How CHA Rehabs Of Senior Apartments Blow Through Budgets, Cause Real Pain

Expensive cost overruns are the rule, rather than the exception, when the Chicago Housing Authority orders up renovations at senior housing complexes it runs. Inconvenience, frustration and sometimes danger for elderly residents accompany the rehab work.

Kristan Lieb for the BGA

This story was published with Crain's Chicago Business.

When 74-year-old Cesar Vera lost his footing in the shower of his Rogers Park apartment last year, he instinctively clutched for the gray metal grab bar that was no longer there.

Instead, he grasped at the air, slipped and flew backwards out of the shower, crashing onto the bathroom floor on his back. Now he lives with a constant pain in his neck that travels down his back and spends his days trying to cope with his anger and frustration at his landlord — the Chicago Housing Authority.

“They knew that this was an apartment for senior citizens,” the retired hotel food and beverage manager said in a recent interview. “My previous studio (in the building) — it had grab bars. So they knew they needed to put a safety in there.”

Cesar Vera
Cesar Vera slipped and fell on his back while grab bars (now installed) were missing during a costly rehabilitation of his government-owned high rise. (Kristan Lieb for BGA)

But the case of the missing grab bars is just one of the indignities Vera and many of his neighbors endured during a $45 million rehab of Caroline Hedger Apartments, a 28-floor government-owned high rise for low-income seniors at 6400 N. Sheridan Road. They endured weeks of a Chicago winter with nothing but space heaters, construction dust that caused coughing fits, and frequent waits of more than an hour for an elevator just to get out of the building.

Tenants have been so angered over their living conditions that on several occasions they have taken to the streets with walkers, canes and picket signs to protest the work, decrying the CHA’s handling of a “modernization” project they argue was largely unnecessary, and plagued with more than $14 million dollars in cost overruns, repeated construction delays and numerous health hazards.

The CHA is shoveling millions of dollars to a politically connected contractor on a taxpayer-funded project that in the end will come in at least 13 months late and 47 percent more than the original price tag. What’s more, much of the work replicates a largely similar rehab on the taxpayers’ dime completed only a decade earlier.

An investigation by the Better Government Association reveals the Caroline Hedger project is just the latest example of what critics say is a pattern at CHA of spending way too much on far too little.

In the last two years alone, the agency tasked with housing the elderly has repeatedly reached deeper into public coffers to fund more than $33 million in cost overruns at eight of its senior apartment buildings undergoing rehabs, the BGA found. As of July, the total cost of those rehabs had reached $132 million — collectively over budget by more than a third.

In March, the CHA board signed off on its latest rehab project in East Garfield Park. The price for the overhaul calculates out to nearly $300,000 per unit in a neighborhood where public records show single family homes sell for less than half that amount.

But the poster child for the agency’s failure to control costs is Caroline Hedger, which by itself accounts for almost half of the total tab for construction cost overruns in the past two years.

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In a written statement, CHA spokeswoman Molly Sullivan acknowledged past problems in the agency’s procurement process, stressing that the agency is now under new leadership and has moved to tighten controls. Sullivan said cost overruns are a routine frustration in rehab work as unforeseen problems arise, but the agency is proud of its efforts to “provide modern, energy efficient building systems and dwelling units that give residents the safety and comfort they need and deserve.”

The agency declined BGA requests for an interview to discuss cost overruns and the decisions leading up to them, and one board member, CHA Commissioner Mark Cozzi, said he was instructed not to comment.

However, at a CHA Board meeting in March, Cozzi raised doubts about contract modifications and their price while airing suspicion that contractors were gaming the system by under-bidding contracts safe in the knowledge that they can add later.

“This process is so broke,” Cozzi said, before voting against the East Garfield project. “These costs are outrageous.”

Sullivan said the CHA follows all federal contracting guidelines and awards bids to the “lowest responsive and responsible bidder” and that the bid process includes a review of the bidder’s past contract performance and other factors. “CHA is confident that its procurement policy meets these guidelines and results in the best qualified bidder being selected for work,” Sullivan said in her written response to BGA questions.

But the CHA’s track record of hiring general contractors raises questions about that process, the BGA found.

Caroline Hedger Apartments
Caroline Hedger Apartments. (Kristan Lieb for BGA)

The agency has repeatedly awarded contracts to companies with a history of cost overruns, records show. Among them is the general contractor the CHA chose for the Caroline Hedger rehab, Orland Park-based Madison Construction.

Two of Madison’s other CHA projects also have high cost overruns. And last year, the company was terminated from a $71.4 million renovation project at Navy Pier amid reports of significant cost overruns and project delays.

In 2014, when the CHA awarded Madison Construction the Caroline Hedger rehab contract, the company was suing the U.S. Department of Housing and Urban Development over a “red flag” HUD placed on its record that jeopardized the firm’s ability to get more federal work. The action resulted from a dispute over leaky windows and patio doors Madison had installed in a different housing development, according to court records.

The dispute over the leaks has yet to be resolved, however HUD has since removed the flag and Madison dropped its lawsuit.

Robert Ferrino, Madison’s CEO, acknowledged his company was “terminated for convenience” from the Navy Pier project and that Caroline Hedger cost overruns were high, but blamed the poor condition of the CHA buildings and critical omissions in blueprints that prompted the late changes. He said he is proud of the accuracy of his company’s bids, which also happen to be low.

Robert Ferrino
Robert Ferrino, CEO of Madison Construction. (Madison Construction)

“We don’t cheat. We are honest, good people,” Ferrino said.

A review of public records shows that over the past decade, Madison Construction and its subsidiaries have amassed a public portfolio of taxpayer-funded projects in the city nearing a quarter of a billion dollars in total, while at the same time becoming politically active in campaigns of the elected officials who help make the decisions to award those contracts.

Illinois state campaign records show that Ferrino, his executives and his companies have donated at least $85,000 to local races, mostly for city council seats.

“Was it that much?” Ferrino said when asked about whether campaign contributions helped his 15-year-old company gain a foothold. “We haven’t been in the system long enough to game the system. We didn’t know there was a system to be gamed.”

Ferrino said the donations to political candidates are part of his company’s broader efforts at philanthropy and to give back to the community. One of the beneficiaries is Ald. Joe Moore, 49th, in whose ward the Caroline Hedger apartments is located.

Records show that more than $10,000 in campaign contributions from Madison Construction, its executives, subsidiaries and subcontractors began flowing to Moore about the same time decisions were being made by the CHA on Caroline Hedger’s rehab. Those contributions continued through 2016, as Ferrino successfully pitched the CHA on a separate project adjacent to Caroline Hedger.

Strongly supported by Moore, the new work awarded to Madison will transform a parking lot now used for Caroline Hedger into a seven-story apartment building with a Target retail store on the ground floor.

Joe Moore
Ald. Joe Moore, 49th. (Antonio Perez/ Chicago Tribune/TNS via Getty Images)

In an interview at his ward offices, Moore rejected any suggestion that the campaign contributions tied to Madison had any relationship to his backing for the CHA work awarded to the construction firm.

“I have conservatively raised in my 26 years as alderman probably close to $3 million, that’s a conservative estimate,” Moore said. “If you look at it from that perspective, that’s a drop in the bucket … I haven’t accepted any campaign contributions since they came to me with the proposed project and I knew then they were going to need a zoning change.”

Records show three of the donations — totaling $1,750 — were given to Moore in December 2016, two months before the zoning change for the Target was introduced at City Council. Moore said those contributions came during one of his bi-annual fundraisers. Two of those three checks were written by Madison subcontractors on the Caroline Hedger project.

“There is no law that prohibits subcontractors, people who are not themselves applying for zoning changes, to donate to my campaign,” Moore said. One of the checks, for $500, came from Madison executive Mike Hugelier.

Hugelier said he was simply trying to support Moore. “We had just completed a couple of projects on Devon (Avenue). We had done a health center and we have other interest in the area,” he said. "So, yeah, just in support of Joe Moore.”

Moore said he knew about the cost overruns at Caroline Hedger, the grab bar issue and lack of heat. In fact, he said he “went to bat” for the seniors and worked with the CHA and Madison to resolve the issues. Yet he strongly supported Madison’s latest project — the public-private partnership funded with nearly $30 million in taxpayer money to develop the Caroline Hedger parking lot.

Moore’s fundraiser in December also came less than two weeks after some of the Caroline Hedger seniors organized a press conference to complain about the lack of heat in their building.

Among them was Peggy Spencer, 70, who said she was waiting to be moved to a rehabbed apartment with the new heating system. In the meantime, Madison Construction gave her space heaters, but she and her husband, Izzy, were so cold that they watched TV with their coats on and slept under multiple blankets to keep warm. “I was furious because it was cold,” Spencer said. “Our apartment was cold.”

According to contract documents, the rehab at Caroline Hedger was originally meant to bring the building into compliance with new city rules requiring a full sprinkler system, voice communication systems and fire rated door frames in stairways, but the CHA also asked Madison Construction to complete other renovations.

Among them was the installation of new windows, doors, stoves, bathroom fixtures and kitchen cabinets.

Just a decade earlier, the CHA had authorized a “major renovation” that included new windows, doors, stoves, bathroom fixtures, kitchen cabinets and air conditioners for all 450 apartments, according to a 2007 report on the building’s condition.

Stephanie Hayes
Stephanie Hayes is a resident at Caroline Hedger Apartments. (Kristan Lieb for BGA)

“I cannot believe they spent $45 million for this building,” said Stephanie Hayes, 66, who said that soon after she moved to a rehabbed unit a closet door fell on her teen granddaughter.

During the more recent rehab, the CHA said it found an “overwhelming amount of discovered conditions” that increased the cost of the project and delayed the project’s timeframe. At first, there were electrical and plumbing issues. Shortly after, asbestos was found in materials used to join walls.

The CHA says it has worked in recent years to improve the standards for awarding construction contracts to keep down cost overruns, but it declined to detail whether those improvements applied to the Caroline Hedger project.

Last year, after already approving six modifications to the contract for Caroline Hedger, CHA officials sought permission from the board for a seventh change. Commissioners approved an additional $3.8 million to cover overtime pay and the cost of hiring additional plumbers, painters, and carpenters, among others, according to CHA documents obtained through open records laws.

Requests for more funds didn’t end there. In April, the board approved nearly $2 million more for Madison, in part to pay the firm to replace the grab bars it had previously been paid to remove.

Asked about the original decision to remove grab bars, Sullivan, the CHA’s spokeswoman, said it was not an oversight. The CHA initially ordered bars removed that were not required by HUD regulations, she said, adding that later it was determined that all the units should indeed have them.

Emily Coffey, an attorney with the Sargent Shriver National Center on Poverty Law, who helped residents push the CHA to install grab bars in the rehabbed units said the CHA moved residents to apartments that were less safe for them and then dragged its feet when worried residents asked to get the bars back.

“This never should have happened,” Coffey said.

Cesar Vera agrees, having fallen twice before cajoling the landlord into putting back grab bars. He said the pain has changed his life, and stopped him from dancing every weekend.

“I try to manage with exercises and Tylenol,” he said.