GALVESTON — Housing authority commissioners on Monday approved a $72.2 million budget for the controversial replacement of two demolished public-housing projects with mixed-income developments catering to both the poor and the general housing market.

The approved budget, which will be sent to the Texas General Land Office, increased about 4.2 percent from a $69.3 million budget master developer McCormack Baron Salazar presented last week, Chairman Irwin M. “Buddy” Herz said. The increase was in the amount the authority anticipates spending on “human capital” programs for residents of the developments and in developer fees, according to budget documents.

Human capital programs include such things as job training and child care aimed at helping people work themselves out of poverty.

The previous budget had anticipated spending slightly more than $1 million on those programs. The approved budget anticipates spending almost $2.6 million, according to budget documents.

Developer fees rose to $18.4 million from $17.1 million that was listed on the budget presented last week.

The amount the housing authority will contribute to construction also was amended from the earlier budget, Herz said.

Early plans called for the housing authority to contribute $13.2 million of about $16.8 million in insurance money it received after most of its buildings were flooded during Hurricane Ike in 2008.

That contribution had become something of an issue because only about $8.5 million of the $16.8 million settlement remained, the rest having been spent under previous authority boards. 

Herz and other commissioners appointed by Mayor Lewis Rosen had for weeks been attempting to determine how much of the spent money could be counted toward the redevelopment projects.

The approved budget includes $11.1 million from the authority — $8.5 million in remaining cash and $2.6 million in payments already made to McCormack Baron Salazar for such things as design and engineering work on the mixed-income projects.

Some of the insurance proceeds were spent on initially repairing and then demolishing four housing projects flooded during Ike — Magnolia Homes, Cedar Terrace, Oleander Homes and Palm Terrace. 

Herz said he thought money used at Magnolia Homes and Cedar Terrace could have been credited toward the mixed-income projects, which will be built where those projects stood. 

Less certain was whether money spent on the other two old housing projects could have been counted, he said.

Also for weeks, Herz, other new commissions and Rosen, an ex officio member of the board, have raised questions about other expenses paid by past boards with the insurance money. 

The new board ultimately decided to move ahead, Herz said.

“Nobody wanted to go through the process of determining why the old boards spent some of the money like they did on legal fees, travel, public relations and things like that,” Herz said. “So, the decision was made to just move forward.”

Herz said he did not think the housing authority being about $2.1 million short on its contribution to construction would make a great deal of difference.

The new budget anticipates a $3.3 million increase — to almost $7.9 million from about $4.6 million — in the amount of Round 2 Community Development Block Grant-Disaster Recover money devoted to the projects.

With a budget approved, the land office staff would be able to immediately begin drafting a contract and “wrap things up” so the housing authority could get to work rebuilding, spokesman Jim Suydam said.

The land office is administering the federal disaster recovery money that will pay for about half of the projects’ costs.

A plan Galveston City Council approved Sept. 28 calls for building 122 units at Cedar Terrace, which is mid-island, north of Broadway on land between 29th and 30th streets and Sealy Avenue and Church Street.

It calls for 160 units at Magnolia Homes, which is between downtown and the University of Texas Medical Branch campus on land between 16th and 18th streets and Mechanic and Strand.

Units at both sites would be divided into two categories — 51 percent would be public housing for low- and moderate-income people in which the rental costs are subsidized by the government, and 49 percent would be market-rate open only to those who could afford the full cost of rent.

That means about 63 of the units would be public housing at Cedar Terrace and about 82 would be at Magnolia Homes.

McCormack Baron Salazar officials said last week construction could begin in July at the Cedar Terrace site and in September at the Magnolia Homes site.


(11) comments

Taxed More

Mixed Housing - One person pays his full rent and gets taxed to pay for half of his neighbor's rent. On what planet is that "fair"?

Tony Janca

So what is the actual cost per unit?? with all fees, etc? Is is 72 million divided by the 282 units?? ( $255,000 per unit not counting land cost )

Trader T

Hopefully the shortfall is not paid for by Galveston taxpayers!

Pat Barrios

Who else do you think will have to pay?

I would love to see the residents have to sign an agreement that, for getting to live rent-free or reduced rent, that once they have worked their "way out of poverty", they will start paying full rent plus paying back whatever subsidies they received on their climb up - and then I woke up.......not sure how we can fix this generational broken wheel, but surely feeding the beast only makes it stronger.......the more you give some people, the more they expect.................just my two cents, which are now devalued to .00125.

69 Chevy

As our Nation steps closer and closer to the “fiscal cliff” we can only hope that impending boondoggles like the current GHA rebuilding plan is one of the first things to get pushed over the edge!

Marine One

Come on now know how the new government operates. You make, they take.

Chris Dannenmaier

Here is an alternate proposal for the 72 million bucks - Don't build the units. Take 282 names off the waiting list and pay them $100,000 each to move to California. Pay each City Council person a $1,000 bonus for each of the 282 units not built. Pay the builder $10,000 per each of the units not built. So in all, we only spend $116,000 per unit, we reduce poverty on the Island, and have incredible future saving in social services not needed, and reduced demand on the police force.


I'm not on public assistance of any kind, but if you gave me 100K to move back to CA, I'd go in a second rather than stay here where so many people are so stupid, ignorant, mean and lazy.

Chris Toombs

Even better than the average per unit cost is the bucket of money that MBS gets to run off with. Let's see:

1) MBS' fees account for 25% of the development cost budget.
2) They have a 1.92% ownership stake in the limited partnership for Cedar and Magnolia.
3) And, they get paid to manage it.

I have no idea how this budget will work given that GHA doesn't have the money on hand to fund it's part. Secondly, the previous budget offering from GHA to GLO led to a comment from the GLO that it had concerns that public money was being used for private market units, and this one is no different. From my review of the budget only $14M of the $72M is from "Private Debt & Equity". I don't know how you get to no money mixing with only 19.4% of the funds private, yet 51% of the units are public housing.

Finally I'm a little bewildered at the lack of investigation by the reporter to the unanswered obvious loose end: Half of the insurance money is gone, the board was investigating it, and then says forget it. Where did the insurance money go? What was it spent on? That would have been nice to know.


Pat Barrios

You can't help people "work their way out of poverty" by throwing money at them.......I had to work my fingers to the bone my whole life to work my way out of poverty - only in America do we reward those that don't want to work. Actually we punish those that are willing to work by taxing us to pay for those that won't. I don't know what the answer is - I don't mind giving a hand up, but am so against hand outs. God Bless America.

Tony Janca

Grackle you are spot on!! THAT IS A FANTASTIC SOLUTION

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