Lawsuit alleges excessive enforcement of housing authority law

Michael McLaughlin, the former director of the Chelsea, Mass. Housing Authority. AP file photo
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BOSTON — Brian Costello retired in July at the age of 63 from the Watertown Housing Authority. He had spent 36 years of his life working there, and had hoped to stay on a few more years as executive director.

Costello, however, was ineligible to receive even a cost-of-living adjustment under the Department of Housing and Community Development’s guidelines for executive director pay. That meant that for every additional year he worked, his pension benefit would decrease.

So, Costello left. And now he’s one of two former directors, three current directors and seven local housing authorities suing the DHCD for what some are describing as an “overreaction” to an almost decade-old scandal at the Chelsea Housing Authority.

The local housing authorities and past and present officials from Fairhaven, Lawrence, Medford, Nantucket, Provincetown, Stoneham, Sudbury, and Watertown joined with the Massachusetts chapter of the National Association of Housing and Redevelopment Officials to file a lawsuit Thursday in Suffolk Superior Court.

The suit asks a judge to strike down DHCD’s salary guidelines and enforcement practices as an excessive use of the power granted by the Legislature under a 2014 reform law to review and approve contracts for executive directors of local housing authorities.

The challenge to DHCD’s authority comes more than eight years after former Chelsea Housing Authority director Mike McLaughlin stained the profession of public housing administration by illegally concealing from the state an exorbitant $360,000 salary, which made him among the highest paid public housing officials in the country.

McLaughlin, who at the time was politically well connected on Beacon Hill, had only been reporting $160,000 in salary to the state. And after then-Gov. Deval Patrick demanded McLaughlin’s resignation, McLaughlin tried to walk out of his job with $200,000 in payouts for unused vacation and other benefits. McLaughlin was sentenced to three years in federal prison.

McLaughlin is a Dracut resident who previously led the Lowell Housing Authority and worked in the Dracut School Department as an administrator.

The plaintiffs say the rebalancing of the scales after the McLaughlin scandal has tipped too far in the other direction, resulting in the “unlawful usurpation of local authority and control” that is hurting communities and people like Costello.

“It impacted me, but I don’t want it to impact future executive directors,” Costello told the News Service from a construction trailer in Cohasset, where he is now the clerk on a construction project for special needs housing. “This whole lawsuit is not about me or executive directors. It’s about local control of housing authorities.”

Costello’s salary had been frozen for more than two years at $115,902. Even while his employees received cost-of-living adjustments, Costello remained ineligible based on DHCD’s enforcement of its salary guidelines, which are based on a housing authority’s size.

So Costello retired earlier than he had planned, taking with him decades of experience.

“Every community is different. Watertown is different from Waltham. Lawrence is different from Andover. Cohasset is different from Norwell. And what DHCD has tried to do is cookie cutter the thing without any deviation from their guidelines,” he said.

After McLaughlin’s behavior was disclosed, Gov. Patrick moved to cap executive director pay at $160,000 and filed legislation that would have regionalized the administration of public housing, which is currently handled by locally elected boards. The Legislature did not go along with Patrick’s regionalization plan, but passed a reform law that gave DHCD the authority to review all executive director contracts.

The law also directed DHCD to issue contract guidelines, and extended the authority to “strike contract provisions that do not conform to the guidelines.”

Michele Randazzo, the Boston attorney representing the housing authorities, says DHCD’s interpretation of that statute has strayed too far from what she believes was the Legislature’s intent. She points out in the complaint that the Legislature did not touch the section of state law that has long given local housing boards the authority to hire and establish the term of employment of their executive directors.

Randazzo and the housing directors said that they have been trying for several years to resolve their differences with DHCD informally, but have been unable to reach a compromise.

Randazzo also said there is a question about whether DHCD’s authority only extends to state money used to pay executive directors, or if they can also disapprove compensation paid with federal funds provided through the U.S. Department of Housing and Urban Development.

To enforce their guidelines for director contracts, the suing housing authorities state that DHCD refuses to approve budgets if executive director contracts contain language that strays from their contract guidelines.

The department, according to Randazzo, will not approve any contract that contains longevity pay or deviates from its template for benefits, such as carryover and payouts for unused vacation. The department, she said, has also determined that executives directors cannot receive any benefit that is not offered to unionized state employees through their collectively bargained contracts.

The department also has strict guidelines, according to the lawsuit, for how many hours an executive director can work based on how many units the authority manages. The plaintiffs argue that no allowances are made for the fact that it can be more time-consuming to manage family housing versus senior housing, or that some communities have different population challenges, more dispersed units or other unique characteristics.

The limits don’t just impact annual salaries, according to Randazzo, but at smaller housing authorities they can determine whether a director qualifies for health insurance through the Group Insurance Commission or to participate in the state pension system based on the hours they work.

A spokesman for DHCD did not have an immediate response Thursday morning when asked about the lawsuit after it had been filed and sent to the department by the plaintiffs.

The full list of plaintiffs includes the housing authorities in Fairhaven, Lawrence, Medford, Nantucket, Provincetown, Stoneham and Sudbury, Nantucket Housing Authority Director Renee Ceely, Provinceton director Kristin Hatch, Lawrence director Efrain Rolon, former Stoneham director Sharon Wilkins, Costello and NAHRO.

Costello said he has great respect for DHCD, and was able to accomplish much with the help of the department over his 36-year career in Watertown. But he also lived through the McLaughlin scandal and acknowledged that it put a lot of pressure on people in positions like his.

“I do think this has been an overreaction to that,” Costello said. “Its kind of like a little family squabble, and unfortunately we had to resort to the courts.”