry Street Project. But not everyone wants to acknowledge the anniversary. Not one city councilor responded to invitations to attend the celebration and talk about their contributions to this stunning achievement in addressing PT’s affordable housing crisis.
But almost four years earlier to the day, on May 10, 2017, city councilors and other local leaders gathered in the beer garden of the Pourhouse to watch the old Carmel House roll off its barge and begin its journey to its resting place on wooden blocks on a hillside overlooking the golf course. There it became “The Cherry Street Project.” There it sat for over two years on those wooden blocks. There it sits still, worse for wear as it falls apart, bit by bit.
The doors and some windows have been open for four years. Construction debris is still scattered around the property. The stucco is falling off. The rain spouts on the back are down. The weather protection for the plywood has mostly peeled away. As we reported previously, a city inspection found holes in floors and walls big enough for people to fall through.
The Jeffco Republicans were having fun. They had a bakery paint a digital icing photo of the glorious Carmel House on a cake.
Sure, they were rubbing the uniformly Democrat/liberal/progressive/inept city councilors’ noses in it. But they do have point.
This is what you get with decades of incestuous one-party rule. Nobody in the Democrat monoculture asked a hard question at the beginning. Questions such as, “How much will this cost and may we see a budget from a licensed general contractor before we write the first check?” Or, “Hey, maybe before we bring this thing here, ya think maybe we should get, like, an inspection to see if there’s any problems in the building?” Or, “If this is such a great building, why doesn’t Victoria want it?” Or, “How can we be sure Homeward Bound will get this done and not just dump it back into taxpayers’ laps after they’ve wasted a lot of time and money?”
Nobody asked any questions. It was jump on board the bandwagon and meet you at the Pourhouse.
City councilors responsible for getting taxpayers into this mess don’t publicly talk about the Cherry Street Project. My query for an update last month was ignored. The last time this boondoggle was discussed publicly at one of their meetings was in September 2020 when they instructed the City Manager to hand it over to Bayside Housing, free and clear of all debt, along with more than $300,000 in cash. They don’t even talk about the City Manager turning down a $1 million cash offer to bail the city out of this fiasco. (We reported on that offer from the Marzans of Port Townsend last October).
I can’t tell you what is going on behind the scenes now. I am still waiting for a response to my latest public records request. Getting the files and emails and memos has been the only way to get any accurate information on this deal.
What’s in those files proves that what the public is being told is not true and far, far from the whole story.
As far as I can tell, that transfer to Bayside has not happened and the Cherry Street Project starts its fifth year with its deterioration accelerating.
Other than making fun of Democrats’ gross incompetence and political inbreeding as symbolized by the Cherry Street Project, Republicans point out the truly unfortunate ramifications of this failure. “Since the city did this,” says Craig Durgan, chair of the Jeffco Republicans, “the city has done nothing else about affordable housing. All the dollars are tied up in this.”
He had more to say in a video about “Port Townsend’s one and only affordable housing project.” It’s fun to watch, and maddening at the same time. “For $2 million the city could have built a really nice place,” he argues. “Instead, people are having to camp at the Fairgrounds.” It’s pretty well done and something new from Jefferson County Republicans. As Durgan has argued in articles contributed to this site, much of the area’s affordable housing crisis has been caused by regulations enacted by the same crowd that that gave us the Cherry Street Project as an answer to problems they created.
