By Ted Carter
Farish Street Group principal David Watkins says he feels blindsided by the U.S. Department of Housing and Urban Development’s suspension of Farish Group from further involvement with HUD-funded projects.
Watkins’ Farish Street Group until last October had a lease deal to transform downtown Jackson’s Farish Street into an entertainment district. He said that until Thursday, he did not know that HUD money paid for the 17 parcels that made up the initial phase of the redevelopment. Nor, did he know, he said, that the project had an obligation to meet terms set by HUD.
HUD announced the suspension in a Sept. 7 letter to Jackson city officials. Watkins said he first learned of the letter Thursday in a phone interview with the Mississippi Business Journal.
In a move than could have far-reaching implications for redevelopment projects in Jackson, HUD also suspended the Jackson Redevelopment Authority from further involvement in HUD-funded projects.
HUD said in the Sept. 7 letter that the suspensions would be in place “until further notice.”
The letter also includes a demand for repayment of $1.5 million by the City for HUD money used to buy 17 Farish Street parcels from 1997 to 2002. City officials say they will repay the money over three years starting in December 2016.
Watkins said in a prepared statement Friday that he was stunned to learn of HUD participation in funding redevelopment of the 3-block stretch of street that was once a thriving commercial and entertainment destination for Jackson’s black residents.
He said the JRA and its lawyer for over two decades, Zach Taylor of Jones Walker, never alerted either he nor his firm’s lawyers to HUD participation.
“Our lease with the JRA on Farish Street is over 90 pages long,” he said, and noted JRA lawyers drafted the lease and set out “all our legal obligations on the property in detail, including payment of rent and a large portion of future profits.
“The phrase ‘HUD’ is completely absent from that document. Interestingly, no federal regulations are cited in the HUD letter either. We are stunned to learn that any HUD regulations even applied to our business venture,” Watkins said in his Friday statement.
Here is the rest of Watkins statement:
“Based upon my success with the King Edward Hotel, the mayor and other officials asked me to assemble a local group to bid on the Farish Street project, which our group did. We were required to assume over $1.5 million in debt from the prior, unsuccessful developer, took over a 45-year lease, borrowed additional money from MDA, and spent a huge sum of private funds, mostly mine, before the JRA pulled the lease out from under us last year. All contracts, leases and business relationships were fully disclosed to the JRA and their lawyers and all funds have been repeatedly audited.
“One constant, responsible party for ensuring compliance of all entities, public and private, even going back to 1999, was Zach Taylor, a Jones, Walker lawyer that has acted as counsel for the JRA for over 20 years, before being abruptly fired from the JRA last month.
“These are the same lawyers that advised the JRA to terminate FSG’s lease. The absence of Jones, Walker in the HUD list of criticism is puzzling.”
“It is worth repeating that neither the JRA nor the City of Jackson gave or loaned the Farish Street Group or Watkins Development a dime on this project, despite some speculation to contrary.
“The HUD reprimand does make it clear that they have not interviewed me or anyone affiliated with the Farish Street Group. We will invite them to do so next week so we can clarify some of the erroneous points and innuendos made in their letter. We are optimistic this outcome will be revised.”
In the Sept. 7 “monitoring” letter, HUD said the City and the JRA failed to meet a host of conditions for receiving and spending the $1.5 million used for buying the storefront parcels.
HUD’s overall gripe is that the City failed to ensure the JRA complied with requirements for the money. In fact, the City never established the JRA as an entity legally entitled to receive HUD money for purchase of the parcels, the federal agency says.
Further, city officials didn’t keep an eye on what the JRA was doing once the Redevelopment Authority received the money, HUD says. “The City failed to maintain its files and provide HUD with documentation that it had monitored its funded subgrantee Jackson Redevelopment Authority.”
Another key unmet condition: Over the 16 years since receiving the money, the City has failed to show the Farish Street project has created jobs for low-and-moderate income residents. Specifically, HUD criteria for meeting a “national objective” mandate that “benefits are available to all residents of a particular area where at least 51 percent of the residents are low-and-moderate income persons.”
HUD gave the city a choice of repaying the $1.5 through deductions to future HUD grants for low-income housing and community redevelopment work.
The City instead has agreed to pay 503,603 in December 2016, $503,603 in December 2017 and $503,603 in December 2018.