The mystery of the management fees

Hampton Roads Ventures hasn’t turned over most of its profits to its parent organization: the Norfolk Redevelopment and Housing Authority

By: - December 22, 2021 12:02 am

The Norfolk Redevelopment and Housing Authority offices are at 555 E. Main Street in Norfolk. (Jim Morrison/ For the Virginia Mercury)

Last in a two-part series on Hampton Roads Ventures and the Norfolk Redevelopment and Housing Authority. Previously: Why is a Norfolk community development entity investing everywhere but Norfolk?

NORFOLK — In the nearly two decades since the New Markets Tax Credits program began, Norfolk lawyer Delphine G. Carnes has marketed her expertise putting together the often-complicated deals that entice investors to projects in low-income areas.

While those ventures can serve as a catalyst for private investment in often-neglected neighborhoods and rural regions, they also yield millions in administrative and other fees for community development entities that broker the deals. 

Carnes, who is the lawyer for the Norfolk Redevelopment and Housing Authority, highlighted that in an April 2017 website post featuring a primer on administering new markets tax credits. For every $39 million in credits, the report said, a community development entity earns $3 million in administrative fees. There could be additional opportunities for profit, according to the post, including collecting an asset management fee for the seven-year duration of the investment, a loan origination fee, and an exit or success fee. 

The Carnes primer suggests that Hampton Roads Ventures, the for-profit NRHA community development subsidiary, should have earned tens of millions in administration fees for the $360 million in new markets tax credits it has won since 2003. NRHA officials cited the lure of those fees when HRV shifted from investing in Norfolk to backing projects as far away as Texas and Nebraska. 

But Hampton Roads Ventures hasn’t come close to producing what they promised.  Only $1.3 million has been transferred from HRV to NRHA over the years, all since 2016, according to documents obtained through the Virginia Freedom of Information Act.  

How much has HRV earned in fees brokering tax credits deals? It’s not clear. 

Housing authority officials have refused to release HRV’s complete financial records, refused interview requests and refused to explain the documents they have surrendered. HRV’s executives also refused interview requests. 

The skeletal documents obtained through records requests raise a number of questions. 

Why would NRHA with a lawyer expert in tax credits deals not maximize the fees earned by HRV? 

Why for years did NRHA employees, including the executive director, get paid separately to work for HRV while also drawing housing authority paychecks?

One-page summaries of Hampton Roads Ventures finances filed with NRHA’s budgets, show that HRV has paid nearly twice as much in the last decade — $2.5 million for “labor/administration” — than it has funneled to NRHA. That’s a departure from other community development entities created by public agencies that are staffed — and paid — by those authorities.  

The records also raise questions about how much oversight NRHA’s Board of Commissioners, who are also the board of managers of Hampton Roads Venture, have exercised over the years. 

NRHA has twice refused requests under the Freedom of Information Act to release the complete financial records of Hampton Roads Ventures, claiming it receives no public funds. Other public housing agencies, including the Portsmouth Redevelopment and Housing Authority, which also created a for-profit community development entity, released their records upon request.

Donald Musacchio, the chair of NRHA’s board of commissioners, and Alphonso Albert, the vice chair, refused requests for interviews, through Carnes (who is also HRV’s longtime lawyer). So did NRHA’s executive director, Ronald Jackson.  

Why is a Norfolk community development entity investing everywhere but Norfolk?

What the Documents Show

While NRHA refused to release HRV’s annual financial statements, authority budgets for the past decade have included a one-page, unaudited summary of Hampton Roads Ventures’ financial status. Those summaries show that the for-profit subsidiary of NRHA hasn’t come close to generating even the average fees reported by independent studies of the new markets tax credits program.  

A 2017 study by Summit Consulting, commissioned by the Treasury Department, found community development entities earned an average of 8.7 percent of each allocation in fees with the typical range between 4 and 16 percent.

In 2013, John Kownack, then the head of HRV, but also an NRHA executive, told Inside Business that by administering $45 million in allocations, HRV could net $1.2 million, money that would benefit NRHA. “We had nine projects that we identified in our application and with every transaction HRV will make money,” he said.

Once projects are funded, they take seven years to fully mature while throwing off fees annually. HRV’s tax allocations by 2014 totaled $260 million (they now total $360 million). If the corporation earned average fees, the payout could have been more than $20 million by this year although those fees would also be used to cover expenses for lawyers, auditors and consultants.

New markets tax credits deals vary widely and often require significant legal and auditing expenditures. If there are reasons for HRV’s financial results, NRHA and HRV officials aren’t explaining. 

One answer to how much HRV has earned came in an October 2016 letter from then-Norfolk Redevelopment and Housing Authority chair Barbara Hamm Lee, obtained through a records request. In the letter, Hamm Lee noted that HRV had $2.3 million available for distribution to NRHA representing “the cumulative outcome of HRV’s operations since its inception.” 



That year, by contrast, a one-page sheet in NRHA’s budget showed HRV had $7.2 million in reserve. It’s not clear from the letter why only $2.3 million was available to the authority.

An email, also obtained through a records request, revealed that HRV made an initial payment to NRHA of $100,000 in 2017. With subsequent payments, the total transferred to NRHA has been $1.3 million, a million dollars less than Hamm Lee was told was available five years ago and nearly $6 million less than the reserves. 




The $1.3 million HRV transferred to NRHA was used for a variety of programs including adult workforce development, community improvements (repairs to buildings), community engagement and youth services like summer enrichment programs. This summer, the housing authority requested another $700,000.

While those expenditures filled gaps in NRHA programs, they did not invest in projects that brought housing or businesses that would increase employment and spur private development in distressed areas of Norfolk, a goal of the New Markets Tax Credits program. 

How much oversight the housing authority exercises over HRV remains unclear because the one-page HRV summaries in the annual NRHA budget can be inconsistent. They list revenue and expense figures for the three most recent years as well as the proposed budget for the upcoming year. But some pages report different figures for the same year without explanation. The fiscal year 2021 budget, for example, shows HRV with a deficit of $599,665 for calendar year 2018. But the fiscal year 2022 budget shows a deficit of only $123,383 for 2018. Why was there an adjustment of more than $400,000?

Neither NRHA nor HRV officials are explaining.

HRV’s profits over 10 years, according to those summaries, amounted to more than $6.7 million. Expenses listed under salaries and benefits alone were $2.48 million during that time, nearly double what it transferred to NRHA. Legal fees over those 10 years totaled $1.69 million. 

HRV’s costs for salaries and benefits have been rising from $288,567 in 2018 to $532,000 budgeted for 2021. The corporation’s website showed a staff of four for most of this year, including a CEO, an executive assistant, a portfolio manager and Kownack, NRHA’s former executive director who was listed as director of business development until he departed on Nov. 1. 

The corporation’s reserves were $8.5 million in 2020, according to an audit NRHA supplied in response to a records request. That’s a rise from $4.4 million reported for the calendar year 2011. Profits in 2018 and 2019 were $496,001 and $551,233, respectively. In their annual reports, NRHA’s auditors say they receive statements from Hampton Roads, but do not audit the company. 

‘A little unusual’ 

NRHA created Hampton Roads Ventures as a for-profit corporation in 2003 with the housing authority’s commissioners as the “governing body.

But the first year that summaries of HRV’s finances appear is in a June 2012 document. NRHA reported that it could not find a similar page for the 2011 budget. Copies of NRHA budgets for 2010, 2009 and 2008 reviewed in an online archive make no mention of HRV. (NRHA removed all but recent budgets from its website during a redesign this summer). 

Hampton Roads Ventures, through Carnes, its attorney, refused to voluntarily release its financial records. Public records requests about Hampton Roads Ventures to the U.S. Treasury Department are pending. The U.S. Department of Housing and Urban Development, in response to a records request, said it did not have any audits for any years that Hampton Roads Ventures has been active. 

Michael Gerber, the interim chief executive officer of the National Association of Housing and Redevelopment Officials and the CEO of the Housing Authority of Austin, Texas, said housing authorities are looking for ways to do more with less and trying to tap the profit power of community development entities might be one. 

Are there other housing authorities using for-profit community development entities in an attempt to create new funding streams? Gerber wasn’t sure. His authority in Austin is not, although it has created nonprofit subsidiaries like the Austin Affordable Housing Corporation to create and manage affordable housing in the city. In Texas, he added, state law dictates that housing authorities can only create nonprofit subsidiaries whose finances are public. 

“My guess is that it’s (Hampton Roads Ventures) a little more unusual, but I haven’t surveyed the different projects that have used new markets tax credits,” he said. 

Housing authorities that have created community development entities (CDEs) like HRV typically overlap staff. But HRV appears to be unusual because in years past it has paid NRHA staff separately for their work. 

The community development entities for the Pennsylvania Housing Finance Authority, the city of Chicago and the Virginia Community Development Corporation, for instance, are staffers for their parent organizations (although the VCDC subsidiary recently hired an employee to handle paperwork). They are not paid separately or extra for that work. The Chicago Development Fund shows salaries paid as zero on its most recent tax return. 

At NRHA, that’s not been the case. In a letter responding to a public records request, Carnes said NRHA employees working for HRV were paid separately. No public funds, she added, were used to pay to anyone who worked for HRV. “Any NRHA employee who provided services to HRV was compensated for those services by HRV, not by NRHA,” she wrote.

Carnes herself works for both entities. NRHA’s current contract with her, obtained through a records request, is for $750,000 over two years, including a monthly retainer of $9,975 and an hourly partner’s rate of $335. An amendment to the contract signed this year provides for an additional $1.5 million to cover additional outside counsel handling the lawsuit seeking a new relocation plan for the St. Paul’s area, where NRHA is moving residents to create a mixed-use development. Carnes has also worked for housing authorities in Chesapeake, Suffolk and Franklin. How much she has earned from HRV over the years is not known. 

NRHA employees collect two paychecks

The overlap between NRHA and HRV began at the outset. Robert Jenkins, HRV’s first head, was also an NRHA employee from 2000 until he left in 2008. Jenkins earned $131,000 his last full year at NRHA. He left Hampton Roads Ventures in 2011. When he departed, NRHA issued a press release praising his work for HRV. 

Jenkins, a lawyer, had been fired in 1994 from his first job in public housing after one year as director of Washington D.C.’s Department of Public and Assisted Housing over his performance

A 2003 Norfolk Redevelopment and Housing Authority article on the first new markets tax allocation said Stephen Blair, NRHA’s programs planning manager at the time, was also operations manager of HRV and “now spends most of his hours handling the myriad details that go into NMTC administration.”

When Jenkins left, John Kownack, then NRHA’s chief housing reinvention officer, took over as head of Hampton Roads Ventures, working both jobs. Kownack remained on staff when Jennifer Donohue became HRV’s CEO. He retired from NRHA in 2020, but stayed as an employee of HRV. Carnes, answering a request for an interview with him, said he left the company on Nov. 1.  

In October 2019, the HRV website listed three staffersDonohue, Kownack, who was still NRHA’s executive director earning more than $150,000, and an executive assistant (there was also a five-member advisory board). The NRHA budget sheets show costs for salaries and benefits for 2019 were $337,661. 

How much did Kownack and Jenkins get paid by HRV in addition to their NRHA salaries? 

There’s no way to know. NRHA, in response to a records request, said it does not require employees to file conflict of interest statements, which would have revealed the payments.  

The mystery of the management fees

In response to a records request for transfers of funds from the housing authority to Hampton Roads Ventures, NRHA issued a page showing payments from HRV for “Hampton Roads Ventures Management” ranging from $1,666 to $360,157 annually from 2006 to 2020. They total $1.35 million. The sheet also listed transfers for “HRV Management Fee” paid to NRHA for $30,000 annually from 2008 through 2019 totaling $360,000.



Why would HRV be paying a “management fee” to NRHA if the housing authority has no control? NRHA offered no answers. When an NRHA spokesperson was asked for details about those transfers, Carnes replied by email, saying the Freedom of Information Act does not cover explanations.  “NRHA is not required to address your request for an explanation or clarification regarding the data provided,” she wrote.

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Jim Morrison
Jim Morrison

Jim Morrison has been a freelance writer since 1990. His stories have appeared in Smithsonian, The New York Times, The Washington Post, Wired, and many other outlets. He won the 2021 Excellence in Reporting award from the American Society of Journalists and Authors and was a finalist for best feature story in the 2021 Covering Climate Now Awards administered by the Columbia Journalism Review. Prior to freelancing, he was a staff writer at The Virginian-Pilot. He lives in Norfolk. Contact him at [email protected].