Nixon criticizes tax breaks for site with illegal workers

~ The current contractor responded by accusing the attorney general of playing politics.

JEFFERSON CITY, Mo. -- Attorney General Jay Nixon claimed Wednesday that the state housing authority is quietly planning to give millions of dollars of extra tax breaks to a suburban St. Louis development accused of using illegal immigrants.

Nixon said he wants the Missouri Housing Development Commission to publicly vote on -- and reject -- the additional tax breaks for the O'Fallon Lakes apartments.

The current contractor responded by accusing Nixon of playing politics.

The additional tax credits aren't secret and aren't rewarding bad behavior but are needed to cover the costs of booting the troubled contractor and using local, union workers to finish the job, said Mike Hejna, president and chief executive officer of Gundaker Commercial Group in St. Louis.

In a letter Wednesday to the housing commission chairman, Nixon attorney Jeff Schaeperkoetter decried an "inexcusable" and "secret plan" to "bail out a private developer and others who were attempting to benefit from the use of undocumented workers."

Commission chairman Richard Baalmann said Nixon's assertions "got my attention" and pledged to look into the matter, though he added he wasn't aware of many details Wednesday.

"Things get political awfully fast, and I'm trying to stay out of that," Baalmann said.

Nixon, a Democrat, is campaigning against Republican Gov. Matt Blunt for next year's gubernatorial election. The two have clashed frequently on numerous topics, including efforts to combat illegal immigration.

Blunt, Nixon, Republican Treasurer Sarah Steelman and Republican Lt. Gov. Peter Kinder make up almost half the membership of the housing commission, which awards loans and federal and state tax credits to affordable-housing developments.

After the state Department of Economic Development authorized $14.6 million in tax-exempt bonds for the O'Fallon Lakes development, the housing commission in 2004 approved $7.4 million in federal tax credits and at least $6 million in state tax credits over 10 years.

In February 2006, five illegal immigrants on their way to the O'Fallon Lakes project were pulled over by local police for speeding and were taken into custody by the federal Immigration and Customs Enforcement office.

A few days later another worker was arrested after police responded to a fight on the site and discovered one of the participants was an illegal immigrant.

Gundaker, which was a minority investor in the project, then essentially shut the project down, Hejna said. It later took over as the general contractor.

"We didn't cause the problem, and I tried to fix it," Hejna said Wednesday. "The extra money was necessary to be able to fire all contractors and illegal workers and hire local contractors and local union tradesman to be able to complete the project."

Nixon's criticism "really smacks more of politics than anything," Hejna said.

The attorney general's office provided The Associated Press with e-mails obtained from the housing commission showing that Steelman and representatives of Blunt's office were notified as early as spring 2006 that there likely would be additional tax credits sought to finish the project.

But Nixon spokesman Scott Holste said the attorney general's office learned of the additional tax credits just recently, after receiving the documents from the commission staff.

Housing commission policies allow staff to adjust tax credits by as much as 10 percent without seeking additional approval from the commission, said spokesman Brandon Laster.

But Nixon's office said the proposal for an additional $4 million in state tax credits -- laid out in an Aug. 16, 2006, letter to Gundaker from housing commission Executive Director Pete Ramsel -- amounts to a 69 percent increase.

Four months earlier, Ramsel had sent an e-mail to Steelman's deputy treasurer, Doug Gaston, saying it would probably cost more tax credits to get the project revived with union workers and proposing that "we do our thing very quietly, and at the staff level."

Gaston said he did not recall the e-mail but that it was probably referring to an assumption that the additional tax credits would not amount to more than a 10 percent increase and so would not need another commission vote.

Steelman, who was chairwoman of the commission in 2006, said she pushed the developers to make sure their were no illegal workers -- and to use Missouri workers instead -- if they wanted to get the tax credits. There was no intent to approve a secret plan and, because of the proposed size, she assumes the additional tax credits will have to come back to the commission for a final vote.

"It appears to me that there's politics being played between Nixon and whoever he wants to pull into this," Steelman said. "All I was trying to do is to make sure Missouri taxpayers were protected and that those tax credits would not go to Gundaker if it were using undocumented workers."

A Blunt spokeswoman had no comment Wednesday about Nixon's criticisms.