PD Editorial: Lawsuit exposes lax oversight for affordable housing

With the election less than three weeks away, Bill Gallaher’s name in a headline conjures the $1.6 million he has spent on a cynical crusade against District Attorney Jill Ravitch.

But the latest revelation about the Sonoma County bank chairman and developer doesn’t involve the county’s top prosecutor or the Sept. 14 recall election.

It did, however, expose inadequate state and county oversight of millions of public dollars spent on affordable housing.

As Staff Writers Andrew Graham and Ethan Varian reported Sunday, companies owned by Gallaher have agreed to a $500,000 settlement with a former property manager who says she was fired after uncovering affordable housing fraud at Vineyard Creek, a 232-unit apartment complex near Charles M. Schulz-Sonoma County Airport.

An obscure state panel awarded $35 million in tax-exempt bonds to help finance development in return for a guarantee that 47 units would be set aside for low-income tenants.

Mariah Clark, the former property manager, alleged in a lawsuit that low-income tenants were overcharged, government agencies were gouged on rental subsidies, and some of the rent-restricted units were leased to people who did not qualify, including family and friends of the Gallahers. Clark says she was subject to verbal abuse and retaliation when she reported the violations; the Gallaher companies denied her allegations in court papers.

The confidential settlement, Graham and Varian reported, covers only Clark’s claims of retaliation and other alleged state labor code violations. That’s between Clark and the Gallahers. If the parties are satisfied with the outcome, so be it.

Our concerns involve the public agencies involved in financing the apartment complex and ensuring its compliance with state law. The agencies include the California Debt Limit Allocation Committee and the Sonoma County Community Development Commission, among others.

As part of the settlement, the state and county agencies agreed to dismissal of the more serious fraud allegations so long as they can be reinvestigated in the future.

Yet they offered no indication that they intend to pursue the matter.

Sonoma County Supervisor James Gore said there wasn’t “a smoking gun.” James Hammill, managing director of the California Statewide Communities Development Authority, which recommended the project for tax-exempt bond financing, said his agency received no complaints and blithely dismissed the idea of developers violating their promises. “There’s too much to lose,” he said, subsequently refusing to answer more questions about the matter.

However, it appears that little if any effort was ever made to ensure compliance with the affordable housing requirements over the decade-plus that Vineyard Creek has been open for business.

The development authority, a consortium of local governments, had no record of ever verifying the accuracy of Vineyard Creek’s self-certifications, and it stopped collecting detailed compliance reports in 2016. David Kiff, interim director of the county’s Community Development Commission, couldn’t say to what extent the agency had independently confirmed information provided by the developers, although an agreement gave the county authority to inspect documents property managers use to verify that tenants qualified for income-restricted rentals.

“I don’t think that could be shown either way at this point without a bunch of additional digging,” Kiff said.

Someone needs to start digging, and that observation isn’t limited to the Vineyard Creek project. Public agencies invest billions of dollars in affordable housing development in California, including tax credits and tax-exempt bonds. Those agencies have an obligation to ensure that developers who get that help don’t shirk their obligation to provide desperately needed housing for tenants with limited means.

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