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.
Cherry Street “Affordable” Housing to Cost More than $2 million, May 28, 2018
The Tragedy of the Cherry Street Project, December 12, 2018
What’s Happening with the Cherry Street Project? October 29, 2019
“Completely Bogus” Numbers–More Problems and Delays for Cherry Street Project,
Cherry Street Project Welcomes First Tenants, February 28, 2020
Default the Cherry Street Project Now, April 22, 2020
Multi-Million Dollar Fraud on Taxpayers: The Cherry Street Project Unmasked, June 27, 2020
Jim Scarantino was the editor and founder of Port Townsend Free Press. He is happy in his new role as just a contributor writing on topics of concern to him. He spent the first 25 years of his professional life as a trial attorney, then launched an online investigative news website that broke several national stories. He is also the author of three crime novels. He resides in Jefferson County. See our "About" page for more information.
Did I not read that the structure has asbestos in it? What about lead paint? Will such materials become friable during demolition?
If so, demolition and disposal is no small, and economical task. No, not at all. The building will have to be 100% contained in order to remove All hazardous wastes in a manner which is in compliance with all Federal and State standards. Cost for such a task will be very expensive, indeed!
Yes, they will have to do asbestos and lead abatement. Not cheap! Then the building will have to be torn down and disposed of. We are likely talking hundreds of thousands of dollars.
Thanks again for your time and efforts Jim. Taking responsibility is not in the cards for Sandoval and others. What needs to be known by all is that Michelle Sandoval has been on City Council for 20 years. She was appointed mayor 3 times. She owns the Windermere office here. She lives in denial, and Port Townsend. Voters must approve. 20 years and numerous elections led us here.
Sandoval has taken the last 3 sewer bill newsletters to wax nostalgic about her time here. Sewer bills are appropriate. She asks for more public input after she leaves. She is known for ignoring public input. There was no public input for the 1.2 million dollar plaza at the visitor’s center. The project removed gravel and parking to pave winding sidewalks and plant weeds. Not so “green”. Not so responsible with decaying roads and affordable housing needs.
Cherry Street is just one more example of Sandoval incompetence. My business and customers, and all who work and visit are impacted by the deconstruction and defunding of the volunteer parking enforcement program 7 years ago. All need to see who benefits. Development, (real estate) in the Historic District sells condos and buildings with free, all day, wink and nod brand parking. Sandoval has a listing right now with “free parking”. Posted signage is just for the unknowing. It is overt discrimination that Main Street plays into. 1)See no evil. 2)Keep social position. 3)Cheer!!!
Currently, through the Port, the Maritime Center is planning on removing its pay lot they say was under used, and putting up a building to attract more visitors. The choice was, free illegal wink and nod parking contrary to posted limits, courtesy of Sandoval’s City of PT, or pay for parking in the lot. Failure was always the option. Now there will be more visitors, less parking.
But wait, at the other end of town at Flagship Landing the Marine Science Center is moving in. They hope to attract more visitors. No parking consideration again. Sandoval’s private lot at Windermere a block away will tow you, Owen Rowe on the board at the Food Co Op has his parking covered too.
But wait, a project under way adds some 38 plus units on Water Street. No parking consideration needed. Then there are the plans for the Hastings building, more units, where do they park?
Sandoval and her corrupted council can’t be bothered with planning. A manufactured problem grows and grows. Now the Police Chief is expected to turn a blind eye after pledging an oath to enforce all laws. Sandoval is incapable of feeling responsibility. Denial is her forte’.
Most important is that there has been no planning for future and current parking. Isn’t there a planning Commission? Paul Rice, Cherry Street Paul Rice, who works for Sandoval, was on it last I knew. There is no education for public, residents, and workers that the spaces they take all day impacts business access and income. It’s also just plain rude. Like someone we all know with a smiley face. No options that are available are spoken of.
City Manager Mauro, according to your article last year, was not qualified for his position. Appointed Mayor Stinson and Sandoval vetted him. Another failure of public trust. What agreements were there that parking planning/enforcement that Mauro is responsible to fund via his job description and City Ordinance were there? Are there? Mauro’s review was shelved as your article about him in the Free Press came out. Later on, he was given glowing reviews. By Sandoval and Council. To deal with his lack of qualifications reflects on Sandoval. Denial is the answer.
Sandoval also signed into existence the FWPDA, and along with Ariel Specer and the gang ignored red flags that State Audits pointed to prior to the FWPDA meltdown. Specer made no waves, never has regarding parking, streets, Cherry Street, and more. She now gets a job with the State Attorney General’s office. It is the way it is. Membership has its rewards.
What happened to Pamela Adams transportation committee parking study as Mauro took over as City Manager? Vanished. No plan. No responsibility for a purposely constructed over crowded present and future PT. Mauro says and does nothing, except to eliminate parking at Water and Adams via Main Street for a “parklet”.
I could go on and on. I know too many words are bothersome to some. Too few words and too little comprehension led us here. Sandoval uses the public dime to end her reign with her version of her great time here, and crocodile tears about all the changes.
Sandoval now has a Windermere office in Quilcene. A sign outside advertises vacation rental properties. How many rentals will be converted with easy management by Windermere and Sandoval? Sandoval is, of course concerned about housing here, Watch the actions. The mouth takes no responsibility. It is the way it is, and what voters allowed. And still allow.
Thank you Port Townsend Free Press for your insight into the problems evident over the past years. The FACTS are what they are.
Your coverage of the Cherry Street failure is important to the taxpayers, but has only been brought to light by your coverage.
Thank you for shining a bright light into the dim corners of PT’s city hall. I agree this ineptitude by the council entered the realm of malfeasance in 2018 when city council members refused to engage in due diligence. And now Faber is poised to become mayor? I fear the the long line of self-righteous, morally bankrupt leadership will continue unabated, aided and abetted by toady press-release-passing-as-journalism, aka The Leader. Keep going, Jim and PTFP. We are reading, talking, voting. We see you, and we are so grateful. The truth will out.
Not mentioned, but it is part of the parking problem. I’m talking about the parking on the hill on Water Street. That street is just too narrow to allow parking. It’s one of my greatest fears that someone will get out of their car without looking and end up being killed or badly injured. As for Sandoval, I have always thought it was a major mistake to let a realtor be on the city council let alone be mayor. It seemed like a definite conflict of interest. This has been supported by the prices of rentals and sales of real estate. Both have gotten skewed more by Sandoval in the last twenty years. As for the city council, you pay for what you elect, though I don’t doubt that good people don’t want to get involved. But, if things are going to change, someone has to step up.
I need to comment on something Les said. Good news is no one has to read it. Your choice. I will be thorough, lots of pesky words to explain beyond the superficial. We will get to Mr. Faber in a minute, to respond to AJ.
First, the uphill parking on Washington is much safer than the intersection at Taylor and Washington, and the corner my business is on at Washington and Adams where locals and visitors cross the street, against speeding cars on Washington. There have been pedestrian accidents there. None on the hill that I know of. I have thousands of days over 25 years observing the area. I make my living there and host thousands of visitors from near and far. Locals and visitors. I have an oar in the water. A costly oar.
The uphill parking on Washington is one of the few legal all day parking areas for employees and others. Many do not want to walk up hill, so they park all day in front of and around my business and elsewhere posted as 2 hours, intended originally, years ago, for customers and visitors. Now many are taught to park wherever they like as long as they like.
A false narrative says this is good for customers. They don’t know. I know that for a fact because I meet all kinds daily. Tenants know. Business owners and workers know and take advantage and harm each other. This is Sandoval’s “community” after 7 years of pretending that parking simply does not exist. For profit. Add it to the list of other things I mentioned in my first comment and more, like REET, Real Estate Excise Taxes not going to affordable housing.
When someone, as you did, makes the comment you did about “dangerous” conditions, ask yourself what is the answer to what you see as the problem and suggest it. A PT police Seargeant once told me that is what he expects his men and women to do. He learned it in the military. He also learned the term “self licking ice cream cone” that he said describes “leadership” in PT.
Will the City of Port Townsend and City Manager John Mauro convert the parking uphill to bike lanes? Any excuse to eliminate cars seems to be Mauro’s happy place. He might now say there is public concern about safety and find an excuse to further screw things up.
A reasonable answer uphill on Washington and intersections below might be to install speed tables, if allowed, approaching the hill and better speed limit signage warning of a congested area ahead. That would be difficult to get done. Here is an example why. In front of my business, they installed “rain gardens” to catch and filter rain water. As they were doing so several of us pointed out that cars parking behind the open pits would not see ahead of themselves and drive over the curb and into the rain garden pit. During construction the dirt pit had danger tape around it. After being paved, and harder with rocks and a sharp grate it is now “safe” and needs no railing to protect people. Amazing. Mauro. Sandoval. Faber. Engineering is their employee(s). No problem.
At my business we personally saw over 10 people drive into the pit and have to be towed out, often with damage to vehicles. Often more elderly folk. Ruined days. Money some can’t afford. We sent photos to City engineering. No reply. Sent photos and text to Council a few times. No response. So much for Sandoval now asking for more public input as she finally steps down. Yeah, that’s the ticket, if you public had provided more input, we wouldn’t have any problems. But, for Sandoval there are no problems. To acknowledge.
We reminded “The City” that the bigger concern was people exiting vehicles, especially at night, walking around the front of vehicles, and falling into the pits. Excuse me, rain gardens. Excuse me, pits. Specific realistic solutions were suggested. There was no empathy for the victims as this went on. A tow truck driver said it happens more frequently on other similar new rain garden installations.
Finally, after about 2 years and sending yet another photo of a stuck car to Council, a simple flex pole barrier was installed so cars avoid the pit, because they avoid the barrier. It’s not good to reward public input. It might encourage more. Denial is easier.
It is a matter of time before someone falls in and is seriously injured. City Managers, City Attorneys, and City Councils should be avoiding lawsuits. Railing is cheap compared to someone in a wheelchair suing. We simply lack the talent to do the job. So many different jobs. Fact. Easily seen. Responsibility avoided at all costs.
That goes for fixing parking problems and getting a plan after 7 years of neglect. Where else but PT? Sandoval fails. Again. Vice appointed mayor Faber fails. Not just here, but from FWPDA audit red flags, to debt, to roads, to Cherry Street and much more. Self-assessing failures that are cheered on by some. The Leader, the Fourth Estate enabling the problems by not digging deep. At all.
Now AJ, about Faber. I will contribute the first $500 towards a campaign to highlight his voting record and damages done. If someone matches it. I will donate part of my street corner across from the Leader for signs and folks just to meet and talk. PT voters should be voicing their opposition to more of the same. Faber- voted yes to 1.2 million dollar no public input visitor center plaza. Faber- part of the Cherry Street problem and declined to be bailed out as explained in Jim Scarantino’s story, with all on council, but Mickhager. Faber is part of the old guard problems. With rank.
I support Monica Mickhager for appointed Mayor. The cleanest hands. Part of the local working community. I supported her against Appointed Mayor Stinson, who knew all and could be told nothing according to smart folk I know, and spent much on ads and other support for Mickhager.
I did not buy a politician and told her when she won, that she was about to learn more than she bargained for, and was a clean drop of water in a cesspool. I really have not spoken to her since she took office. I am indeed a liability. Too many words. Not enough smileyface. Lacking smarm. She has and had her own lessons to learn.
A past Council Member during my time trying to prevent the FWPDA from taking over Fort Worden years ago called me with some advice on how to slow things down. They also said out of the blue when I was a bit too trusting, “Port Townsend has a black heart”. Another time they told a story in a LTE in the Leader about being pulled aside and advised not to make waves. Wonder who that could have been? Now I see.
With more, so far, clean drops heading into the cesspool it only makes sense to make sure Faber has no undue power. Likewise, Mauro. We still have Mauro, Stinson and Sandoval’s little project who was and is not as advertised, according to the Free Press. Let’s make sure policy starts and ends with Council, representing all of PT, where it should. Not with a tool selected to avoid and ignore laws, codes, and any kind of parking planning as more development happens in the Historic District. With the City’s OK. Mauro and Faber. Watch out. Attorney and tool.
Who will step up? Who will be proactive? Who will whine as most do and make no meaningful moves? Most of you. It’s how it works.
I really do have a customer that was City Manager in 5 cities I met a month ago. I asked him about corruption in those cities. A council member in one town is in prison now for what they did on Council. He tells me that especially in small towns, people get the government they deserve. $500 asks who will step up. Who will whine? End of lots of words. Please forgive typo’s etc. I have to get to work.