Mailer attacking Connelly on wasteful project mostly true

A mailer widely distributed to Tacoma residents last week amounted to the first attack ad in what’s turning into a negative campaign for the 27th District state Senate seat between two Democrats – state Rep. Jeannie Darneille and trial lawyer Jack Connelly.

With only two candidates in the race, both are assured a place on the general election ballot. Yet the campaign already has gone negative, even before the Aug. 7 primary.

The mailer in question – distributed independently of Darneille’s campaign by a political action committee called “Tacomans for Integrity in Government” – criticizes Connelly for his ties to misspending of public funds at an affordable housing nonprofit, the Martin Luther King Housing Development Association.

On one side, the mailer displays photos of a fenced-off vacant property and intones in all block lettering: “Where was Jack Connelly when the MLKHDA wasted $4.4 million of our tax dollars?”

On the flip side, it states: “Jack Connelly was on the governing board. And now, Jack Connelly wants to be our state senator. Can we really trust Jack Connelly to protect our tax dollars in Olympia?”

The ad also cites part of a Dec. 22, 2009, editorial in The News Tribune, which notes that two financial reviews “found serious problems” with the nonprofit’s books, but its board had disputed the findings and “deny that any money was misspent.”

WHAT THE CANDIDATES SAY

Connelly: The ad distorts the amount of the nonprofit’s disputed spending of public grant money awarded to build a business center on Tacoma’s Hilltop.

“I feel bad because the numbers on (the mailer) are not the correct numbers,” he said.

On his campaign Facebook page, Connelly has posted a letter sent to the state in September 2011 with what the nonprofit says is the correct accounting for questionable spending: about $455,000.

Darneille: “I wasn’t aware of it. … My campaign wasn’t involved and has been entirely positive.”

Ken Miller, chariman of the PAC behind the mailer: “We didn’t collaborate with anyone on it.”

Miller’s PAC is registered with the state’s Public Disclosure Commission, but the group has yet to file a required independent expenditure report about the mailer.

“We’re in the process of doing that now,” Miller said last week.

Miller said he co-funded the mailer with fellow committee members Marshall McClintock, Sharon Coleman and John Bartolatz, all of whose names appear on the ad, as required. The group spent about $8,000 for an undisclosed number of mailers sent to “likely” voters across Tacoma, Miller said. The PAC’s members also have personally contributed at least $2,400 to Darneille’s campaign, records show.

“One of our goals was to be factual,” Miller added of the mailer.

THE FACTS

Once hailed as the largest affordable housing landlord on Tacoma’s Hilltop, the Martin Luther King Housing Development Association spiraled into a financial crisis in 2009 amid risky land deals and financial mismanagement exposed when the economy turned sour.

When the financial meltdown occurred, Connelly was on the nonprofit’s five-member directors board, which is responsible for the agency’s financial oversight.

Several months after problems surfaced in 2009, the board fired the nonprofit’s executive director and its chief financial officer, largely blaming them for concealing financial problems. Connelly has since taken an active role in trying to right the agency.

The mailer’s claims are based on how the nonprofit handled $4.4 million in state and federal grants meant to help build a proposed business center on the Hilltop site depicted in the ad’s photos.

Separate state financial reviews in 2009 determined that about $1.8 million had been spent outside the project’s scope or was not properly documented. Connelly and the nonprofit have disputed that figure, primarily contending that more than $1 million of the amount was spent properly.

Regardless, Commerce officials note that the nonprofit has spent all of the grant money and the proposed business center remains undeveloped.

Under its contract with the state, the nonprofit has until the end of June 2013 to complete its project – a highly unlikely prospect for the penniless agency, state officials said. Until then, the state won’t technically declare the nonprofit’s spending out of compliance or take funding recovery actions.

“If those lots are empty next June, I guess (what the mailer claims) would be true,” said Dan McConnon, deputy director of the Commerce Department’s community services and housing division. “I guess you would call all of the spending ‘wasted’ if the project that the money was intended for doesn’t happen.”

Connelly agreed the business center project won’t be built, but he disputed that means the entire $4.4 million has been wasted – particularly if another agency or the state can salvage the site for some beneficial use.

But the state requirements specified the money to be spent on the business center as proposed.

Separate from the Hilltop project, the City of Tacoma has passed about $2.1 million in federal housing loans to the nonprofit in recent years. An undetermined amount of those loans remain unpaid and in question, a city housing official said.

BOTTOM LINE

The mailer’s claims that MLKHDA wasted $4.4 million in taxpayer money while Connelly was on the nonprofit’s board are mostly true.

While technically the nonprofit won’t be declared out of compliance until a deadline lapses next year, state officials and Connelly both agree the grant money is gone, the agency is broke and nothing has been built.

At this point, the state contends only about half of the grant spending is questionable, but since it’s assured the nonprofit will not develop the envisioned center, it’s only a matter of time before the full $4.4 million amount will be considered a waste by Commerce officials.

On top of the grant for the Hilltop project, an undetermined portion of public housing loans provided to the nonprofit remains in question.

The mailer passes the smell test.