Contractor walks away from city rehab deal

PHOTOGRAPHER: Kathleen Moore

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The first contractor to sign up for the new contractor-rehab program has given up, the city’s building inspector said.

Gary Pappas stopped working on 14 Myers Alley and walked away without ever signing the contract the City Council approved in December.

He also never paid the $10,000 sale price he agreed to pay for the house.

But the city didn’t have to pay Pappas for his work — the program calls for contractors to get paid only when they sell the building after they finish it.

Pappas could not be reached for comment. Building Inspector Eric Shilling said he has already interviewed a contractor who is willing to step in and finish the job.

Usually, the city would not sell a house to a contractor through the rehab program, since the house is supposed to be sold to a third party after it is renovated. But Pappas wanted to keep the Myers Alley house, so the council agreed to a different deal in which he was to pay $10,000.

Shortly after council members voted to accept that deal, they were emailed by various people who knew Pappas in Colorado, where he had been convicted of embezzling from his failing auto parts business in 1999. Pappas had not disclosed his criminal history.

At the same time, council members learned that Pappas had never produced proof of financing for his proposed $75,000 renovation project, and that his resume was so outdated that the references’ phone numbers no longer worked.

Councilman Vince Riggi criticized the way in which Pappas was chosen to be the first contractor in the program, saying City Hall should have vetted the man more carefully.

Pappas then quit, but Shilling persuaded him to keep working. Now, he’s quit for good, Shilling said.

He said Pappas was offered other construction jobs and was annoyed by how long it took to get a sale contract from the city.

Shilling said the city’s Legal Department was simply overworked. But Mayor Gary McCarthy said negotiations between the city and Pappas dragged on, with each side rejecting each other’s drafts. The contract was supposed to include construction deadlines and a list of code-related items that had to be done, each of which had to be defined and described in ways that satisfied both the contractor and the city.

“These require almost as much negotiation as a $5 million deal,” McCarthy said.

While the contract was being renegotiated, Pappas began to work on the building. He gutted it, removing an estimated $100 to $200 in scrap metal as well as the entire interior of the building.

McCarthy said the city didn’t take much of a loss since the scrap metal is worth so little.

“The city’s coming out ahead in it,” he said. “The building’s worth more now.”

Councilman Carl Erikson agreed. “The fact that he gutted it and we didn’t have to pay for it, to me shows the value of the program,” he said. “Some people weren’t confident he’d be the guy who could pull it off. We said, ‘Hey, let’s give him a shot.’ ”

But Riggi said the council should have been told that Pappas never paid the $10,000.

“Why weren’t be apprised of this situation?” he said. “Nothing was said.”

He said he wasn’t surprised to learn that Pappas had quit.

“My fears were substantiated,” he said.

Erikson also said the council should have been notified about the contract difficulties and Pappas’ decision to quit.

Erikson said the “challenging” property was too much for Pappas, but would be well within the abilities of an established contractor. Still, he had no regrets in letting Pappas try.

“We didn’t lose anything. If we didn’t do the program, the building would still be infested with garbage,” he said. “The city didn’t take a hit. We are a step ahead.”

The next step is to rebuild. The next contractor will take on that job, and then sell the building to pay for the work.

Shilling said that contractor would benefit from not having to gut the building first.

“The next contractor gets a massive benefit,” he said. “Now the quote-unquote ‘easy’ part can commence.”

The new contractor should be chosen in the next two weeks, he added. He expects that there is about 60 days of work remaining at the building.

Another house sold through the contractor system is doing far better. The city finalized its sale for 1108 Albany St. without protracted negotiations and the contractor is nearly done with construction, Shilling said.

“The work is well under way,” he said.