Schenectady's contract rehab program doesn't rely on trust
Gary Pappas, the first contractor to take on a run-down foreclosed house from the city of Schenectady under its new rehab program , dropped out last month after his criminal history was revealed by his ex-wife. He is now back in, after being talked into participating again by Building Inspector Eric Shilling. We have no serious problem with that -- not because Pappas' iffy past isn't a concern, but because no matter what happens, the city can't get hurt under the terms of the program .
The rehab program is a key part of Mayor Gary McCarthy's plan to upgrade the condition of housing, and promote homeownership, in the city. There is nothing more important, from the standpoint of tax revenue, property values, crime, quality of life. All those eyesores that owners have stopped paying taxes on, many of them rental properties or empty, are blight dragging down Schenectady's once-strong neighborhoods.
McCarthy has had luck with the Key to the City program , in which Key Bank offers financing incentives to those who buy homes in the city, and the city offers grants to first-time homebuyers. But so far, at least, the houses sold have been owner-occupied and in basically good shape.
The rehab program is for crummy houses that the city has foreclosed on, or plans to, which number well into the hundreds. It is innovative and smart. The city will have contractors bid on a house, and those who agree to bring it up to code for the the lowest price, will get it.
The city pays nothing; the contractor bears the entire cost of repairs. And the city risks nothing, because if the contractor doesn't do the work as promised, or walks away, he loses the investment and the city keeps the house. The contractor only makes money if he completes the job and sells the house, in which case any profit is split 50-50 with the city.
Pappas does not intend to sell the house he bid on; he intends to turn it into a two-family, living in one unit and renting the other. After putting $75,000 into repairs, he will pay the city $10,000 for the house, with the stipulation that he live in it and keep paying taxes for at least five years.
Pappas hasn't always lived up to his obligations in the past. In 1999, he was convicted of embezzlement for stealing from his employees' retirement fund, sentenced to probation and ordered to make restitution. Years later, when he failed to make payments and falsified reports to his probation officer, he was sent to prison for 18 months.
Pappas clearly isn't a saint, even though he says he has now turned his life around with the help of religion. If the city were giving him money, or relying solely on his good word, we'd say don't.
But that's not the case. The city will be giving Pappas nothing until he delivers on his initital promises, and will still be protected if he fails to meet subsequent ones. The city needs more programs like these.