V & M Management Co., Inc.
Watertown, MA 02172
June 2, 1993
President Bill Clinton
The White House
1600 Pennsylvania Avenue
Dear Mr, President:
I am the President of V&M Management Co., Inc., owner of a two hundred seventy -six unit, low-income housing development in lower Roxbury, Massachusetts and I have been involved in proviing low-income housing to Black and Hispanic neighborhoods for the past twenty-five years. The purpose of this letter and accompanying exhibits is to share with you my experience and efforts to challenge the governmental agency waste and mismanagement that I have personally witnessed in the course of my career. I offer my suggestions to your administration with the confidence that my research, implemented on a national scale, will yield billions of dollars in saved taxpayer funds.
My experience in housing has lead to the conclusion that a variety of official agency agendas having apparently little to do with tenant welfare. Low-income tenants in government subsidized housing have been, and continue to be victimized in Massachusetts and throughout the United States by misplaced and mismanaged federal subsidies and systematic overbilling by local taxing authorities and utility companies, among other entities.
USURIOUS CHARGES BY PUBLIC UTILITY COMPANIES
To illustrate, in the City of Boston, the federal government under the auspices of HUD, and other owners of low-income housing, pay utility companies - Boston Edison and Boston Gas - the highest rates for public utility service to affordable housing. Consequently, as a result of being charged interest-on interest of 44% and 71% percent on its Boston Gas and Boston Edison accounts respectively, V & M Management Co., Inc. filed suit in Massachusetts' Suffolk Superior Court for injunctive relief against the Department of Public Utilities ("D.P.U.") for failing to respond to a long standing administrative challenge to prior decisions allowing public utilities to compound charges on unpaid bills, leaving commercial accounts with effective interest rates exceeding 100% on unpaid balances. The complaint challenged: 1) utility company policy of categorizing Section 8 "affordable housing" as a commercial vs. residential account, thereby subjecting it to a higher billing rate; 2) whether utility companies can charge 18 % interest on unpaid bills when the prime rate is only 6%; and 3) whether utility companies can charge"pyramid" or charge interest these already outrageous interest charges. Since the D.P.U. failed to respond in the nine (9) months since the complaint was filed, V & M Management filed a complaint in the Massachusetts Superior Court to compel the D.P.U. to carry out its responsibilities.
As a result of the D.P.U.'s inaction, and in retaliation for my efforts to stop these unfair practices, the Boston Edison Company has responded with a motion for the Mandela Development to be placed into receivership and an attempt to seize funds from the United States Department of Housing and Urban Development ("HUD") earmarked for the operation and maintenance of Mandela's 276 units and its 1,5001 tenants. This action currently threatens the homes and welfare of 1,500 low-income Black and Hispanic tenants who reside at the Mandela Development Boston Edison cited nonpayment of arrearage in justification of their action; however, V & M had paid all of the Boston Edison usage charges. Fully 71.6% of the claimed due amount was the challenged interest and interest-on-interest. From the period December 1988 to March, 1993, total compounded interest charged to V & M Management was approximately 80.1%, despite that all current usage charges were paid, and in fact, overpaid (refer to attached exhibits).
A review of Edison's billing practices by The Goodman Group, a Boston-based energy consulting firm (see attached affidavit, full report to follow by mail), reveals that between December, 1988 and 1993, V & M Management paid 100% of its usage charges - indeed, it overpaid and was under-credited by $34,000; amazingly, however, compounded interest charges that accrued during this period equalled 80.1%. Furthermore, the analysis reveals various sources of error and questionable billing practices, including estimation and meter reading errors, billing errors, and statements which were confusing or difficult to understand. The estimated electric use and demand charges are upwardly biased, in some cases, more than three times greater than the highest actual reading. These over-estimates increase the interest charges above the level warranted by timely actual readings. Long intervals exist between actual meter reading, in contravention of Boston Edison's Terms and Conditions, as approved by the D.P.LL There exists an inordinate amount of voided, skipped or estimated readings. Furthermore the "actual" meter readings on several accounts are highly questionable, with values being very "round" (such as 66,000 kilowatthours), or the same "actual" value is reported for two or more months. Additionally there are many uncorrected billing errors, including interest charges on residential accounts. Finally, other ambiguities or irregularities exist, including multiple bills within a given month, unexplained credit of electric charges, convoluted corrections for previous billing errors, and transfers to/from unspecified accounts. In fact, the Goodman report shows that V & M has paid close to 100% of all usage charges, and the dispute and errors pertain to compounded interest (refer to attached exhibits). After review of the analysis performed by the Goodman Group, I understand Boston Edison's motivation for filing for receivership, since Boston Edison would also avoid exposing their billing practices through an audit, which would undoubtedly make the company vulnerable to millions of dollars in liability. Challenges to these unconscionable, unfair billing practices have been met with resistance at all levels of government. V & M 's account has been handled with political bias and favoritism benefitting the utility companies, all at the expense of consumer protection. Neither the Massachusetts Attorney General nor the Massachusetts Legislature have challenged these unfair practices; in fact, various state legislators that I have personally contacted expressly stated that the utility companies' powerful lobbying forces and generous, sustaining political donations make any challenge to policies prohibitive, if not impossible. Therein lies the hidden agenda by which two of the state's most powerful consumer protection forces,the D.P.U. and the Attorney General will stand idle and allow receivership to displace 1,500 black and hispanic tenants - not because utility usages charges were not paid, but because a consumer has instituted a good-faith challenge to usurious interest charges exceeding 71% on inaccurate, overestimated balances. Accordingly, the taxpayers, which ultimately fund all government-owned or subsidized housing continue to be victimized by the unfair and deceptive billing practices perpetrated by local utility and water service providers and the federal government must ultimately bear responsibility for allowing this to continue.
President Bill Clinton Page Three June 2, 1993
CHAPTER 121 A URBAN RENEWAL TAXATION
An equally troubling phenomenon is the fact that in Boston, the federal government and other providers of low-income, affordable housing pay the highest real estate (excise) tax - three times higher than that assessed Boston's luxury condominiums. Much of Boston's real estate is tax exempt non-profit hospital, universities and churches. The city derives the majority of its real estate taxes from residential housing. As a result of Proposition 21/2, a 1980 ballot initiative which capped tax rates on non-121A property, the current, unequal tax structure effects every 121A, low-income housing project in the state. Ironically, chapter 121A urban renewal taxation, which was originally designed to create an incentive for private owners to provide low income housing, instead taxes these owners at a rate far in excess of what other businesses pay.
Apparently, the federal government has never challenged this policy, and has always paid these bills without question. However, I do not have access to the seemingly 'unlimited resources' of the federal government and cannot afford such taxation. Consequently, I have been forced to spend hundreds of thousands of dollars to institute a legal challenge to this unconstitutional form of taxation, which, if successful, would require the state to rebate excess charges from 1980 when Proposition 21/2 was enacted. A successful challenge to the 121A tax, the highest tax in the city, could result in the state abating hundreds of millions of dollars to all the 121A investors, going back to 1980, and will likely precipitate a major policy change. The ultimate beneficiary of a successful challenge will be the federal government, and the American taxpayer. Consequently, my threat to the status quo has prompted harassment by city and state agencies who have, thus far unsuccessfully, attempted to remove me from ownership, by repeated 'coding', vindictive lawsuits and unsuccessful motions for receivership. (Despite the relatively "model" status of the Mandela Development, Mandela is the only development in the city that has been coded by the Boston Inspectional Services, Boston Redevelopment Authority and the Attorney General's office).
Before your administration asks how much more "we the people" must sacrifice in the face of government squandering-spending of precious resources, the following questions must be answered. Why has the federal government not challenged the assessment of commercial rates by public utilities for its residential properties? Why has the federal government not challenged Massachusetts' Ch. 121A urban renew tax, which taxes low-income housing at a much higher rate that of other properties. Inasmuch as the federal government, specifically HUD has failed to challenge these policies, I had no choice but to litigate. But such laissez-faire attitude by the federal government can easily bankrupt the whole nation, despite that the government, and ultimately the American public stands to benefit from this precedent setting litigation which could yield a sizeable reduction of the federal deficit if implemented on a national scale. I urge you to direct the Secretary of Housing and Urban Development, already joined as a party to the above-discussed motion for receivership by Boston Edison, to seize the opportunity to challenge unfair utility company billing practices by actively litigating the issues at hand. The federal government has a responsibility to conserve taxpayer money, protect its real
President Bill Clinton Page Four June 2, 1993
estate developments nationwide, and monitor state and local governments to ensure that affordable housing is protected and basic community services are provided. Providing more money is not the answer, since funds received are invariably mismanaged. I hope that your administration,will investigate the utility bills that the federal government has paid without question, and discover how much of these attachments were due to overestimated billing, compounded interest and late charges. I can't think of a better victory , announced on the front page of the Boston Globe during your upcoming visit to Massachusetts, stating that you have ordered an audit of utility companies' billing practices in an attempt to end their abusive tactics. Equally important, rather than considering this a letter of criticism, I hope that you will consider these thoughts a contribution of my considerable experience, offered with the hope of improving the lives of millions of Americans.
Very truly yours,
Alphonse Mourad,~President V & M Management Co. Inc.