By Stephen Young
By Stephen Young
By Stephen Young
By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
Overly sensational: In response to your June 26 article "Suckahs" (Buzz) and to the previous articles on the related subject ("Sweetheart Deal," by Thomas Korosec and Rose Farley, April 25, 2002, and "The Taxman Cometh," by Thomas Korosec, May 29), I am commenting to correct the record and to address inaccurate and misleading statements made by the Dallas Observer regarding the transaction of Williams Run. Two statements are accurate: My father is Jim Wright, the former speaker of the House, and I did tell Thomas Korosec to "get out" of my office in June 2002. Most other comments are overly sensational or wrong.
In 1999 I created Greenbridge Development Corp. to provide affordable housing for working families. Greenbridge was a 501 (c)(3) corporation; it was not MY company. My husband, Scott McGuire, worked for Elsinore Group LLC; it was not HIS company. We did not pay OURSELVES anything from the Williams Run transaction. We earned fees to support the companies for which we worked. Developers fees of $400,000 (not $600,000, as alleged) are not excessive on a $13 million transaction; in fact, they are low. In Greenbridge's case, reimbursements were made to professionals and businesses that incurred the costs of closing the transaction and setting up the ownership entity.
Tenants have a right to express an opinion concerning ownership when it changes. They do not have a right to deny low wage-earning workers housing because they are poor. A number of residents at Williams Run were displeased with the sale of the property because 501 (c)(3) bond financing, used to purchase the apartments, carries a "low-income" stigma in the financing mission. In reality, the bonds require 75 percent of the residents to be low-income and allow 25 percent of the complex to remain at market-rate rents. These are IRS rules, not random income selections, and at the time I left Greenbridge in April 2002, the resident income restrictions were met.
At least in part, the IRS investigated the transaction because dissatisfied residents contacted them and complained, and because abusive practices have been alleged in other tax-exempt bond transactions. The IRS has a responsibility to investigate a situation when unrelated parties allege wrong behavior. Williams Run, however, was not an improper transaction. Two of the same residents that contacted the IRS (boasting of their IRS connections) asked Greenbridge to pay them $10,000 each to move to another complex.
This was an extremely complicated financing transaction, entered into for the purpose of maintaining housing as affordable for working households. TDHCA, lenders and all legal representatives have done a superb job of managing the process. One lawyer put the IRS investigation in perspective by saying, "Neither [their firm] nor [our firm] thought the IRS position was valid, but the $3,000 cash cost was so low that keeping lawyers fighting to win over that amount was not worth it." The IRS concluded that part of Elsinore's fee was for processing things such as applications to TDHCA (10 percent, or $40,000). The IRS then applied the $40,000 amount to the 2 percent limit on issuance costs from tax-exempt proceeds, thus the need to redeem bonds by Related Capital and the $3,000 expense to Greenbridge. No one has received special treatment, and no one has been bailed out in this case.
Editor's note: Ms. McGuire says nothing to explain why she (as the sole officer of a nonprofit claiming to be working in the public interest) hired her husband (working in a small for-profit company for which he was later named an officer) to carry out a transaction in which her husband's company collected nearly $500,000 (according to the IRS) and her company collected $100,000 (according to closing documents). Ms. McGuire used the latter to pay her own salary. The McGuires organized this self-serving arrangement through a contract signed by nobody but the McGuires. We stand by our reports.