Peter Chapman is a very smart guy — articulate, educated and committed to urban revitalization.
The 43-year-old native New Yorker moved to Denver to be part of John Hickenlooper’s mayoral staff. At the city, Chapman worked on economic development strategies, quickly recognizing that Denver lacked the financial infrastructure to fully leverage the city’s shrinking allocation of federal Community Development Block Grant (CDBG) funds.
CDBG funds are used for community development, affordable housing, job creation and civic improvements in impacted neighborhoods, at the discretion of state and local government.
In 2004, prompted by Chapman’s research, Hickenlooper asked Chicago-based Shorebank Advisory Services to evaluate Denver’s capacity for economic development and revitalization in impacted communities. Shorebank found significant gaps in resources and infrastructure for community development financing. The study concluded that Denver needed a more entrepreneurial approach to expanding capital and creating new financial products. In 2007, the city decided to to partner with New York-based Seedco Financial to extend its financial reach.
Denver committed $15 million over four years from its CDBG revolving loan fund to the Denver startup. Seedco hired Chapman to be the vice president and executive director of the Denver operation. (Chapman secured a waiver from the city’s ethics board because he served on the task force that selected Seedco and did not wait the required six months before going to work for an organization doing business with the city.)
When his appointment was announced, Chapman pledged to bring new capital to Denver, raise money from local banks and foundations and focus on low-income neighborhoods. Of the more than $3 million Denver invested in 2007, $800,000 covered Seedco Denver’s overhead and $2.5 million was invested in projects, creating 172 jobs.
The largest Seedco loan — $1.4 million, including $200,000 from the city’s CDBG investment — is in the 62-unit River Clay condominium project in the Jefferson Park neighborhood. This mixed-use, primarily market-rate development includes six affordable units available to individuals earning approximately $39,000 per year or families with a combined income of $50,000. The $1.4 million also helped subsidize the purchase of two commercial, ground-floor spaces at below-market purchase prices.
Perhaps it’s cynical to suggest that $1.4 million created seven jobs ($350,000 per job) or subsidized six units of affordable housing and two commercial units ($175,000 per unit). However, it’s downright devious to suggest — as Seedco’s first year spreadsheet reflects — that the leverage in this deal is 12-to-1.
The city’s internal monitoring report chastises the organization for sloppy accounting, poor recordkeeping and a lack of internal controls.
Seedco will not file its official response to Denver’s monitoring report until late December.
While it may be prudent to take a portion of precious CDBG funds to prime the pump for a new resource for community development, job creation and affordable housing, it’s equally prudent to play by the rules, report findings accurately and operate efficiently and transparently.
Rather than voting on the 2009 contract Monday night, the City Council should also exercise prudence. Wait for Seedco to fully respond to the monitor’s findings.
Susan Barnes-Gelt (sbg13@comcast.net) served on the Denver City Council and worked for Mayor Federico Peña. She is a consultant to local architectural and development companies.
