The Bitterness of Sugar Hill

This is the story of a runaway money train called Sugar Hill. Fueled by your federal tax dollars, it has gobbled cash -- almost three million dollars -- on a seemingly unsupervised six-year journey of outrageous waste and incompetence. To date all it has produced are unfinished buildings, shoddy workmanship, and unanswered questions.

The wheels began to turn in 1993, motivated by ideals that are beyond reproach. In that year the nonprofit Economic Opportunity Family Health Center (FHC) submitted a proposal to create 26 apartments to house AIDS patients and their families. The agency signed a contract to purchase five buildings, one of which was to be demolished. The remaining four were to be redesigned and rehabilitated -- a task that proved more formidable than starting from scratch.

The project, called Sugar Hill, would cater to the neediest AIDS sufferers, those in the final stages of the disease. The dying would come largely from the ranks of impoverished minorities. FHC decided to locate the project in one of the worst parts of the inner city, smack in the middle of apartments also called Sugar Hill. It branded the area around NW Fourteenth Place and NW 71st Street a "transitional neighborhood" and sold the development as the first step in an effort to transform the surrounding squalor.

But rather than raising up the area, the Sugar Hill project began to sink to the level of decay and inertia around it -- a victim of neglect, indifference, and ineptitude. Its history is almost comical: It failed to meet federal noise guidelines and its first contractor went bankrupt; cost overruns became the norm while builders ignored schedules and workers installed shoddy materials; one of the buildings burned down, and overpriced appliances and fixtures were looted. Today not one AIDS patient lives at Sugar Hill, a site that rusts and rots while waiting for yet another infusion of cash to complete it.

From the beginning Sugar Hill carried a costly price tag. FHC requested $2.35 million in federal grant money. Funds would come from the coffers of a U.S. Department of Housing and Urban Development program specifically designed to help local governments house AIDS patients. Usually these funds are earmarked for rental assistance and utility bills, but occasionally the money is used for permanent housing. Allocation and administration of the cash fell to Miami-Dade County and the City of Miami in a 51/49 split. In its proposal FHC offered its experience and reputation as important reasons why it should receive the grant. As proof of its expertise, the proposal included the résumé of one of the county's most distinguished women, the president and chief executive officer of FHC at the time, Jessie Trice.

Trice, who includes among her many honors an appointment to a White House conference on children and a section of NW 22nd Avenue that carries her name, promised to take the slum housing and transform it into an enclosed compound that would include new apartments, a spacious community center, and grassy areas. The project priced out at an expensive $106 per square foot of building space. (Private construction for a three-bedroom townhouse currently averages around $66 per square foot.) Nonetheless the grant was quickly approved by the city and the county commissions. The city commission agreed to disburse $1.1 million on December 16, 1993, and a little more than one month later the county commission voted to give an additional $1.2 million.

On March 10, 1994, FHC hired the man whose signature became the passkey to the Sugar Hill money box, architect Joseph Middlebrooks of Joseph Middlebrooks and Associates, Inc. He continues on the project today. His job: to help hire the contractor, draw the plans, and supervise construction. The architect needed to sign on the dotted line certifying that all work was completed satisfactorily before construction bills could be paid. Middlebrooks declined to respond to more than ten phone calls to his office, as well as to faxed questions, for this story. He was not alone. Despite more than a dozen attempts and a request by city officials that they speak with the media, FHC employees as well as the project's last general contractor refused to comment or account for how they spent the public's money.

FHC's site choice had obvious and inherent difficulties. Almost a year after signing the contract to buy the Sugar Hill property, the agency received a report from the sound-engineering firm Archicoustics. It appears the agency failed to adequately take into account the railroad tracks that abut the property. The noise level ran afoul of HUD guidelines for housing. Archicoustics concluded the building closest to the tracks would never meet minimum noise standards, even if substantial barriers were built, so FHC decided to make that building the community center. The other structures could receive a poor HUD sound rating of "normally unacceptable" if plans were modified according to Archicoustics' recommendations. They were.

The rumbling of trains is not the only reason Sugar Hill would be an uncomfortable place in which to lodge the sick. It is an area marked by poverty and urban blight, where the air is thick with fatalistic hopelessness. Liquor marts and storefront churches occupy nearly every block. Employment and industry are scarce.

One recent afternoon visit to the property found six young men huddled shooting dice on the broken, unfinished sidewalk at Sugar Hill's main entrance. One of the men, wearing John Lennon-style granny glasses with frames that appeared to be solid gold, smiled and said, "Hey man, you look like a customer." Across the street, in front of a run-down housing complex now owned by the Urban League, a young man rolling a joint commented wryly that he passed his time just trying to stay alive.

Oddly enough FHC did not purchase a block of twenty apartments that sit in the middle of the Sugar Hill development. Chiquitha Penson and her three children live on the second floor of this building. Like most of the residents, she receives welfare. The government helps pay her $225 per month rent. Great blotches of mold grow on her ceilings. Her children crawl around sagging floors of rough wood. Penson doesn't quite know what to make of the multimillion-dollar development going up around her. Others in the neighborhood grouse that they don't want AIDS patients living next to them.

At the outset FHC hired the consulting firm Gagnier, Hicks Associates, Inc., to help with the project. The firm submitted a list of "known" contractors for consideration by FHC and Middlebrooks, but the bid for the publicly funded project remained open.

Indeed a contractor not on the list was chosen by the architect and FHC. When all the interviews and conferences concluded, Tecina International, Inc., signed a contract with FHC on August 2, 1994, for $1,495,713, an almost perfect bid, just $14,287 shy of FHC's own estimated building costs. In the contract Tecina pledged to complete all the project's construction, including materials and labor, within 195 days after work began. The firm also agreed to pay a $200-per-day penalty if it finished late. And the company guaranteed all of its work for a year after completion.

Then the fun began. Communication broke down and delays set in almost immediately. The gap between reality and what was reported started to widen.

According to memos between FHC and the city, actual construction did not commence until September 15, 1995. Problems with building permits and exasperating code changes were blamed.

Then a mysterious fire burned down the community building sometime in 1996. The Miami-Dade County Fire Department has no record of the blaze. The first mention of it in government documents was in late April of the same year.

The only part of the building that could be salvaged was the foundation. But no setback seemed too large to paper over. An April 22, 1996, memo from an FHC consultant to city officials explained how the damage was enormous yet unimportant. They would have to rebuild almost from scratch, but work on the structure still qualified as a rehabilitation.

"The fire damage did not result in total destruction; however, we were faced with structural damage to the walls," the consultant wrote. "The buildings department allowed us to remove [the walls], but keep the foundation and slab. They [still] consider this a rehab just as long as we do not increase or decrease the structure."

No one seemed to care about the project's true state as long as the key players kept the federal cash flowing.

On April 29, 1996, Tecina declared bankruptcy, but amazingly, continued working and receiving payments. It appears the City of Miami, which had taken over supervision of the project from the county, was not immediately notified.

But Tecina's subcontractors noticed quickly enough when they stopped being paid for their work. They began placing large liens against the property as early as October of that year. For instance Miguel Lopez, Jr., Inc., which provided paving and drainage for Sugar Hill for $32,513, filed a lien against the property for $10,670 that remained unpaid despite the work's completion.

By November 1996 Tecina had devoured $1,372,303. Yet during that same month, more than half a year after Tecina declared bankruptcy, Middlebrooks approved two more construction payments totaling $77,765.

On December 10 the city finally reacted to the crisis. Paul Eisenhart, a housing official, expressed alarm at the situation. In a memo he noted that though most of the Sugar Hill construction money had been spent, the work was far from complete. Based on a city inspector's report, he described workmanship as ranging from poor to fair and stated that most categories of construction appeared to have been overfunded and overpaid. Eisenhart refused to release $67,376 of the payments approved by the architect. The city official worried in the memo that Tecina would walk off the job, even though his own inspector already had reported that no one was working at the site.

Eisenhart wondered in writing who exactly was supervising what had clearly become a disaster.

"I question whether the architect is scrutinizing the [contractor's] applications and certifications for payment adequately enough to assure project completion," he pondered.

The day after Eisenhart's memo, the insurance company that had written the policy guaranteeing Tecina would finish the job wrote an indignant letter to FHC demanding that the agency release the final payments. Its request appears to be based on the inflated conclusions of Middlebrooks, who apparently told the insurance company that the project was almost finished. Obviously it would be in the company's best interest if the project were indeed completed. "This last draw, according to your architect, brings the project to over 90 percent," wrote Michael Burton of United Surety Associates, Inc. "Common construction practices allow for a reduction in retainage at this point." (Retainage is the small fraction of contract monies held back from the contractor to ensure the contractor finishes the job.)

On January 9, 1997, Tecina was given a notice of default officially severing it from the job.

Almost two and a half years had passed since Tecina had signed on. Most of the money had been spent and less than half the work was done.

"We didn't know Tecina from a hill of beans," remembers John Hazelroth of Gagnier, Hicks Associates. "It was all so long ago. I sat in on some of the meetings when we were discussing various contractors, and Tecina seemed alright. But I remember that it was Middlebrooks, the project's architect, who was excited about Tecina -- about their engineering abilities. Middlebrooks seemed to feel that Tecina could take on some of the engineering for the project and save his firm some work."

Early in 1997 Coral Gables attorney Reginald J. Clyne was hired by FHC to negotiate a settlement with the insurance company to cover Tecina's shortcomings. More than nine months passed before the claim was settled, with the company paying FHC $300,000 on September 26 of that year. FHC refuses to say how much of the settlement was paid to Clyne as fees and expenses. During this time, work at the job site came to a standstill.

Tecina's failure and subsequent departure from the scene not only brought work to a halt, it created yet another pressing problem: FHC now owned an unguarded, half-finished, construction site in which they had invested a couple million dollars. The area required professional protection in a neighborhood where anything not fastened down would likely disappear.

So, departing drastically from any planned budget, FHC hired professional guards from Command Security Corporation of LaGrangeville, New York. It was the first of three companies to get the job.

In an August 21, 1997, letter from the security company to FHC, Command threatened to swiftly sue the agency for nonpayment of $11,759 for roughly one month of guard duty at the site. FHC promptly changed companies to Garrison Protective of Florida. They would later switch yet again to Equalizer Security.

Based on bills on file with the City of Miami, guarding Sugar Hill appears to have cost approximately $9000 per month -- about $100,000 per year. Over three years of delays, the project incurred security costs of between $200,000 and $400,000. FHC refuses to reveal where that money came from or exactly how much was spent.

The $300,000 settlement from the insurance company upped the entire project budget to build Sugar Hill to $2,646,000. It is unclear whether FHC received additional insurance money from the community center fire or for vandalism and burglaries that occurred at Sugar Hill, even though records indicate thousands of dollars were initially spent to insure the site. Yet as the money available for the project increased, the number of apartments to be built inexplicably dropped from 26 to 24.

According to a city inspection in February 1997, the project was far from finished. Still awaiting installation were handrails, light fixtures, landscaping, electrical outlets, air conditioners, closet doors, shelves, windowsills, floor coverings, toilets, bathroom sinks, interior doors, exterior stucco, and more.

No one had the courage to turn off the money spigot for a six-month project that had turned into a four-year debacle.

During the insurance-settlement negotiations, Clyne informed the city on May 30, 1997, that FHC intended to complete the project and asked the city to confirm that $546,128 remained available for the construction.

On June 19 that same year, Eisenhart reported that Clyne had "provided this office with a copy of estimated cost ($657,224) submitted by Sterling Contractors, Inc., to complete the project."

In a memo four days later, Clyne enthusiastically reported to the city staff that the head of Sterling, LaVerne Fernander, is "one of the best-known small black contractors.... I have never personally heard anyone criticize her work." He went on to say that FHC had nothing to do with choosing the firm.

On October 28 Sterling signed a contract for $750,050. The terms eerily echo those agreed to by Tecina: Sterling would finish six months after it began, and it would pay a $100-per-day penalty if it failed to finish on time.

The amount of the Sterling contract escalated faster than the war in Vietnam. A year later the Sterling contract had grown to $869,561, an amount equal to 58 percent of the original Tecina contract. If Sterling had finished this new contract on time and within budget, it would follow that Tecina had completed only 42 percent of the job.

But, of course, Sterling didn't finish.

A look into Sterling's expenditures shows not much had changed. Among the waste one invoice paid by Sterling stands out. The bill has no imprinted letterhead. Rather it is a simple boilerplate form available at any office-supply store, from a company calling itself the "T&R Group." It is dated February 24, 1998, and requests payment for 24 small Westinghouse refrigerators, 24 Westinghouse electric ranges, and 24 Newton range hoods. Nothing is itemized. The $40,321 bill was paid by check number 3308 on February 29, 1998.

Obviously bargain hunting was not part of the contract. Similar appliances could be found at full retail from any of the large outlet stores for less than $15,000 in total. Sterling seems to have paid $25,000 above average costs.

The location of the T&R Group, typed on the face of the bill, is a phantom address. The section of the street referred to on the invoice does not exist.

Reinaldo A. Torrente is listed as the chief officer of the T&R Group in records of the Florida Division of Corporations. The address listed on the state document is for a modest, older house near the Palmetto Expressway in Kendall. It is not an appliance store, or even an office. When contacted on the phone Torrente refused to discuss the bill or any details about his business.

On several occasions thieves broke into Sugar Hill and stole a number of the new appliances. (Sterling and FHC would not comment on how many were actually taken.) According to a security guard at the site, the remaining appliances have been stored onsite in a semitrailer, with its doors welded shut to prevent further theft. It is anyone's guess how they will work when they are pulled from this homemade oven and finally installed.

The blame for the boondoggle is spread far and wide, but one name stands out: Joseph Middlebrooks.

"Once you hit construction, the architect takes over," remarks FHC consultant John Hazelroth.

The architect was supposed to compensate for FHC's lack of construction experience. As the designated onsite professional, Middlebrooks was entrusted to closely guard the interests of the agency, HUD, and taxpayers by monitoring construction and payments.

He helped choose Tecina and agreed to pay the company $1,439,680, even as it went bankrupt and the site fell into a shambles. When Sterling won the contract for $750,050, Middlebrooks signed the change orders that increased the sum to $869,561. He also certified the appliance invoice from the T&R Group.

It was his job to walk the site, making certain that construction was sound, on time, and within budget. Yet until the city stopped payment on a $6893 check for routine architectural-site supervision made out to his firm, records reflect that he never tried to put the brakes on the fiasco.

He signed certificates for payment, and the money continued to move. Today Middlebrooks is still signing, according to FHC, but he refuses to talk about his role.

According to his contract, Middlebrooks was to be paid a flat fee equal to seven percent of the construction budget for delivering the architectural drawings for the project. Additionally he charged various hourly rates for himself and his employees for site supervision.

Based on a June 1994 budget, the cost for his site supervision for the project was expected to total about $27,000. An examination of the architect's invoices in city and county files clearly shows he billed a great deal more than that. For example in just one three-and-a-half month period in 1998, he charged FHC $12,024 for construction administration. Middlebrooks and FHC refused to comment on how much the architect has received to date.

Today Sugar Hill is inching toward completion. A new construction contract is being put out for bid by FHC, according to Sharlene Adelman, a city housing-program manager. The new contractor will be expected to finish the apartments in 90 days from the onset of work, but Adelman acknowledges that the community building might take a little longer. At this point city officials have no contingency plan if this contract also fails to get the job done.

But even if tenants move in, they might not be happy with what they find: Closet doors that fall off their hinges, bathroom sinks beneath windows, bubbled vinyl flooring, and flimsy plastic kitchen piping are only some of the shoddy materials and workmanship that await them.

It didn't have to be this way. Sugar Hill didn't have to be an exorbitant waste of time and money out of the small pot of goodwill expended on the inner city.

North of Sugar Hill, on the edge of a slightly kitschy but standard South Florida-style manmade lake, a private developer is building and selling new homes and townhouses on pleasant, full-size lots that back up to the water's edge.

The developer's sales pitch is simple: "Everything's included."

"Everything" includes all the gizmos and polish that typically comprise the good old no-fooling-around American middle-class standard of living: the marble sills and saddles, the choice of tiles and carpets, the dishwashers, good-quality appliances, garbage disposals, and alarm systems. The homes must be nice, or the developer won't be able to sell them, and the developer and his partners will go broke.

The developer's costs also typically include the interest paid on high-priced construction loans, on an advertising budget, on commissions, and on the wages of a sales force. And more.

These three-bedroom, two-bath homes sell for $91,000. The three-bedroom, two-bath townhouses sell for $78,000, and offer more than 1100 square feet of living space.

The small Sugar Hill apartments cost far more than the privately built houses, which have better workmanship and higher quality fixtures.

And then there are the intangibles the private developer doesn't offer: the gunfire and street noise that can be the nighttime soundtrack of Liberty City. Instead, some new homeowners say, in the evening they listen to the water lapping at the edge of their back yards.

And of course, there is no train.


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