Durango pulls emergency brake on sale of city-owned townhome (2024)

Housing innovation manager resigns after failing to disclose potential conflict of interest

A townhome purchased by the city of Durango for resale as a below-market rate, deed-restricted workforce housing unit is about to be taken off the market.

Despite a prospective buyer’s readiness to purchase the unit from the city for $399,999 in mid-July, the city is pulling an emergency brake on the sale, with Durango City Council scheduled to formally vote on the matter on Tuesday.

The townhome, unit 501 at the Animas City Park Overlook Townhomes on East 33rd Street adjacent to Animas City Park, was purchased by the city in April from developer Agave Group for $547,000.

The city’s intent in buying the townhome was to resell it at a below-market price as part of its ongoing efforts to increase its workforce housing supply, Eva Henson, former housing innovation manager for the city, said in April.

But Henson submitted her resignation to the city on Sunday.

City Manager José Madrigal said Henson submitted her resignation letter after she was questioned about a previously undisclosed workplace relationship between two city employees. She oversaw one of the employees in the housing division; the other employee, a member of the Durango Capital Improvements Project division, was the prospective buyer of the townhome.

Madrigal said he was made aware of the workplace relationship on June 12.

The relationship itself is not problematic, he said. The employee working under Henson told her about the relationship. But Henson’s failure to disclose that information to City Council, city attorney’s office, director of the Community Development Department or Madrigal himself, was an issue, said Madrigal said.

Henson’s failure to disclose the workplace relationship, combined with the timing of the city’s receipt of the homebuyer application, created the appearance of a conflict of interest, he said.

When Henson learned of the workplace relationship, she didn’t notify anybody else within the city about it because she didn’t think it was problematic, Madrigal said. Her reasoning was the employees were not living together.

“And so (Henson) just kind of said, ‘All right, I’m going to hold on to this and we’re going to move forward with it.’ So that’s a lot of flags for us,” Madrigal said.

The city of Durango’s 2024 employee handbook says employees shall disclose any personal relationships to their department directors “in any instance where there could be the appearance of a conflict of interest.”

The handbook lists an example of an employee’s spouse working for a developer doing business with the city.

Madrigal said even the appearance of impropriety can muster heavy scrutiny from the community the city serves.

“It just does not pass, I think, the test of fairness and equity within our system in our process,” he said.

Additionally, the timing of the employees’ application to purchase the townhome, and the fact that application was the only one out of five received that was fully completed, was “fishy” and raised eyebrows, Madrigal said.

He said there is no “smoking gun” – an email or any other evidence – thus far that suggests anyone conspired to prioritize the city employee’s homebuyer application over other applicants. But the circ*mstances are too suspect to be ignored and should not have gotten this far, he said.

HomesFund, a mortgage assistance nonprofit serving first-time homebuyers in Durango, screened the applications for purchasing the townhome and forwarded them to the city.

Durango Community Development Director Scott Shine said HomesFund first announced the townhome’s entrance on the market to a group of prospective homebuyers who were on various waitlists on April 25. Between then and May 11, 93 households or prospective applicants were notified of the townhome being made available for purchase.

Despite the large pool of potential applicants, just five applications were forwarded from HomesFund to the city, Madrigal said.

Wait-listed homebuyers should have had more time to submit their applications, he said, and there should have been a randomized selection process or a fairer system for awarding first dibs on the townhome.

Of the five applications received, only the Capital Improvements Project management division employee’s application was fully completed and ready to be approved. The day the city received the application May 11, the employee disclosed the relationship to Henson.

The city is required to pass an ordinance for any sale of city-owned property. It held a public hearing for the sale of the townhome on June 4, and City Council supported the transaction in a first reading. That was before city officials were made aware of the buyer’s employment with the city and his or her workplace relationship.

“Had we known … there’s only one applicant – it was somebody that was in a dating relationship and a city employee – we would have definitely put the stop on it before we even got to the Council,” Madrigal said. “And I can’t speak for the council, but I’m pretty sure they probably wouldn’t have approved that because it just doesn’t seem like that was a fair and open process.”

The city has policies about workplace relationships when they involve one person holding authority over another, Madrigal said. But otherwise, the city tries to stay out of its employees’ private lives.

“We probably need to … strengthen our policies and processes if there is a dating relationship or a personal relationship between two employees,” he said. “It has to be disclosed in anything that could even have the appearance of a conflict of interest.”

Workplace relationship disclosures aside, Madrigal said the city must also rethink how it announces, evaluates and times property sales to ensure all residents have equal and ample opportunity to make their bids.

Shine, the director of Durango Community Development, said he is still processing what played out, but the fiasco is an important reminder the city and its staff members are charged with conducting “robust and open” processes.

“Public employees need to accept that we have a higher standard and be ready to live up to (it). So it’s just reminders on all those things, and then really being diligent about being open and defining procedures,” he said.

Henson’s hiring by the city was announced in January 2022.

Her resignation might come as a gut-check to the city. Area economic development and housing experts have lauded her work on expanding the variety of housing options Durango has to offer.

She was praised at an October groundbreaking for a project repurposing a former Best Western Inn & Suites on U.S. Highway 160 in west Durango into low-income housing for residents earning 60% annual area median income or less.

She has been complimented at Durango Chamber of Commerce Eggs & Issues breakfasts and seminars, received shout outs by area housing officials and residents in public comments during City Council meetings, and has generally received positive feedback at public meetings for her approach to housing solutions.

Attempts to reach Henson on Thursday were not immediately successful.

Madrigal said Michael French, former director of the La Plata Economic Development Alliance, has been contracted by the city to serve as a housing and tourism officer.

“He will be coming in under contract to help us with housing and then also help us with our tourism,” he said. “... Working with Visit Durango to kind of find a structure moving forward.”

Visit Durango, the area tourism office, also fell under public and city scrutiny recently when questions arose about its spending priorities with city-allocated lodgers tax funds.

cburney@durangoherald.com