Housing Panel Staff Target of New Probe : Mayor Subjects Director to Questioning; Calls for Changes in Operation of Agency

After huddling in closed session for nearly two hours Monday, San Diego housing commissioners announced their own investigation into whether the Housing Commission’s staff violated federal rules or engaged in favoritism by putting together a deal to renovate the 122-unit Island Gardens Apartments.

The commissioners--most of whom are City Council members--instructed the housing agency’s attorney, Larry L. Marshall, to review documents, listen to tapes of public meetings and interview staff members to ascertain whether there was a “deviation” from U.S. Department of Housing and Urban Development regulations. Marshall is to report back with his findings Feb. 18, said Mayor Maureen O’Connor, who also serves as Housing Commission chairman.

With that, O’Connor and the other commissioners Monday decided to postpone plans to call Ben Montijo, the agency’s executive director, on the carpet. Although O’Connor said last week that she wanted to call the closed session to evaluate Montijo, she emerged Monday from the closed meetings to say that any job performance reviews would wait until after Marshall submits his report.

But Montijo wasn’t entirely off the hook.

O’Connor and other commissioners made it clear during their public meeting that they were going to crack the whip to get some quick changes in the way Montijo and his staff run the housing agency, which has been buffeted by a series of controversies.

O’Connor told Montijo that, from now on, all federal housing programs would be advertised, a direct reference to questions that have surfaced on the Island Gardens project.

A Times investigation of the project showed that the commission apparently violated HUD guidelines by not taking out newspapers ads about the availability of the federal rehabilitation funds that were eventually awarded to Island Gardens developers.

The mayor also instructed Montijo that he must put more information into his written reports to commissioners.

“You’ve just got to assume that we want to know everything that you know,” O’Connor said. “That’s how we’re going to run this agency.”

She then drove home the point by peppering Montijo and his staff with questions about several items, including how the agency bid for insurance brokers and why it experienced a $29,772 deficit in running the Otay Villas housing project.

The housing staff’s report said the State of California was willing to pitch in $16,406 to help pay the deficit because of insufficient “tenant income.”

Yet under questioning from O’Connor, housing staff members admitted that an estimated $8,000 to $9,000 of the loss stemmed from property damage after a car rammed into a laundry room at the project.

“That is the kind of stuff that bothers the chair,” O’Connor said. “Basically, you said it was because tenant income was down.”

O’Connor then ran down a list of suggested changes at the agency and told Montijo and his staff to prepare new policies for the next time the commissioners meet. The list, taken from a September city manager’s report, includes writing rules for procurement, hiring consultants, remodeling and acquiring new office space, in-town business expenses, and keeping track of employee phone charges.

On the issue of telephone expenses, agency Deputy Director Cathy Lexin explained that employees are told to write long-distance calls on a log. But she admitted that the agency has yet to codify the practice in a written policy, despite the city manager’s recommendation.

“You haven’t got one yet?” O’Connor said. “This report is kind of old.”

Against Housing Commission staff recommendation, O’Connor and the commissioners said they didn’t think the agency should pay for a $36,000 roof replacement at the agency’s new headquarters on Newton Avenue. Instead, they instructed Marshall to go to the building’s owner and ask him to pay for it.

Tightening controls even further on the agency, commissioners agreed to appoint a special advisory task force to monitor and advise the Housing Commission staff on real estate transactions. O’Connor said she would nominate people for the new panel.

The commissioners also put off for a second time a proposal to give raises to Montijo and his deputy directors. Councilwomen Abbe Wolfsheimer and Celia Ballesteros said they want to make their decision after Montijo supplies them with annual salary figures, as well as job requirements and qualifications.

The Island Gardens project became a point of controversy last week when HUD officials disclosed that they were investigating to check for improprieties or possible criminal wrongdoing. HUD officials said they initiated the investigation after the commission denied a HUD employee access to the Island Gardens files two weeks ago. The HUD employee was sent to research the files to answer questions posed by The Times.

The commission bought the 122-unit complex in the 3500 block of Island Avenue in December, 1984, and held it for nine months so the developers could line up financing to purchase the property. That financing included a $700,000 loan from the agency when it eventually sold the property for $4 million to the developers, who include state Coastal Commission member Gil Contreras.

In the interim, Montijo and his staff recommended that the project be included in HUD’s Section 8 Moderate Rehabilitation Program, which is coveted by landlords because it can guarantee substantial rents for 15 years.

HUD approved the designation, but it warned in a February, 1986, letter that the agency’s involvement in the deal could be construed as “favoritism.”

A Times investigation of the deal showed that the agency failed to advertise, as required by HUD regulations, the availability of the moderate rehabilitation funds, and commission officials admitted that they often rely on “word of mouth” within the development community.

In addition, Montijo’s teen-age son was hired by Contreras to work on the project for three weeks in 1986. The youngster received about $600 a week as a laborer.

The commissioners huddled before and after their public meeting Monday to discuss the deal, and they instructed Marshall to find if any HUD regulations were violated. Marshall, the commission’s general counsel, told reporters he played a “peripheral” role in arranging the Island Gardens deal, but O’Connor said she didn’t think that posed a conflict “at this point.”

Marshall, who is a private attorney paid by the commission, said he will be investigating whether Montijo and his staff showed favoritism to Contreras and his business partner and whether they violated HUD regulations about advertising the moderate rehabilitation program, among other things.