Putting numbers to the EDA workforce housing project

Let me see if I’ve got this right. I am not trying to accuse anyone of anything but simply want to understand the issue of the Economic Development Authority project for work-force housing. Here are the facts as I understand them:

The EDA decided at some point in time to build a thirty-six unit apartment complex for “workforce housing to encourage young professional workforce retention.” This project was subsequently reduced to twenty-four units.

Originally, the land for this project was to be given at no cost to the EDA by Mr. and Mrs. Walter Campbell who are the aunt and uncle of Jennifer McDonald (Executive Director of the EDA). The gift was contingent upon a confidential agreement that required con-struction to begin by March 1, 2017. That deadline was missed and Mr. and Mrs. Campbell apparently lost their tax credit that was expected from HUD. Therefore, the EDA would have to purchase the property for $445,000 instead of having it given to them. This deadline was apparently unknown to a number of the EDA members including Dan Whitten (Attorney for the EDA and Warren County.)

Subsequently, Jennifer McDonald and EDA Board Chair Patty Wines indicated that ap-proximately $500,000 had been spent on the project; and further Ms. McDonald reported to the Town Council of Front Royal that the value of the land had been determined by an “appraisal.” After it was found that there had been no appraisal, McDonald admitted that she “misspoke.”

Patty Wines indicated that the above $500,000 expenditure was a major reason for the purchase of land and continuation of the project. This was also found not to be true. Jennifer McDonald indicated that all but $10,500 of the $500,000 was recoverable if the project was cancelled.

In addition, at some point along the way, it was discovered that the land is not suitable for construction and an estimate from a local contractor indicated that $823,000 would be needed to level the property for the project. This brought the true cost of the land to $1,268,000 which is far more than the value of any land on a dead-end street in Front Royal.

So, from my perspective, it looks like the EDA decided originally to pursue the construc-tion and rental of apartments using land to be given without cost to the EDA. Throughout the process, there have been many “He said, she said, I don’t remembers and I Misspokes.” Meanwhile, this is what the project looks like today:

Overview: Land purchase: $445,000, Site work to level the property $823,000, $500,000 set aside for development costs equals $1,768,000. Using industry estimates for apart-ment construction, 24 units (900 square feet each) would cost between $3,500,000 to $4,000,000. Assuming the low end, the total cost to develop this project would be ap-proximately $5,268,000 ($219,500 per apartment). Keep in mind that this is a low-end estimate.

Monthly costs: Mortgage @ 4%/30 years = $25,100, Real Estate Taxes = $4,100, Vacancy and Repairs = $2,400, Management = $2,050, Insurance = $1,100, TOTAL PROJECTED MONTHLY EXPENSES = $34,750.

ASSUMING A BREAK EVEN PROJECT, MONTHLY RENT PER APARTMENT = $1,450 ($17,400 ANNUALLY). Somehow, this does not seem like a viable project for “Workforce Housing.” What teacher or fireman wants to spend $1,450 per month for apartment rental when they can buy a house of their own for considerably less? In addition, there are no impediments that would require our local workforce people to rent these apartments and they would be available to anyone with the income, etc. So much for “Workforce Housing.”

I also question why the residents of Warren County were kept in the dark for so long? This is not a secret government silo project but the EDA has treated it as such. Whether there were (are) improprieties with this project, I do not know. I do wonder why if there is so much smoke, where is the fire?

John Costello

John Costello is a locally-based businessman, who owns commercial and residential real estate, not only in Front Royal/Warren County, but along the east coast between Boston and Florida.