Tax credit application for senior housing units denied

State officials have denied Michael McDonald’s application for federal tax credits that would have helped fund nearly 200 senior housing units near Vegas Drive and Decatur Boulevard.

The denial prompted city officials to terminate their development agreement with McDonald, a deal that included about $3.9 million in public funds to subsidize the plan.

The plan has been the subject of controversy since April, when the council approved it over the objection of Economic and Urban Development Director Bill Arent, who said that it was too costly and that McDonald didn’t have the experience to pull it off.

With the city redevelopment funds, McDonald was seeking federal tax credits awarded annually by the Nevada Housing Division. The tax credits, which then can be sold to investors on the open market, were needed to make the project work.

“It seems that it went through City Council rather easily,” said Martin Dean Dupalo, president of the Nevada Center for Public Ethics. “I think it had more to do with his political access and less his business qualifications and track record.”

Since April, McDonald has served as chairman of the Nevada State Republican Party. He also is a constable for the town of Laughlin and a former police officer.

Frank Hawkins, another former councilman who is now an affordable housing developer, was a consultant to McDonald’s project.

During their time on the council, McDonald and Hawkins each had brushes with the state Ethics Commission.

In 2001, the commission found that McDonald violated rules by urging the city to enter a business deal that would have benefited his boss.

In 1995, Hawkins was found to have failed to disclose a loan from a business with issues before the council and to have benefited from a golf tournament that had participants with business before the city.

Dupalo called the state’s decision to deny credits and essentially undercut McDonald’s agreement with the city “refreshing” because it prevented public money from going to what appeared to be a flawed project that would have rewarded former public officials for having good connections at City Hall.

“Clearly the state looked at his business qualifications and track record regarding housing and not his political access,” Dupalo said.

Others cast doubt on the very need for the project in a real estate market now flooded with low-cost housing.

“In the current market, it would make a lot of sense for cities to start looking at how to rehab vacant houses that are affordably priced now,” said Geoffrey Lawrence, deputy policy director at the libertarian-leaning Nevada Policy Research Institute.

McDonald disagreed with the decision. He said that it is “very disappointing” he didn’t get the tax credits and that state officials were wrong to deny the proposal based on a lack of experience by the developer.

“To say I had no development experience, that is a lie,” McDonald said, adding he has worked for commercial and condominium developers.

Mayor Carolyn Goodman responded to a request for comment, saying through spokeswoman Diana Paul that she is sorry the proposal didn’t succeed and is hopeful the site will be developed for senior housing.

Ward 2 Councilman Bob Beers defended the council’s decision to approve the agreement. He said Arent’s analysis showing the project cost substantially more per unit than other subsidized projects was flawed because it included the city’s cost to buy the land, which subsequently tumbled in value.

Beers also said cities are forced by state law to spend a percentage of money raised through redevelopment to build affordable housing. Approving McDonald’s proposal would have helped meet the requirement, he said.

“We still have this obligation from the state to spend money on affordable housing, although I’m not entirely sure our houses aren’t plenty affordable now,” he said. “I’m not sure the mandate from Carson City makes a lot of sense anymore.”

With McDonald’s proposal off the table for now, the city is left with the undeveloped property.

Ward 5 Councilman Ricki Barlow, who represents the area of the project and supported McDonald’s application, said he would like to put out a request for new proposals.

“Maybe there is someone out there looking for a project in this area,” he said.

Contact reporter Benjamin Spillman at bspillman@
reviewjournal.com or 702-383-0285 .