By Amy Silverman
By Olivia LaVecchia
By Monica Alonzo and Stephen Lemons
By Chris Parker
By Michael Lacey
By Weston Phippen
FSAL warned HUD and its mortgage holder that the disruption and loss of income from the channel project meant the foundation couldn't pay its bills. Neither entity responded, bankruptcy court filings show, and in 1990 FSAL simply quit making its mortgage payments. It's not made a payment since. (Despite not making those payments, Desert Crest claims that it presently just meets operating expenses because of the income it lost when the 11 cottages were bulldozed.)
As the loan's insurer, HUD assumed the note in June. A year later, the foundation turned over to HUD the $1 million it had won in the condemnation lawsuit and, in 1993, agreed to a HUD request to cut costs by closing its 64-bed nursing center, Crestview, which remains empty today.
The foundation then attempted to find a buyer who would take over the retirement home and continue to run it.
Mikkelsen says HUD and the foundation offered to sell Desert Crest to the City of Phoenix in 1992 or 1993 at a discount price.
But the city turned down the offer. Mikkelsen says small amounts of asbestos in floor and ceiling tiles at Desert Crest were enough to turn off city officials.
David Hicks of the city's housing department says he doesn't remember discussing a price. "I don't remember that it was a dollar. That sounds pretty good," he says.
"I think the general thinking was that there was a lot more than a small amount of asbestos. I think it was fear that there was quite a bit. From there I think it just fell through and nobody pursued it from either side," says Hicks.
So the foundation looked elsewhere for a white knight. FSAL contends HUD again bungled things. In 1995, the foundation was on the verge of selling the center to the Campus Health Care Group, which planned to keep Desert Crest running, reopen Crestview as an Alzheimer's unit and pay HUD $3.9 million. But delays by HUD, says the foundation, nixed the deal.
HUD dismisses the foundation's allegations of government screw-ups. Instead, HUD employee Sally Thomas says that Desert Crest suffered from years of mismanagement as the foundation stubbornly held onto services that lost money.
"They had several buyers that were interested in Desert Crest, but [the foundation] would use stall tactics. They would never go through with anything," says Thomas. "We wanted them out of it, very frankly, because they weren't operating it well.
"It's been in trouble for a long, long time. They would never listen to us as far as making some of these services self-supporting."
Thomas' assessment is diametrically opposed to the story told in the foundation's bankruptcy papers. But she says that doesn't surprise her.
"Guy's very sharp," says Thomas. "One thing I don't want to do is get into a pissing match with the diocese. Neither does HUD."
In 1996 and 1997, the foundation tried to arrange another sale, this time to Evans Withycombe Residential (now Equity Residential), which planned to tear down Desert Crest and put up apartments.
By this time, HUD had sold Desert Crest's mortgage along with 157 others to MMT, a Delaware business trust. The foundation says that MMT did not respond when Evans Withycombe offered $3.05 million for Desert Crest. Instead, MMT notified the foundation that it intended to foreclose on the long-dormant mortgage.
A few days later, in August, Desert Crest filed for Chapter 11 bankruptcy protection. Soon, it had lined up another buyer, JPI, which also sees apartments as the best use of the Maryland Avenue property.
Ken Tims remembers the initial shock of learning that nearly 400 apartments would be going in not far from his house.
A resident of the Tonka Vista development southwest of Desert Crest, Tims thought he and his neighbors had already been through enough.
Their bucolic collection of large ranch houses lost much of its access to neighboring parts of Phoenix when the Squaw Peak Parkway was constructed in 1990. Traffic into the area south of Glendale Avenue and east of the freeway now is restricted to two small streets.
That's made getting in and out more of a hassle, but it's also reduced cut-through traffic, which benefits property values. But with such narrow access to the neighborhood, residents jealously protect their homes from the prospect of increasing population and cars. Several past projects have been scuttled by resident activism.
JPI's plans to put 400 apartments in the middle of the neighborhood, where 100 seniors--most of whom don't drive--presently live, have Tims dreading the impact on his peaceful street. He and other members of four local homeowners associations have mounted an offensive against the foundation's proposed sale to JPI. At a January 6 bankruptcy hearing, Judge Redfield Baum told the packed courtroom that he'd never received so many letters about a case. Neighbors united against the development have also sent letters to Bishop O'Brien and have lobbied Phoenix village-planning committees as well as city and state politicians. The City of Phoenix may be able to do nothing about the matter, however. Desert Crest sits atop land zoned for high-density multifamily dwellings. JPI won't have to seek rezoning for its plans.
It wasn't long before Tims and his neighbors realized that Desert Crest's seniors were also facing a dismal future.