The Rehabilitation of Jason Adam

[XLFD]

While most owners of downtown property are experiencing some hardships due to the Covid-19 pandemic and the associated shutdowns and loss of business over the last six months, one looks to get some wind in his sails courtesy of pirating some funds from the very State that sank his fellow crewmates: the Downtown Development Authority's (DDA) board member, Jason Adam, pictured below with his wife, Jamie.  The city council looks to get him one league closer to shore tonight by allowing him to bypass the scrutiny and spyglass of our elected officials.

Jason Adam has been a sworn DDA (aka Downtown Ludington Board) voting member since February 2019, shortly after having his appointment confirmed that January, briefly after he and his wife transferred his downtown property at 212 W Ludington into a limited liability company (p.14).  That spring, he received an estimate from a construction company (p. 13) for rehabilitating the four apartments above the business below (Crickets LLC, selling souvenirs and candy).  The estimated costs were about $225,000.  

Despite getting the non-specific one page estimate from the company of one of the Adam's friends, Brian May, whose business, Coastline Construction LLC, is not licensed by the state or found anywhere else, that work has still not been performed.  This is because the estimate appears to be solely for the purpose of getting around $240,000 from the state for rental rehabilitations. 

Other than his friend's fictional construction business, no other estimate was provided in his rental rehab application.  Adam admits in the application that the four units were all occupied by tenants until November 2018 (from the time when he brought the property in 2015), which would have been about the time he was tapped for the DDA job, and less than a month before the LLC was created for the property.  

Since the rental inspections work on a three year cycle, all four apartments were inspected and approved at least once in the four years, indicating that little work likely needs to be done to have all four operational again, the pictures provided in the application would support that.  The assessed value of 212 W Ludington in 2019 was $94,200, the proposed construction looks to sink in 2.5 times that amount of work, all going to an unlicensed contractor friend of the family, in order to create nothing new.

But that's not all.  Over the last couple of years the process has been abused and DDA voting member Jason Adam has not had to disclose the sweet deal he is about to receive while hundreds of landlords in Ludington scrape up what they can afford to sink thousands of dollars of their own money into improving their properties.  The process of qualifying for rental rehab grants in Ludington was codified in 2009 and hasn't been modified since in any action taking place at an open meeting.  

Another thing that hasn't been performed in an open meeting of the DDA in 2019 or 2020, an initial evaluation of the Adam's application or any other RR application for that matter:  

The evaluation, if it had been performed, would have forced Adam to disclose his conflict of interest in being a potential recipient of these funds when it came before the DDA.  Even though the evaluation was mandated by city law, it was not performed, the rental rehabs were only brought before the Ludington City Council earlier this year, who saw nothing about Mr. Adam being a recipient, nor any disclosures of that fact.  This is another procedural disaster since according to Federal Rental Rehabilitation Codes:  

§ 511.12  Conflicts of interest.

(a) No person who is an employee, agent, consultant, officer, or elected or appointed official of the grantee or State recipient (or of any public agency that performs administrative functions in the RRP) that receives rental rehabilitation grant amounts and who exercises or has exercised any functions or responsibilities with respect to assisted rehabilitation activities, or who is in a position to participate in a decision-making process or gain inside information with regard to such activities, may obtain a personal or financial interest or benefit from the activity, or have an interest in any contract, subcontract or agreement with respect thereto, or the proceeds thereunder, either for themselves or those with whom they have family or business ties, during their tenure or for one year thereafter.
(b) The appropriate HUD Field Office may grant an exception to the exclusion in paragraph (a) of the section on a case-by-case basis when it determines that such an exception will serve to further the purposes of the Rental Rehabilitation Program and the effective and efficient administration of the local rental rehabilitation program or the project. An exception may be considered only after the grantee or State recipient has provided a disclosure of the nature of the conflict, accompanied by an assurance that there has been public disclosure of the conflict and a description of how the public disclosure was made and an opinion of the grantee's or State recipient's attorney that the interest for which the exception is sought would not violate State or local laws.

Summarized, Adam as a participant in the initial evaluation of his own RR application should not be receiving these funds unless granted an exception by HUD which is reliant on Adam having made a public disclosure of his conflict.  It has been over a year, the bean counters have almost approved his application, and he has not disclosed such conflict publicly.  

A similar statement, even more strict, is located in Ludington's protocols:

Ludington's protocols also requires that at least two licensed contractors be used for bids, and that they be licensed.  Only one was used by Adam, with Brian May and his faux LLC appearing not to have any licensing by the state.

Conflicts of interests, non-disclosures, missing evaluations, bogus construction companies, insufficient number of bids, inflated non-descript rehab worth more than the property and making nothing extra... surely that's all? 

Nope, tonight the Ludington City Council will decide two things on behest of Community Development Director Heather Tykoski:  1) to authorize the city attorney to draft a development agreement for 212 W Ludington and another property  2) to authorize the city manager and clerk to sign those drafted agreements (see pp. 1, 50).  

These development agreements are between the City of Ludington and the Adam's LLC and Dr. Riemer's LLC owning 119 W Ludington.  If the city council authorizes these two actions, they take themselves, and the public, out of the picture.  For whatever the attorney drafts, it need not come before the public body that represents the City of Ludington ever again for discussion or amendment, because they will have already ceded approving authority to the city manager and clerk, which is often little more than a formality because the council has already made the decision to sign.  

Such careless delegation rarely ever happens, even in the decadence of Ludington's political history, and it makes one believe that the community development director, who has ran cover for the swashbucklers disregard of the process for nearly two years, will grant even more of our public treasure to her regulation-avoiding privateer friends in those secret agreements while other downtown businesses and city landlords haven't two doubloons to rub against each other.   

Arrrrr.

[Freedom Seeker]

Hardy har har, a pirate's laugh. They're really going to hate you for this exposure X. I hope more than one Council member uses a spyglass to look this over. Corruption just gets more bold in Ludington. If this passes by the signature of the CM and Clerk, we'll know what side of the fence the new CM is on, for he has the power to set this straight. I really don't expect much scrutiny from the Clerk. I just think they don't know right from wrong anymore.

The insurance is that if fraud is proven, the grantee will have to pay back funds? (Last sentence of Tykoski memo). What? The city is the grantee? Noncompliant with MEDC guidelines? I wonder if the MEDC has a compliance board? Looks like they are from the outset non-compliant.

Thanks for exposing another city appointee who should be walked off the plank, followed by a few others. Such details just erode hope in the city coming out of corruption, and troubles any confidence that was there.

[XLFD]

Councilor Serna has looked at the information provided to the council and plans on delving into the issue further at the meeting, because it is confusing and it appears to be 'sneaky' at the least.  When they look at the treasure map a little closer they may find an unexpected 'X' on it.  

[Freedom Seeker]

Thank you, Councilor Serna for looking into the matter.  Not only does the "contractor" seem "fishy" with no license ( makes me think a large possible kickback on a grant far exceeding the assessment.)  Will there be accounting of funds?  And why do only two buildings get so much and others struggle?  Is this fair?  

[XLFD]

Good questions.  The Rental Rehabilitation Programs are constructed primarily to utilize 'Taxpayer' buildings for extra residences.  If you've never heard of that type of building, they are those buildings you see in a business district that have an additional story or two which originally housed the business proprietor.  When suburbs grew in the mid 20th century, the owners typically abandoned them to live out in the suburbs, and converted them to non-residential purposes like storage. 

RR is meant to build up the populations in downtown areas so that the areas can reach a critical mass of self-sufficiency.  I believe Chuck Marohn of Strong Towns would approve of such programs.  The problem is that fewer people want to live on the upper floor of a business in a noisy downtown area than they do in the suburbs, as 'proven' by the shopkeeper's original flight from the downtown.  

Jason Adam's actions here show why the RR programs are failures and ripe for the picking by the unscrupulous.  You can get $60K per upstairs unit in a very short time by just taking existing apartments and claiming they are non-residential.  The 311 square foot studio unit in front of Jason's holding could only bring in 1/10th of that per year in rents, plus you would have a tenant to deal with.

[Freedom Seeker]

Interesting concept of RR and Strong Town, X. Thanks. Exciting while you're young living above a bar on a busy street and can maneuver stairs after having a few too many to drink. At least you don't have to drive. Sounds romantic at first. When kids come about and you have to haul baby equipment and groceries and trash up and down stairs, and with no garage in the winter have to walk half a block in the blowing wind and ice with a baby in your arms, the romantics could easily wear off. 311 s.f. might be good for a single young man for awhile. I don't see it appealing to longterm renters.

How can one possibly get $60k in short order by claiming a non-residential upstairs? My mind can't imagine that scheme.

[XLFD]

Here's how you do it in Ludington, I offer two prior recipients of rental rehabilitation grants as examples:  1) Kathy and Dave MacLean at 102 W Ludington (Spindrift Cycling) and 2) Budde Reed at 115 W Ludington (FOTOF Building, currently housing Melissa Reed's My Sister's Closet).

The rules back then allowed $35K grants per housing unit you added where there was none before, you were trusted to rent out your new units to low to moderate income folks at fair market rate for 5 years, and then you could do with them as you please.  But not even that applied since CDD Tykoski effectively allowed them to be on the honor system with her, and state authorities trusted she was keeping the RR recipients honest-- when city officials Kathy Maclean (DDA treasurer) and Budde Reed (Building Authority president) were not honest about several items on their applications.   

So after five years, these old RR buildings could conceivably quit renting their upstairs apartments for any reason, maybe change their LLC name to make it look better, and come back for more rental rehab dollars to make them rentals again, receiving $60K now per unit, unless there's some safeguard against that of which I missed in the process.  It's a scheme ripe for abuse and exploitation.

[Willy]

Thankss X for that explanation. It makes the situation easier to understand. Also there must be some kind of oversight and record keeping by the Government agency that provided the money, plus some kind of recorded follow up to verify compliance. If not then something is very wrong.

[Freedom Seeker]

https://www.detroitnews.com/story/news/politics/2020/01/13/communit...

Thanks X for that summary. I attach an article about communities struggling to maintain MEDC funds, and in Paw Paw"s case, the total amount for the community is around the amount that is going to Jason Adam alone This just doesn't make sense. Remember when Whitmer make budget cuts to MEDC. Maybe she saw some of this potential for corruption?