Stanley/New Fountain Hotel was a key prize for PHS

The Stanley/New Fountain Hotel is like a well to which PHS Community Services Society keeps returning. 

The Downtown Eastside charity’s four senior managers quit and its nine-member board was replaced last week after B.C. Housing and Vancouver Coastal Health audits found widespread misspending of taxpayer funds. PHS, with almost $28.6 million revenue, ran a $2.07 million deficit for the year ended March 31, 2013, but its annual financial report was revised last summer to show a $3.9 million surplus after it sold the 1907-built, 36 Blood Alley Square property.

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In 2001, Greater Vancouver Housing Corp. gave PHS ownership of the single room occupancy hotel, but 2002 provincial cutbacks halted renovations. City hall paid PHS $2 million for the 104-room Stanley/New Fountain in 2003 and B.C. Housing chipped-in $500,000 for renovations to house squatters from protests at the vacant Woodward’s department store. While PHS was responsible for repairs under $50,000, city hall spent $237,504 for a new roof and arcade fencing in 2008. A report to council said it was supposed to break-even on ground floor commercial leases and room rents, but ongoing maintenance and additional staff needed for tenants with addictions and illnesses led to undisclosed PHS losses.

PHS was pondering a plan to develop new housing at the Only and Stanley/New Fountain sites, but city hall balked at extending the March 31, 2013 deadline for PHS to buy the property.

“All those local area planning things became so controversial, they decided they wanted to wait until all the processes were finished,” PHS co-executive director Mark Townsend said, referring to the 30-year Downtown Eastside plan, which city council eventually passed March 15.

City manager Penny Ballem confirmed the extension was refused, but denied city hall intervened in the sale.

“It's not our business to say you can afford it or not, it's not something you'd interfere with,” Ballem said.

Westbank Corp. president Ian Gillespie said PHS approached his company about the property and his 23 Cordova Property Inc. eventually exercised the option for $2.348 million on April 29, 2013. Under the deal, PHS remains the manager; the developer has to replace the SRO housing. Stanley/New Fountain was appraised at $9.51 million in 2012, so PHS auditor EPR Coquitlam withdrew the original 2013 financial statements because of the sale and counted a $6 million gain in the revised version.

“(PHS) didn't have the money to buy it themselves,” Gillespie told the Courier. “They were concerned that it not get bought by some of the elements circling for property in that area.”

Gillespie, whose company redeveloped Woodward’s for $400 million, said redevelopment of Stanley/New Fountain isn’t a big priority.

“We felt like over a long run it was an important site,” he said. “Blood Alley is really important to the nature of that neighbourhood and we've got a property across the street (60 Cordova) we're really concerned what type of retail went in, because of our investment in Woodward’s. It was really more of a defensive move.”

In May 2010, 209 subsidized apartments at Woodward’s opened. Of those, 125 units are PHS-operated in the nine-storey West Hastings building.

As for PHS’s problems, Gillespie said he wasn’t aware until the damning audits were published.

“They were fantastic to deal with, so it's kind of sad,” he said. “On the other hand, as a taxpayer, I think it's important that people are looking out for these things.”

City of Vancouver statements of financial information list $938,081.06 in payments for goods and services and $133,363 in grants to PHS between 2003 and 2011.

Problems have existed at PHS for more than a decade. In September 2003, the Courier reported that PHS revenues ballooned from $327,500 in 1997 to $6.8 million through fiscal 2002. But it racked up a $550,000 deficit between March 2000 and March 2002 and a combined overdraft and line of credit debt of $1 million. That prompted an April 2002-completed B.C. Housing special audit of the society. B.C. Housing refused to release the audit to the Courier and PHS not only hired a lawyer to block release of the audit, but it also threatened the Courier with a defamation lawsuit while it researched a feature story on PHS.

In Question Period on March 24, Housing Minister Rich Coleman downplayed the 2002 audit when asked by NDP caucus chair Shane Simpson.

“For the next eight to nine years there were no anomalies found with the society on an annual basis,” Coleman said.

Coleman claimed a “small deficit” in 2011-2012 led the government to review and later audit PHS finances.

But PHS financial statements show there was a $300,576 deficit in fiscal 2009 that more-than-doubled to to $674,618 in 2011. In the four years prior to 2013, PHS lost a combined $1,827,949.

Meanwhile, Vancouver-Mt. Pleasant NDP MLA Jenny Kwan was absent from the Legislature after beginning a leave of absence because she was caught up in the scandal.

On March 21, she repaid $34,922.57 in expenses for trips to Disneyland, England and Austria charged to PHS by her estranged husband, Dr. Robert “Dan” Small, PHS’s director of policy, research and fund development.

Kwan claimed Small brought the family along on his business trips and told her that he paid the expenses. “I trusted he was telling me the truth,” she said at a March 21 news conference.

Small did not respond to Courier interview requests. Townsend said Kwan’s cheque was received on March 21. Small and Townsend are two of the four senior managers quitting because of the scandal.

“As to the amount, I think what Jenny is doing is, because she is an honourable and sweet person, she’s just paying everything,” Townsend said. “But technically she’s paying things that are work-related. That is for her to talk about, not for me.”

Kwan, whose riding includes the Downtown Eastside, has not responded to a Courier interview request.

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