The Price of Liberty is Eternal Vigilance

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City Council, March 4

Elpis - where has all the money gone?
Parking contract awarded but with conditions
Marc Knapp

One wonders about our City Council. Elpis Inc, a non profit group, has received about $1 million from the City to support social programs and help restore the Josiah C. Tennent House on East Bay Street. The group has also received over $3 million in private donations and from bank loans. It has now defaulted on a bank loan and the City has agreed to buy the building for $1.415 million, the amount owed to Wachovia. The City will borrow the funds from Charleston LDC in a 20 year term loan, bearing interest not more than 4.5%.

Not a single question from Council members
Not a single question was asked by City Council members as to what was happening. When the issue came up for a vote, the Mayor said that Elpis had hoped for a federal grant to meet its obligations. This has not transpired and Wachovia planned on foreclosure. The City was moving to prevent this and recover its investment. No question was asked about where all the money given by HUD, private citizens and the City had gone. There were no questions about the management of these funds or the provision of promised social services. These questions were being asked by citizens for some years. But Elpis continued to be the largest recipient of HUD funds distributed by the City, receiving $150,000 a year.

More to the issue than revealed by the Mayor
We suspect that there is much more to the issue than the Mayor has revealed. I suggested in Citizens Participation that the City conduct an audit of the non profit. Charlestonwatch made a report on Affordable Housing (See Affordable Housing – Hailed, hyped and hobbled, November 24, 2004 ) In it, we noted our concern – that the building was beautifully renovated but no social services were being provided. We noted the large amount of money that has passed through the non profit. We questioned why the City was supporting a renovation of an historic building through HUD monies which should be directed to social services and affordable housing. We also noted the representation of such business luminaries as Robert Clement and Frank Brumley on some of the non profit’s Committees. Mayor Riley also served on a committee and Council member Gallant was a director.

Elpis fails to fulfill obligations to the IRS?
My associate Warwick Jones in Citizens Participation questioned what had happened. He writes “that since our report in 2004, nothing has occurred to change our critical views. Indeed, our opinion has hardened. Non profits, of the size of Elpis, are obliged to report annually to the IRS by completing Form 990. This form is the equivalent of a corporation’s Profit and Loss statement and Balance Sheet. We suspect that Elpis has failed to meet this obligation to the IRS. It is also our opinion that reporting has been sloppy.

“Guidestar is an organization that gathers information on all non profits in the USA. The information from the IRS is available for the public. Guidestar carries no reports on Elpis after the 2005 IRS filing. By law there should have been a 2004 filing. A filing for 2006 was due in May last year. Also of interest is that the 2005 filing was for the 12 month period from November 2004 to November 2005. The previous filing was for calendar 2003. Where are the reports for the 11 months to November 2004 and for all of 2005 and 2006? We have written to Elpis twice in the last 12 months requesting its latest filing, which by law they are required to provide. The response to the first request was a copy of the 2005 filing and to the second, silence.

Why so few directors?
“We don’t know why Elpis has been so tardy. But we do know that since 2004 there have been some apparent changes. The last IRS 990 report indicated there were only 2 directors, Messrs Dallas H. Wilson and Carrol Gethers. In 2004 there were 10 directors. Council member Gallant resigned from the Board in 2004 when he was hospitalized with a heart condition. There have also been changes to the non profit’s web page. There are no longer references to the directors or members of the sub committees. The glowing good that the flows from the non profit is still described there but it is hard to know whether the services are being provided or are still promised.

Skepticism about services
“We have asked a number of members of the Eastside as to the services provided by Elpis. None know of them and some have commented that there is a big gap between promises and reality. However, we believe that some services are being provided but probably far less that suggested by the financing received by Elpis. It is interesting that 3 of the 4 floors of the building will be rented by the City to other non-profits. We conclude from this that they were not being fully utilized. The lower floor is designed as a day care and the top floor as a dental clinic.

“We have summarized the financial information that is available from IRS filings in a table Download file

"Viewers can see the funds that have flowed to Elpis over the last 10 years. They have been substantial. The non profit received the building for $5 in 1993 and has since renovated it. We don’t know the funds raised prior to 1997 but the flow of funds into the non profit from 1997 to November 2005 was $4.2 million. Certainly there has been a continued flow since 2005 but we have no knowledge of the amounts. The City of Charleston has given $150,000 a year since 2005 from HUD grants.

Ineptitude or more ?
“Considering the flow of funds enjoyed by Elpis over the years, we can only conclude that the sale of the Josiah C. Tennent building flows from ineptitude, and perhaps more. The renovation of the building was completed in 2004 though work continued on the garden in subsequent years. Why the grants and gifts were not sufficient to pay the interest at least on the mortgage remains a mystery to us. Why didn’t Elpis cut its other expenses to remain solvent?

“We have also heard rumors over recent years of an investigation of Elpis. Nobody seems to know who is investigating and why. But suspicions are aroused by the seeming desertion of directors from the board, the resignation of Council member Gallant and despite the recovery of his health, his failure to rejoin the Board. Our suspicions also grow from the seeming tardiness in reporting to the IRS and from the erratic reporting in 990 returns prior to 2004.”

City attempts to micromanage Parking Garage contract
Not unusual for a City meeting, a large amount of time was spent on an item that should have been dispatched much quicker. It related to the management contract for the City’s garages. A request was before the Ways and Means Committee to award Republic Parking a contract for which the City would pay $160,000 a year until 2011. The Mayor added an amendment to state that the minimum wage paid to employees should be $7.25 an hour and that employees should receive the same Cost of Living increases as City staff.

Division on Council
These amendments did not sit well with some Council members. Council members Gilliard and Lewis wanted the $7.25 amount raised and said that Republic was taking advantage of employees. Indeed, despite the receipt of the highest score by the Committee formed to choose the manager, these members wanted the contract awarded to another bidder. Others said that the City should award the contract to Republic and the City should not try to micromanage the agreement. It should be left to manager to pay employyes what was appropriate.

The discussion went all over the place and Council member Morinelli toward its conclusion exclaimed in despair, what are we voting on? We too were grateful for the desire for clarification.

Council voted to award the contract to Republic and that it raise the minimum wage to $7.25 an hour and to provide the same COLA each year that City employees receive. The higher costs would reduce the profits generated by the parking garages and which are received by the CIty but would not affect the management fee.

Other matters

• The cost of the Dock Street Theatre is rising. A change order for $90,402 was approved to cover a higher than anticipated cost for seating.

•  I drew attention in Citizens Participation to the continued mismanagement of the City’s Fire Department. I have been told that needed equipment is arriving but that it is not being distributed to the firemen. I also hear that despite the provision of funds, firemen are not being sent to training courses that are necessary. A more disturbing fact is that even after the Sofa Super Store tragedy, the fire department has fallen back to it’s old ways and are falsifying the training records again. When are we going to figure out that the same people that allowed the death of nine men can not properly manage this department!

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