Naked City

The Anderson Community Development Corporation planned to build 100 new homes, like the one at left, in central East Austin. So far, only 26 have been completed. (Photo By John Anderson)

For nearly a decade, the Anderson Community Development Corporation (ACDC) has been trying to deliver 100 new homes to central East Austin through a partnership with the city. But on June 1, the City Council and ACDC agreed to settle their dispute over the infamous Anderson Hills development, a project that managed to put up only 26 homes between East 11th and 12th streets, and buy land for the rest, before burning through its federal subsidy. Construction was stopped cold nearly a year ago when an audit from the U.S. Dept. of Housing and Urban Development (HUD), which oversees the block grants that funded the development, found improper expenditures and described developer's fees as "clearly in excess" of reasonable costs.

Since then, the city, ACDC, and the developer/ consultant who essentially ran the show, Gene Watkins, have been in mediation trying to sort out who owes what to whom. According to ACDC attorney Jerry Saegert, the nonprofit finally decided to step out of the way, and let the city continue the work with another developer at Anderson Hills, rather than ensnare the project indefinitely in ACDC's dispute with Watkins. According to last year's HUD audit, 90% of the funds that have been spent on Anderson Hills were attributable to Watkins, who helped launch the Anderson Hills development while he was director of the city's housing office.

Watkins left that post in 1993 and took over as the project's lead consultant. Under his guidance, Anderson was proposed first as a rental-only development to be financed by federal tax credits -- an extreme long shot but of the sort that typically pays developers handsomely -- then, when that failed, as a mixture of single-family homes and townhouses built with block grants from HUD.

Watkins, who could not be reached for comment, has defended the fees he charged ACDC as compatible with the going rate during the HUD audit, and counterattacked city housing staff who were growing suspicious of his management by deluging their office with information requests. Saegert says a lawsuit between Watkins and ACDC was not inevitable, but was a very real possibility. As a result of the settlement, ACDC will pay Watkins $75,000, a sum that Saegert says Watkins is not happy with but which ends the conflict. "Is anybody happy now that's it's over? No. Is everybody happy that it's over? Yes," Saegert says.

Other provisions of the settlement require ACDC to pay back $100,000 to HUD for improper expenses and undergo an audit to determine if the nonprofit owes HUD more money.

Now that Watkins is out of the picture, city housing officials are optimistic that construction at Anderson can begin again soon, possibly as early as fall. Neighborhood Housing and Community Development director Paul Hilgers says his office will be designing a new plan for Anderson over the next three months and seeking a new builder. The city has about $3 million left to spend on the project, Hilgers says -- which is not enough to complete another 74 homes -- but NHCD plans to involve private funds to make up the difference. Anderson's future will also be helped by recent concessions from property owners along East 12th, where a portion of Anderson is planned, to accept townhouses as well as retail uses along that strip.

Meanwhile, says Hilgers, the city still considers ACDC an important player in the quest for affordable housing solutions. The nonprofit will still have a say in Anderson's design, says Hilgers, and will have the option of owning and operating the rental townhomes. Potential residents on waiting lists who were left in the lurch when construction halted last year, however, will have to reapply for the new homes.