State treasurer fires back at attorney general over housing tax breaks

JEFFERSON CITY, Mo. -- Republican State Treasurer Sarah Steelman cast doubt Friday on Attorney General Jay Nixon's claims that he was kept in the dark on a plan to award additional tax breaks to a development accused of using illegal workers.

Steelman said Nixon was absent from all but two of the 28 meetings in the past few years of the Missouri Housing Development Commission, of which both the treasurer and attorney general are members.

But Steelman supplied meeting minutes Friday showing Nixon staff members were present at meetings from which she claims they should have been aware of the plans -- and thus potential costs -- to revive construction on an O'Fallon apartment complex after illegal workers were found.

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 for the O'Fallon Lakes affordable-housing complex. A letter from the commission's director to developers in November 2005 confirmed costs had risen and indicated the development likely could receive $8.1 million in federal tax credits and $7 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 Commercial Group of St. Louis, a minority investor in the project, then essentially shut down the work site and later took over as the general contractor.

On Wednesday, Nixon's office claimed the housing commission staff had come up with a secret plan to bail out the developers with additional tax credits. It cited an August 2006 letter in which the commission's executive director told Gundaker it appeared the development would qualify for $10 million each in federal and state tax credits over a 10-year period. The letter noted the actual amount of tax credits would be determined after the project was complete and its costs certified.

Gundaker's president has said the additional tax credits are necessary to cover the costs of booting the former contractor and hiring local, union laborers to finish the project.

Steelman provided minutes from a Feb. 22, 2006, meeting in which she asked Nixon's representative, Ronald Molteni, for legal advise in dealing with the development.

Minutes also show Molteni present at a meeting the next month in which Steelman noted the projects costs would have to be certified before the development got any tax credits, and at a May 19, 2006, meeting in which she said the developer had come up with additional financing and would be restarting work on the project.

None of those minutes appear to include any direct statement that additional tax credits would be needed to finish the project.

But Nixon's staff "knew that we were discussing how to refinance the site with the new developers and new subcontractors who were hiring legal workers," Steelman said. "If they were so concerned about it, they should have been involved in it from day one, when I asked to be involved in it."

Nixon spokesman Scott Holste said the minutes only back up the assertion that there was no public discussion about a proposed increase in tax credits to the development. The attorney general's office had no problem with switching to union workers, he said.

"The problems of undocumented workers on this project was discussed extensively at commission meetings," Holste said. "What was never discussed was the secret solution by the governor and treasurer to provide $4 million in state tax credits to this problem."

Those tax credits have not been issued yet.

A commission policy requires any tax credit change of more than 10 percent of the original allocation to be resubmitted to the commission for its approval.

Nixon contends that other members of the housing commission were quietly trying to circumvent that requirement. Steelman denies that and says the tax credits would have come back for a final vote regardless of Nixon's complaints.