Housing Ad Guidelines Were Met by ‘Word-of-Mouth’--Montijo : Panel’s Failure to Obey HUD Rules a ‘Mistake’--O’Connor

In the wake of revelations that the San Diego Housing Commission is under federal investigation, Mayor Maureen O’Connor said Wednesday the embattled agency made a “big mistake” by ignoring government regulations requiring advertising for a federal low-income housing program that figured in a controversial 1985 apartment deal.

“That will change,” said O’Connor, who recently became chairman of the commission. “I totally disagree with that. It’s a . . . regulation that they advertise and they will be advertised. That’s standard operating procedure for any governmental agency.”

The commission’s apparent failure to comply with federal regulations is one of the issues that the U.S. Department of Housing and Urban Development is now investigating in connection with a deal to rehabilitate the Island Garden Apartments in Southeast San Diego--an arrangement that HUD once warned smacked of “favoritism” toward the developer.

HUD Regional Administrator Duncan Howard said Tuesday that he called for the investigation by his agency’s inspector general after commission officials refused last week to let a HUD employee examine files on the Island Gardens project. HUD asked to see the files after receiving queries from The Times about the agency’s role in the deal, and Howard said he wants to see if the commission acted improperly, including any “criminal activity.”

In a press conference Wednesday, commission Executive Director Ben Montijo emphasized his willingness to cooperate with HUD--which supplies most of the funding for the city agency’s $42-million annual budget--and insisted that his employees did not block HUD’s access to the files. To underscore the point, Montijo had three open boxes of Island Garden records on the table near him.

Saying he has yet to receive official notice of an investigation, Montijo called on Howard for a “public apology.”

Montijo also demanded a retraction from The Times for saying that commission officials had declined, to date, to answer the newspaper’s questions about the Island Gardens project in the 3500 block of Island Avenue. The commission delivered a retraction demand to The Times late Wednesday. San Diego County Edition Editor Dale Fetherling said Wednesday night he had not seen the commission’s request, but said he will consider it.

Montijo vigorously defended the way his agency arranged the Island Gardens deal, in which the public agency purchased the 122-unit complex in December, 1984, and held onto it for nine months so the developer could line up financing.

As part of the financing, the agency loaned the developer $709,000 at 16% interest so it could buy the property in September of 1985 for $4.2 million. The agency also backed the deal with $1.3 million in letters of credit.

In the interim, the Housing Commission recommended to HUD that Island Gardens be included under the Section 8 Moderate Rehabilitation Program. For every eligible housing unit an owner spends $1,000 or more to renovate, HUD will pay rent subsidies as high as 120% of the market rate for 15 years.

HUD grants a set number of “mod rehab” units to various local housing agencies, which are responsible for choosing deserving developers. HUD regulations require the housing agency to advertise the availability of the units in a general-circulation newspaper.

“We want to be certain that all of the owners have an equal opportunity to participate in the program,” said Benjamin Bobo, director of HUD’s office in Los Angeles.

“We operate by these regulations. You don’t ignore the regulations. That’s the law for us.”

But a Times investigation of the Island Gardens deal showed that commission officials apparently didn’t advertise the available mod rehab units. Commission officials admitted they often rely on “word-of-mouth” to plug the program.

On Wednesday, Montijo said he believes that the word-of-mouth campaign works, since more than 1,000 property owners are on the mod rehab waiting list. He said the method meets “HUD guidelines in advertising that program. . . . We have evidence that we have done a diligent job of getting the word out, that the program is available.”

Asked by reporters to produce that evidence, Montijo said: “I’ll have to dig it out. I don’t have it at my fingertips.”

Montijo also said he was aware of a HUD warning that the Island Gardens deal raised questions. He confirmed that the agency received a letter dated Feb. 6, 1986, in which a HUD official said the commission’s financial involvement with the apartment developer “could be construed as an identity-of-interest transaction or favoritism to an owner.”

Montijo said he didn’t write back to HUD because the federal agency didn’t ask for a response. But he asked the developer to check to make sure that it did not violate federal conflict-of-interest regulations for housing projects.

The housing director also added that the commission has gone to the same lengths to help arrange similar deals for other developers under the low-income rehabilitation program. One such project is the 89-unit Del Sol apartments in the 3600 block of Del Sol Boulevard, he said.

“Every single project that we do requires financial assistance in order to make it work,” Montijo said. “If it didn’t, the conventional lending markets and the developers would simply be doing it. Government is always . . . having to provide assistance.”

On another issue, Montijo defended the fact that Island Gardens developers, who include California Coastal Commission member Gil Contreras, hired Montijo’s 17-year-old son to work on the project last year. Contreras told The Times that Randy Montijo was hired for three weeks to clean up after construction crews at the apartment complex; his pay was $600 a week.

Randy’s mother told The Times that Montijo was the one who arranged the job. Patricia Bright divorced Montijo in 1981 and is now living in the Chicago area.

Montijo described Contreras as a “business” acquaintance but not a social friend. The director also emphatically denied that he played a part in getting his son the job but conceded that the youngster “could have” learned about the employment opportunity during conversations at home.

“I talk about my work at home,” Montijo said. “He’s aware of different developers that do work both for the commission or otherwise. I’m not saying that he hasn’t become aware of different developers that might have jobs.”

In addition, Montijo reiterated that a Housing Commission attorney ruled in April that Randy’s job posed no conflict of interest.

“It’s a legal issue,” he said. “It’s not an appearance, a gossipy ‘Well, I think it does, it looks like . . . ‘ It’s a legal issue. It requires a legal opinion. You want two? I’ll get you a second one.”

But Mayor O’Connor said Wednesday that despite the legal opinion, “I don’t think that was a good idea” for Montijo’s son to work for the developer of Island Gardens.

“The reason why the City Council took over the agency was because it was concerned about problems within the agency, bad judgment,” O’Connor said of the City Council’s decision late last year to assume more direct control of the agency. Council members ousted five housing commissioners and appointed five elected officials in their place.

“We will continue to change the policy of the agency where it is necessary,” O’Connor said.

Councilwoman Abbe Wolfsheimer, who also sits on the new Housing Commission, said Wednesday she is gathering information in an attempt to determine how well Montijo is doing his job.

“I wouldn’t say it (Montijo’s job) is at stake yet but I think it is something that has to be investigated,” Wolfsheimer said.

“When HUD comes in to investigate, one does not sneeze at that. I think everyone on the council is going to be very eager to hear what HUD has to say and what evidence they produce.”

Howard said he will not cancel the investigation, despite the offer from commission officials to look at the agency’s files. He also said he would not make any apologies.

“As soon as the inspector general’s report is in, if HUD has reason to apologize, we certainly will,” he said. “I’m not going to do anything further, in any shape or form.”