The District of Columbia government, accused last year in an audit report of "throwing good money after bad" into its stalled effort at redevelopment on Bates Street NW, has spent another $2.5 million on the project, raising the total spent or loaned for the effort to $8.8 million.
At the same time, officials have agreed to give the developers seven more years to pay off loans the city made for the project.
The interest-free loans, totalling $6.3 million, should have been repaid by last year, but the city has collected only about $2 million so far.
About 90 of the 133 planned townhouses have been completed in the project once touted as the showpiece of Mayor Marion Barry's housing program.
Last April, according to property records filed last month, the developers returned to the city 47 Bates Street homes, most of them unrestored.
Former housing director Robert L. Moore said the department, which had sold all 133 homes to the developers in three stages beginning in 1978, took back the unfinished units because "in essence the developers had run out of money and we weren't prepared to further finance the development team."
The most recent expenditure of $2.5 million went to help pay off more than a hundred liens filed against the Bates Street development project by contractors who have not been paid for their work.
Acting housing department director Madeline Petty, asked last week about the latest expenditure, would not explain why the city chose to spend more money to help clear the books on the project.
The developers, a partnership including the local firm of Haley-Makielski, declined to comment on the financial arrangements, which were outlined in property records filed Dec. 22.
Petty would not say last week where the $2.5 million came from.
Moore said earlier that some funds in escrow accounts would be used to help pay debts at Bates Street, but he declined to reveal the amount.
The new financing arrangements provide for the developers to repay the Bates Street loans with revenues from home sales at the Parkside development project in Northeast Washington, another major city project that was awarded to the same developers in 1980.
Petty said she "had no fixed date" for the start of construction at Parkside, which is now 13 acres of vacant land located on the western side of Kenilworth Avenue just north of the intersection with Benning Road.
John E. Haley, one of the principal partners in both projects, said he was "unsure at this time" about the start of construction at Parkside.
The proposed $30 million Parkside project, is designed to include 332 new townhouses, 194 new apartments and a new office building.
Haley's partners on Bates Street include Dennis J. Makielski of Clinton; Jack W. White of Washington and George Holmes Jr., of Wheaton.
ll four are also the developers for Parkside along with architects Paul S. Devrouax and Andrew D. Bryant, real estate broker Carlton D. Jones, community activist James T. Speight of Southeast Washington and attorney Marion Phillips.
In his sharply worded review of the Bates Street project, the auditor found that city housing officials had failed to follow their own regulations for overseeing project spending until the developers had spent nearly $4 million of the city-funded interest-free loans.
Debts against the project grew. Contractors who supplied lumber, carpeting, painting, and electrical work went unpaid until their liens totalled $2.6 million in August, according to the auditor. The Internal Revenue Service placed two liens totalling nearly $250,000 against the partnership for unpaid taxes.
The Bates Street developers also were more than a year overdue in payments of a separate $1 million loan for the project from John Hanson Savings and Loan, one of the largest such loan firms in Maryland.
City housing officials have been trying since September to find a way to clear the books of the troubled project, which is two years behind schedule.
At one point Moore thought he had arranged for a new development team headed by builder Philip Miller and former mortgage banker Harry D. Calhoun to replace the Haley-Makielski team and help pay off the debts.
But that deal fell though after Moore was replaced as housing director in late November.
City Controller Alphonse G. Hill is credited with making the new financial arrangements. Hill declined to discuss the project last week, referring questions to Petty.
To clear the title, it was necessary to take care of the $4 million debt to the city. That was accomplished by transferring the debt to the Parkside project.
City officials said the $1.8 million from the guaranteed loan and the $2.5 million put up by the city last month will be used to pay off all other outstanding debts.
The savings and loan firm has been paid its $1 million plus interest and penalties, a spokesman for the institution said.
But some of the contractors said they have been unable to collect their interest charges.
Carl Jones, president of Jones and Artis Construction Co., said his company was owed in excess of $120,000--the largest amount of outstanding liens--and had been paid the principal in the last few weeks, but no interest or penalties even though some of the debts were three years old.
"We thought anything we received was a godsend," said Jones."That project was a disaster: the lack of performance, the sheer waste of money and using government money and not paying the contractors."
Jimmy George of G&M Mechanical said his company filed liens with interest totalling $98,000 because the developers and city officials had agreed to pay interest on the outstanding bills.
George said he settled for $69,000, the principal amount of the debts and no interest because "we were in such bad financial shape we had to settle . . . . We were financially not able to fight it any longer so we got no interest.
"All the small contractors are in bad financial shape and had to settle for much less."