Enterprising private companies are rewarded by the marketplace, resulting in profitability and progress, right?

Well, maybe. As long as those private companies are not working for a government housing agency. Over the past several years, a number of cases across the United States have proven time and again that working for the government can be more trouble than it's worth. Just such an episode has recently gone the government's way in an Alaska Supreme Court decision.

The premise of the case was simple enough. In 1998, the Alaska Housing Finance Corporation (AHFC) decided that some of its low-income housing in Fairbanks was too out-of-date and run-down. So the quasi-governmental agency hired a contractor to destroy the 1973-era buildings, which would be replaced with new structures.

The contractor, Jerry Timmons, took one look at the buildings and decided they had potential. He checked out the contract he had signed with AHFC, which he felt allowed him to keep any materials he salvaged from the buildings.

So rather than tear down the low-income buildings, Timmons picked them up and moved them lock, stock and barrel. He found a buyer willing to pay $150,000 for the buildings, which the purchaser would renovate and rent.

Well, when AHFC found out that a private company had come up with a better idea for the buildings, the agency was appalled. And rather than accept its mistake, AHFC filed suit.

Did the agency sue to recover the buildings? No. AHFC sued to stop their renovation, insisting that the buildings were meant to be destroyed. The agency got a court-order halting construction.

And, eventually, AHFC won in court. A judge ruled that the contract did specify the buildings were to be destroyed, not hauled away and salvaged. The case wended its way to the Alaska Supreme Court, which handed down a decision favoring the agency in October.

"This decision was a total and complete vindication of AHFC and its staff," said Daniel Fauske, CEO and executive director for AHFC. "I have a tremendous amount of pride and confidence in AHFC's employees. AHFC was always trying to do the right thing in a manner that respected the wishes of the people of Fairbanks.

"Its unfortunate that public funds and time were spent defending a public procurement process that was completely above board and proper," Fauske added.

So this morally-superior and above-board agency now has set about destroying the 15 public housing buildings, right? After all, many Fairbanks property owners were unhappy that they eyesores showed up in their neighborhood, where renovation was taking place.

Nope. AHFC has not moved ahead with plans to disassemble the buildings. In fact, the contractor they sued had such a good idea that AHFC decided to, er, "adopt" it.

The housing agency is selling the buildings to the highest bidder. And the highest bidder on 14 of the 15 buildings is paying the agency $235,000.

The more cases like this that are resolved in the government's favor, the less likely quality contractors will be willing to submit competitive bids to state agencies. And that doesn't hurt anyone but taxpayers and low-income families who want decent housing.

For more articles by Lesley Hensell, please press here.

Published: November 1, 2001

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Lesley Hensell covers commercial real estate and financial issues for Realty Times. Based outside of Dallas, Lesley works with high-tech and real estate clients as an independent marketing and public relations consultant. She also writes for several publications, including the Dallas Morning News. E-mail Lesley at: lhensell@earthlink.net