Thursday, February 12, 2004

A painful lesson in how not to develop


The financial collapse of an eight-building repair project near Findlay Market in Over-the-Rhine cost Cincinnati taxpayers $338,859, and it will cost another $394,745 to mothball them for final rehab. Hamilton County Prosecutor Mike Allen, Cincinnati police and the city's internal auditors found no evidence of criminal conduct or misuse of public money by Scheer & Scheer Development or subcontractor Jindal Builders. But the failure adds another vote of no confidence in the city's ability to pick able developers and oversee tough rehab projects.

The city especially needs to do more rigorous screening upfront when awarding contracts.

The irony in this case is Scheer & Scheer also had a contract with the city to verify construction work on other city-funded projects and evaluate "scope of work." Their eight-building project hit a wall over $232,000 in cost overruns from "unforeseen, unanticipated" expenses such as ridding the properties of lead contamination.

Buildings in Over-the-Rhine present rehab challenges that can eat inexperienced developers alive, but that's all the more reason for city development officers to be extra-vigilant on such projects. The Scheers are respected educators and architects. It does not necessarily follow that they are experienced developers. Even before the contract was awarded, Brenda Scheer was offered the deanship of the the University of Utah's Graduate School of Architecture, where her husband, David, is a visiting professor. They made a young, unlicensed architect the project manager for the Over-the-Rhine work. The city's original offer of a $1.07 million loan to the Scheers called for them to buy the buildings, but that was later dropped. They had no personal financial exposure in the deal. The city had to foreclose to take back the buildings.

City officials have wisely changed strategy to seek individual developers for the eight buildings. Mayor Charlie Luken views the Scheer & Scheer deal as another example of why the city needs to move development functions out of City Hall. But there will always be a need for due diligence and watch over city-funded projects. There is no excuse for amateurism in City Hall oversight.

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