Arizona group pitches affordable housing project for northwest LV

By Timothy Pratt

Friday, July 8, 2005 | 11:03 a.m.

An out-of-town private foundation has crafted a proposal to build 300 units of affordable rental housing in the northwest using an untried federal government program set up to sell land at heavy discounts.

The Tapestry Group, an Arizona-based charitable trust, recently pitched the proposal to the Las Vegas Housing Authority. The proposal is one of several recent attempts to obtain discounts of up to 95 percent on Bureau of Land Management land for affordable housing projects, a provision that comes out of the Southern Nevada Public Lands Management Act of 1998.

The program -- cheaper land for affordable housing -- is receiving increasing scrutiny as different groups and analysts, most notably the Clark County Growth Task Force, have identified affordable housing as one of the Las Vegas Valley's greatest needs.

"We certainly need a test case and a success, because the amount of affordable housing produced in this valley is going to depend greatly on whether we work this out," said Ken LoBene, Nevada state coordinator for the Department of Housing and Urban Development. HUD works with BLM in evaluating proposals under the law.

But the proposal also brought up questions about what the housing authority's mission should be, and what affordable housing really means, said Franny Forsman, commissioner for the authority.

As well, it is being made by a group that is unknown locally, has a short history overall and no history building such projects.

The Tapestry Group, whose mission is "to lessen the burdens of government," made the presentation on the proposal at the housing authority's June meeting. The group would build the units on 29.9 acres near Iron Mountain Road and U.S. 95, at a cost of up to $35 million, Gene Wilczewski, a consultant for the group, said.

The discount goes to local government agencies only, so the Tapestry Group was pitching working in partnership with the housing authority. The housing authority would apply for the land. The foundation would pay for the land and build the project, manage the apartments and collect and use the rent money for 10 years, and then turn the property back over to the housing authority, Wilczewski said.

Forsman said "these kinds of creative partnerships are the direction we need to move in," since the federal government has less and less money for housing.

Though the land management act was passed seven years ago, guidelines for selling the land and evaluating proposals for affordable housing were only approved in April 2003, and no project has been approved to date, while several have been discussed, according to Libby White, BLM representative.

Wilczewski said his proposed project would meet a "need (that) is immediate and extreme."

After describing the project at the June meeting, Don Davidson, housing authority commissioner, said, "We are so short of housing that we have to open our doors to anyone who can help us achieve our mission."

But Forsman asked the group, "What do you mean by affordable rent?"

Wilczewski gave a long explanation about the possibility of interest rates rising and other factors that could affect the eventual cost of the project, before Linda J. Menk, assistant vice president of GMAC Commercial Mortgage and another consultant with the group, said the apartments in the project may wind up costing between 75 and 81 cents per square foot, or between $780 and $950 a month for a two-bedroom apartment.

According to a recent study done by Applied Analysis, a Las Vegas research firm, in the first quarter of 2005, the average rent in the Las Vegas area was 88 cents per square foot and the average rent was $788 a month.

"Is that affordable housing?" Forsman asked Menk. "That's going to be the issue -- who's going to be able to live here?"

LoBene said that it is HUD's job, working together with BLM, "to see if it (a project) meets affordable housing criteria."

For rental housing projects, HUD uses a formula based on 60 percent of the area median income, a figure that changes annually. The area median income is currently $56,760.

Then 30 percent of a family's take-home pay is considered the maximum amount of rent that a project could charge its tenants and be considered affordable.

For a family of four, 60 percent of the area median income would be $34,056 per year. If that family actually takes home $22,704 -- 33 percent less -- their maximum rent under HUD guidelines would be $567 a month.

LoBene said it is difficult to build projects that are financially viable under those guidelines.

"These are very much harder deals to put together because their margins are much more limited," he said.

Forsman said the project proposal ought to make the housing authority examine its own priorities, and define, among other things, what affordable housing really means.

"We're throwing this term around like crazy -- but who are these people? Can people earning $50,000 a year not find housing? Can they rent but not own?"

"This ought to serve as a stimulus to that discussion ... What priorities do we have? Have we taken care of business with the neediest of our residents first?"

Wilczewski said that working people like teachers and firemen are increasingly having trouble finding housing in the valley and his project would help meet that need.

He said affordable housing doesn't necessarily refer to housing for people who are indigent.

"There are various levels of affordability desperately needed in the the Las Vegas market," he said.

As for the group making the proposal, several things are clear: though the Tapestry Group was formed in 1999, the foundation's tax returns show that its financial activity didn't begin in earnest until 2003.

"We decided to build this thing over time," Wilczewski said.

In 2003, the group acquired nearly $30 million in assets through the purchase of properties that were under HUD mortgages and threatened with foreclosure. To date, the group has had no experience building projects such as the one described to the housing authority.

Wilczewski was listed on tax returns and papers filed with the state of Arizona in previous years as president, but sometime in 2003 he became a consultant for the group.

He said the reason for the change was "not anybody's business."

At the same time, he said "not a dime has been removed from the foundation to pay anybody up to this time."

In 2003, Wilczewski and Gaylen Brotherson, now the president of the group, each loaned the foundation $255,890 and $121,052, respectively. The loans were for "working capital," according to tax returns.

Asked about these and other matters -- including $1.7 million listed on the 2003 return as "accounts payable and accrued expenses" and the foundation listing about $9 million less in assets on an early 2004 Arizona form than it did on the 2003 return -- Wilczewski initially said, "I don't think our finances or those types of questions need to be addressed."

Later he said that the foundation's accounting firm -- Omaha, Neb.-based Bland and Associates -- could answer certain questions.

Jay Perry, an accountant at that firm, at first said he received the foundation's account "in a little disarray" in late 2003. Then he said he would have to research the account further. He did not call back.

Wilczewski also said that all consultants hired in Las Vegas for the project being proposed -- including lawyer Richard Bryan, who was one of the sponsors of the Southern Nevada Public Lands Management Act when he was a U.S. senator -- are all being paid and that the foundation was "very cognizant of wanting to maintain a clean and viable corporation."

The group's consultant said that the project being proposed represents an "exceptional opportunity."

"Here's an opportunity -- how do we make it work?"