Wide Open Records at DCA Put Sunshine on Magnolia Trace

The furor over the construction of Magnolia Trace Subdivision, a low income housing development funded under the auspices of the Georgia Department of Community Affairs (DCA), was white hot back in November of last year. Much was said and written about hidden machinations behind this development, particularly the Columbia County Board of Commissioners’ resolution in support of the development at the apparent prompting of county attorney Doug Batchelor in June of 2010. Ire of project opponents reached epic proportions when it was revealed that Batchelor had worked for the developer, Affordable Equity Partners of Columbia Missouri, or one of its stable of interrelated companies on an earlier project and was the closing attorney when AEP affiliate Magnolia Trace, LP purchased the land in the second half of 2011.

Speculation abounded, but truth lies in the documents, to the extent that they are discoverable. This writer prefers to focus on the story the documents tell, so was moved to examine the process by which Magnolia Trace came to be approved for DCA’s tax credit program. The review found that the DCA’s Qualified Application Program was so stunningly exhaustive in its information and filing requirements that very few mysteries would remain, should an examiner look at all of the filings that DCA has. Doing an examination of the required documents was natural and logical.

A Georgia Open Records Act request for DCA to make the Magnolia Trace Application available for inspection and copying was submitted last week, with the review taking place yesterday, Wednesday, February 29, 2012 in DCA’s Atlanta headquarters. Ms. Phyllis Carr, of the DCA Housing Finance Division, graciously coordinated the review, provided the documents, assisted, and answered questions.

The examination was intended to answer these inquiries: 1) Was Doug Batchelor prominently engaged by Magnolia Trace, LP in the application phase? 2) Was there active involvement of Columbia County, over and above what has been disclosed, during the application process? 3) What was the nature of the agreement to purchase the land by Magnolia Trace, LLP from previous owner, DORRA, LLC? 4) What realtor(s) were involved? 5) What entities benefited from this transaction and were politicians tied into them more than previously reported?

Beyond Batchelor’s involvement with gaining the favorable county resolution and being the closing attorney for the developers, no other evidence was found anywhere in the 8 inch thick application and supporting documents of his involvement or that of his firm, Hull, Towill, and Barrett. The attorney appearing on the option for the developer to buy the property was the Atlanta giant, Smith, Gambrell & Russell. VanMatre, Harrison & Volkert, P.C. Of Columbia, Missouri is the attorney of record for the project. Legal fees budgeted for the construction were $52,000, with no distribution among firms cited. Legal fees for land acquisition, where Batchelor is known to have fit in, were set at $15,700. Title and recording fees were a surprising $18,000.

Columbia County’s involvement beyond the controversial resolution endorsing the project was minimal. Most of the preliminary inquiries were done by intermediaries without the project or its owners being named. At December 31, 2010, when the application was due for decision, no issues pertaining to Columbia County remained.

The contract for the purchase of the land was executed March 24, 2010 between Peach Way Holdings, an affiliate of Affordable Equity Partners (AEP) and the owner of the land, DORRA, LLC. The particulars of purchase price, contingency upon DCA approval of tax credits, and eventual closing date have been widely discussed and will not be reiterated here. The contract for the sale shows that the realtor was Sherman and Hemstreet represented by agent Billy Franke. The deadline for closing of March 2, 2011 was obviously missed and was extended. The contract gave the buyer wide latitude to cancel the sale until it had approved and accepted the offer of tax credits on March 14, 2011.

The new information discovered in this review was that in a initial review and determination letter sent to Magnolia Trace, LP, dated December 14,2010, the DCA, “determined that the Application does not meet the required Threshold requirements of the Application.” The reason cited was that costs were out of line with other DCA developments. Magnolia Trace appealed within the allotted 5 days of the letter.

The tax credits were approved on March 14, 2011, three months before a sister AEP entity, Capital Health Management, Inc. gave Georgia House Speaker David Ralston $5000, so there was no quid pro quo evident in these events.

Overall, the strategy employed by AEP appears to be to internalize as many of the project planning, development, financing and other major cost components of its projects, meaning reduced use of other professionals. This strategy is employed in conjunction with lavish campaign contributions at the state level and to a much lesser extent, the local level, with Rep. Ben Harbin being the key local beneficiary.

Look for future reports here on the broader policy issues presented by this particular financing method for low income housing in Georgia, using Magnolia Trace as an example. The current effort was restricted to addressing local government in the process. No effort was made to investigate the DCA evaluation of this application after the initial rejection, because the reasons cited were costs, not local government factors.

No smoking guns were found in this examination as relate to Columbia County and its officialdom. What was found was a highly-regimented and documented process required by the Department of Community Affairs accompanied by a high degree of supporting documentation. The author was and is most impressed, as not many recent reviews have found such accuracy.