Let us call it what it is: fraud. Incompetence is no longer an adequate explanation.

Homeward Bound is in default on their $1 million loan from the city. They have no way of repaying what they owe, or finishing work on the decrepit building looming over a Port Townsend neighborhood.  They never did, and they and the public officials who threw money at them knew it all along.

After sitting vacant for three years, the building is showing increasing signs of deterioration. The lot is a mess, a disgrace to the neighborhood. The only residents of the property are the rats seen by one neighbor and a homeless man living in a copse of trees. For this taxpayers are on the hook not only for a $1.4 million bond obligation, but also for the substantial, still unknown costs of what it will take to get rid of the empty, asbestos and lead contaminated, not up-to-code, uninhabitable 70-year old building.

But city leaders and Homeward Bound don’t want to hear the word “default,” because that would mean the time for reckoning has come. Instead, on June 15, 2020 Port Townsend City Council voted to “defer” payments on the loan until October 1, 2020, while “options” are explored. Without that action Homeward Bound was required to make a first payment of $23,000 on July 1.

They had been given a grace period of two years during which they were supposed to complete construction of the building and rent it out to earn income which they would accumulate in a cash reserve to start repaying taxpayers. They never started work on the building except to get it off wooden stacks where it squatted for over two years.

Yet, in November 2019 they were back making a pitch for at least another million dollars, giving the city a chance “to get in on this,” as if “this” were some sweet deal serious players wouldn’t want to pass up. They glibly promised the building would be ready for occupancy by December of this year, well knowing that was a pipe dream.

“Scam” and “con job” are also fitting descriptions for the Cherry Street Project. At one point, nearly the whole city was taken in. But those who snickered at the idea from the start have now been proven the wiser members of our community.

I was at the Road House having lunch the day the building was trucked to its hillside above Cherry Street. City leaders and housing activists were at the Pourhouse celebrating. Men and women at the Road House in oil stained overalls, people who know how to make and fix stuff, were laughing and shaking their heads. They’re still laughing and shaking their heads, but now they’re also angry because it is their tax dollars that have been squandered and they are going to be asked to pay even more.

Homeward Bound: False Hopes, False Front

Homeward Bound has portrayed itself as an organization worthy of great public trust. It has gotten away with the act because it has been a pet project of the politically powerful in our community.  The mask has now come off for good.

It was a shell corporation of one person when the city gave it a parcel worth $600,000 and $250,000 to purchase and move the building here. It has gone through several convulsions in the last three years, several presidents, and its leadership group has shrunk from twelve directors to the bare minimum required by its by-laws. Pleas for more people to step up have gone unanswered. They don’t even have volunteers to keep the weeds down and pick up trash.

Homeward Bound describes itself as “a vibrant organization that is a fundamental component of ensuring the availability of affordable housing in perpetuity in Clallam and Jefferson Counties.” The Homeward Bound website and Facebook page say it has an office in Uptown at 616 Polk Street, Port Townsend. This is what is inside that one room office.

Homeward Bound lost its treasurer last year and in January put out a request for another volunteer to fill the position. So far, from all that can be gleaned from its website and Facebook page, no one stepped up.

In February it announced it was looking to hire a bookkeeper [correction: office manager] and would keep the job posted until filled. It is still posted.

Its by-laws require transparency. It stopped posting minutes of its meetings almost a year ago.

But their greatest act of deception has been low-balling the costs and complexity of this project as it sought free land from the city and subsidized loans.

Getting Off to a Bad Start

From two years of reviewing documents obtained by a series of public records requests, it appears that the city agreed to finance purchase of this building without first seeing it. The 70-year old building called the Carmel House was located in Victoria, B.C. and slated for demolition. No one from the City of Port Townsend went there to see it before purchase. The city did not contract with an independent building inspector, as a home purchaser does before closing a sale. Instead, the city relied on someone chosen by Homeward Bound. According to former city manager David Timmons in an April 24, 2017, city council meeting, that person was “a builder in the community” who “came back with a positive report.” You can watch that meeting by clicking on this link.

It was not a formal building inspection where the inspector crawled under the house and up in the attic, walked the roof, took photographs, and offered an expert opinion backed by their guarantee and insurance. After two years of public records requests I have seen nothing of the sort in the city’s files. But I did discover a toxic materials inspection Homeward Bound apparently had from the beginning but did not share with the city until last year. I will come back to that.

This “builder in the community” was not identified by name, but the handout from Homeward Bound for that meeting, a one-page document with a picture of the building on its lot in Victoria, identified Brian Finch of Sustainable Structures NW as Homeward Bound’s general contractor. It appears that the person the city relied upon in loaning the funds to buy the building was a person hoping to get the job of remodeling and finishing the building once it was brought to Port Townsend. This was hardly a professional, disinterested inspection.

Finch and his company left the job, and apparently the area. Homeward Bound has publicly complained that its general contractor just up and vanished. According to the Washington Department of Licensing and Inspections the business license for Sustainable Structures has been suspended.

Homeward Bound presented the projected costs of making the building habitable through its volunteer consultant, Mark Blatter (though he was later compensated by Homeward Bound, according to December 2017 minutes). The year before, Blatter had lost employment with the Bainbridge Island housing authority after abruptly resigning.  Blatter told the city council at the April 24, 2017 meeting, linked above, that all the plumbing, carpentry, painting, electrical, landscaping and parking lot work would need only $100,00 to $150,000. He was quoted in newspaper reports predicting the building would be rented by the Fall of 2017.

Homeward Bound quickly realized that those numbers were “completely bogus.” That was the word one of its presidents used to describe the project budget. The entire project, she complained, had been “rushed, slapped together.”

I have not seen in the city’s files any written project budget by Mr. Blatter. He, too, was quickly gone from this project and replaced by a second volunteer project manager, who drew up yet another low-ball project budget.

More Money Wanted, More Misrepresentations

In less than a year Homeward Bound was back before council seeking an awful lot more money. They presented their second project cost estimate and said they needed $834,000. In May 2018 council voted to float a bond large enough to cover that amount. The bond proceeds would then be loaned to Homeward Bound, which would pay it off over 40 years. The total cost of the bond over that time came to $1.367 million, because it included a $451,115 hidden interest subsidy in addition to the interest for which Homeward Bound would be responsible. We revealed that in our first report on this fiasco. With the $600,000 value of the land given to Homeward Bound, a $30,000 organizational grant, free utility work, and other considerations, the real cost of the project within a year had ballooned to more than $2 million.

Homeward Bound again knew it was again understating project costs. But they persuaded the city to loan them a large amount of money well knowing they would be coming back for more.

Withholding Critical Environmental Information

In September 2019 as Homeward Bound sought construction permits, city staff informed it that under state law it would have to conduct a hazardous materials inspection. Homeward Bound responded by providing a toxic materials inspection report that had been prepared by the prior owner. That report showed that asbestos had been found in flooring and lead in the paint on all walls.

This report was not disclosed to the city until after Homeward Bound had obtained the nearly $1.4 million loan package.  The project budget submitted in 2018 as the basis for that loan said nothing about the costs of mitigation, containment, or removal of asbestos and lead.

Painting a Rosy Picture for the Public

Periodically, Homeward Bound would go on a public relations blitz. They were always on track, moving forward and excited to be providing much needed low income rentals for Port Townsend.

But they’ve known all along it was not going to happen. Nothing has been happening. They don’t even take care of the building or grounds. We’ve previously reported city inspectors found holes in floors large enough to swallow a person.  Trash is scattered around the property, now hidden by waist high weeds. On our most recent visit we observed that the doors were wide open and the black material protecting the plywood was fraying and torn. Other signs of deterioration around the building are evident. The condition of the building reminds one of an expensive Christmas gift, broken and forgotten, after the child grew bored with it and moved on to new toys that are more interesting and less trouble.

After discovering that the Cherry Street project had its first tenant, in a homeless camp in the trees, on February 27, 2020, I reached out to the group with some questions, such as when they would expect their first tenants inside the building. Homeward Bound president Paul Rice, who is also on the city’s planning commission, responded:

Not getting a direct answer, I followed up, asking Rice to respond to two simple questions: 1. When will the first apartments be available for rent? and 2. Will Homeward Bound make its first loan repayment to the city?

Homeward Bound president Rice responded:

This is an admission that three years since this building was floated across the Strait of Juan de Fuca, Homeward Bound still had no plan for how taxpayers could get their money back. Rice never came back with the promised information. Unsurprisingly, the public meeting Rice promised never happened.

I put similar questions to County Commissioner Kate Dean, who has played a leadership role on the board of Homeward Bound since 2017. She didn’t give me an answer but promised she would give me a tour of the building. I’m still waiting for that tour.

Next Report: Accountability