Providence allowed home tied to $165,000 grant to be sold at tax sale for $2,500

PROVIDENCE, R.I. (WPRI) — A Providence multifamily home was sold at tax sale for just over $2,500, even though the city had given out a $165,000 taxpayer-funded grant to renovate the property.

The process revealed a mechanics lien by a contractor that indicated a portion of what the nonprofit that owns 42 Hanover St. intends to spend on the West End home.

Real estate investor Tom Conley, who said he has renovated about 40 properties, paid the tax sale lien and was later shocked by the contractor’s $295,000 lien.

The West Elmwood Housing Development Corporation (WEHDC) told Target 12 the nonprofit plans to spend over $500,000 on the project. The property is currently assessed at $95,500.

“Shocking amount of money,” Conley said. “I’ve been doing this about 15 years and I’ve never seen anything like this. It could be done very well, up to code, for much less.”

THE COST

According to the nonprofit’s webpage, key components of its mission are enabling home ownership and economic development.

A statement from the organization indicates $360,000 in public grant funding will be invested in the 6,386-square-foot property, with “the total development cost” pegged at $512,217.

The nonprofit expects to sell the home for between $155,000 and $165,000.

“Ultimately, WEHDC, as with other community development corporations, has a social mission, and not a financial mission,” the organization’s statement read. “[The mission] is designed to stabilize families, home values, and address and impact, in a positive way, crime, disinvestment and gentrification in these hard hit communities.”

Records indicate just under $38,000 of the $165,000 city HOME grant has been paid out so far.

West Elmwood received $810,000 in taxpayer-funded government grants, according to its IRS filings in 2014, the year the nonprofit bought 42 Hanover for just over $89,000.

THE ANATOMY OF A TAX SALE

Conley was surprised the city would sell a property for $2,500 at a tax sale after giving West Elmwood access to $165,000 in grant money.

“We found that out after the tax sale,” Conley said.

The $2,500 lien was attached to 42 Hanover as part of the city’s Clean and Lien program, which gives the city power to clean up delapidated properties and bill the owner through a lien.

When a property is sold at tax sale, the owner has 12 months to regain control of the real estate by paying the buyer the amount of the lien, plus interest. If the owner doesn’t do that, the tax sale buyer has the right to foreclose.

Even though the 12-month period had lapsed, Conley said a city clerical error prompted him to agree to give up the property after he was paid the $2,500 he spent, plus interest.

Conley said he is “not in the practice of taking property from people who pay their liens.”

“So, it’s not a problem for me [to let West Elmwood get the property back],” he said. “What is a problem is what I discovered going through this process. Ridiculous spending of taxpayer money.”

It appeared the tax collector’s hand that put 42 Hanover up for tax sale for $2,500 was not communicating with the planning department’s hand that gave out the $165,000 grant.

But Mayor Jorge Elorza’s press secretary, Victor Morente, insisted there was no clerical error, and nothing wrong with the tax sale.

“The tax collector’s office made the proper decision under state law,” Morente explained. “West Elmwood was also notified of the tax sale.”

THE DEBATE

According to West Elmwood’s webpage, the “key components of [their] mission are enabling home ownership, community engagement and economic development.”

The organization said the grants they use have stipulations that include lead mitigation, meeting energy efficiency standards, unforeseen structural issues and paying for architectural plans before construction starts.

Conley cannot look past “spending too much” taxpayer money to renovate Hanover or any home.

“With the amount that they contracted and purchased [Hanover] for, they could’ve knocked it down and built two two-family houses,” Conley said.

The nonprofit counters, saying the organization’s mission is social, not financial, with the goal to help blighted neighborhoods.

Morente pointed out the city has provided two other grants that total just under $300,000 for properties on Hanover Street from its federally funded HOME program, which is also the origin of the West Elmwood grant for 42 Hanover.

Morente verified that HOME grants involve “strict property and rehabilitation standards” that can be costly.

Send tips to Target 12 Investigator Walt Buteau at wbuteau@wpri.com and follow him on Twitter @wbuteau