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Hercules Affordable Housing Initiative Spent Nearly $50 Million, Produced Almost Nothing

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Sycamore North, a mixed-use structure envisioned as a downtown centerpiece and showplace for affordable housing, stands uncompleted while the City Council is negotiating its sale. | Bob Porterfield/The Huffington Post

Reporters Bob Porterfield and Jackie Ginley are exploring the financial challenges facing Hercules for The Huffington Post and Hercules Patch. Read their report on municipal utility spending here.

HERCULES, Calif. -- There are 918 names on 'the list.'

People from every walk of life are on it, with one thing in common: They all wanted the chance to take advantage of affordable housing offers in the small city of Hercules.

Many have been waiting more than five years for a call that would have given them entrée to sparkling new digs in Sycamore North, a $70 million mixed-use housing development in this struggling community of 24,000 residents northeast of San Francisco.

They're still on hold, waiting for a project that looms over a mostly barren downtown, its only occupant a security guard living in a small trailer.

"It's a bummer," says Karla Bernal, a Hercules native who moved back home two years ago and was lured onto the list, looking to buy a condo she and her mother could afford. "It would be amazing, awesome, to be able to live there."

Bernal ended up moving to nearby Pinole, where she rents a home.

Even Hercules has washed its hands of Sycamore North. After dumping $38 million into the project with no hope of raising another $30 million to finish it, the city began maneuvering in August to find some way to salvage it. Negotiations are underway with potential buyers, possibly at fire-sale prices, and Hercules is asking the state to extend $5 million in loans it made to help with construction.

City Council members are now debating whether, through a sale, to scrap Sycamore North's 76 affordable housing units and convert the entire residential portion of the project into market-rate condominiums or retail space. Whatever the outcome, city officials say they hope to have the Sycamore North problem resolved within a few weeks.

State auditors and federal investigators now are trying to unravel what went wrong with the Hercules affordable housing program, Sycamore North and other redevelopment projects in the town.

A key question will be how a financially strapped community committed more than $100 million to an affordable housing program and its related infrastructure, spending nearly $50 million before the money ran out -- including $30.2 million on the affordable housing segment of Sycamore North and $17.9 million more on other projects and assistance to benefit low-income residents -- without producing a single unit of affordable housing.

Another question will be why Hercules' biggest affordable housing advocate, former City Manager Nelson Oliva, embarked in 2005 upon a spree of borrowing, spending and building that has nearly bankrupted the town.

City Hall today is almost as empty as Sycamore North, with the few remaining employees, a new City Council, new city manager and new city attorney left to clean up a mess not of their making.

It will be a daunting task. The Huffington Post and Hercules Patch reviewed thousands of pages of public records in an attempt to follow the trail of taxpayer money spent on affordable housing and other redevelopment in Hercules, but couldn't determine where all the money went.

Affordable housing program records are in disarray or missing, and former city officials and employees who knew what was going on have either been fired, laid off because of budget cuts, hired lawyers or simply refused to talk about Sycamore North. Even the experts and consultants who advised the city or have strong opinions on what happened in Hercules won't comment publicly, for fear they will be drawn into lawsuits or grilled by FBI agents who are methodically interviewing current and former city personnel.

"It's easy for me in hindsight to look at this and say it was a poorly conceived project that was poorly managed," says Frank Fox, a Philadelphia developer that Hercules hired in February to sort out its real estate transactions. "Cities should not be in the development business."


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