Housing Santa Cruz County should disclose its ties to Workbench: the public deserves transparency

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Santa Cruz County is the least affordable place to live in America, according to the National Low Income Housing Coalition. 

That’s one reason Housing Santa Cruz County (HSCC) has become such an influential organization. It led the campaign for Measure C, the affordable housing ballot measure approved by City of Santa Cruz voters this year. Its endorsements carry weight with elected officials. When HSCC asks residents to attend public meetings or support a housing project, many people listen. 

Most residents probably assume HSCC is an independent nonprofit advocate for affordable housing. 

I did too.

Then I started reading tax filings, annual reports, and public records.

What I found was a web of financial, leadership and governance connections that most residents have likely never heard about.

The biggest surprise was this: Housing Santa Cruz County is not actually a separate nonprofit. It operates as a fiscally sponsored program of New Way Homes, a 501(c)(3) tax-exempt charity. As a result, HSCC’s two-person staff, Elaine Johnson (executive director) and Karen Menehan (communications and operations manager) are employees of New Way Homes, which handles payroll, bookkeeping, insurance and legal compliance. 

New Way Homes works with community partners to build affordable and supportive housing. Instead of relying only on government grants, it raises money from local organizations, employers, foundations and community members.

On its own, there is nothing improper about a fiscal sponsorship. Many small nonprofits have one to reduce administrative costs. After I contacted New Way Homes President Sibley Simon, he explained that the arrangement allows HSCC to focus on advocacy while New Way Homes handles the back-office work.

HSCC’s relationship to New Way Homes, though, isn’t the only question here.

New Way Homes is also closely connected to two for-profit housing companies: Workbench and Envision Housing.

Simon serves as president of New Way Homes, principal at Workbench, and managing director of Envision Housing. Workbench and Envision “joined forces” in 2021 to address the affordable housing crisis. New Way Homes states that the housing projects it currently finances are managed by the Envision team at Workbench. Simon also serves on HSCC’s advisory board.

In other words, the county’s best-known affordable housing advocate, the nonprofit lender NWH and the companies involved in developing many housing projects are connected through the same leadership network.

That does not mean anyone is doing anything wrong.

It does, however, make transparency especially important.

Understanding who is connected to whom is only part of the story. The money matters, too. 

New Way Homes takes in low-interest loans and grants from institutions like Dignity Health, the Central California Alliance for Health, the U.S. Department of Housing and Urban Development and Santa Cruz County. It then loans that money out — to entities that do business with Workbench and Envision. 

Many readers may be familiar with the development at 841 Capitola Road, advanced through a “builder’s remedy” filing. It will contain 54 market-rate units, one very-low-income unit, and three extremely-low-income apartments. 

Simon told me he has never been paid for these ownership stakes, which he says are often temporary — he holds risk by guaranteeing the loans, then transfers projects at cost once they clear the predevelopment stage, where many stall. He pointed to Harvey West Studios, now owned by Housing Matters, as an example.

His explanation was thoughtful and deserves consideration.

Affordable housing development is extraordinarily difficult. Projects often spend years seeking financing, approvals and partners before construction ever begins. Creative organizational structures may help make projects possible that otherwise would never be built.

But another question follows: how much are the people at Workbench and Envision paid on projects New Way Homes funds — in fees, ownership interests or other returns?

I asked how much affiliated companies earn from projects financed by New Way Homes and what safeguards exist to ensure those arrangements serve the nonprofit’s mission. Simon said New Way Homes receives the “net benefit” of those transactions and that Workbench discounts some of its services. I could not find evidence of an independent committee responsible for reviewing those transactions. I would still like to see more details about how much Workbench and Envision are paid for those projects, and how those arrangements are reviewed by the board at New Way Homes. 

And I still have questions about Housing Santa Cruz County. 

When an advocacy organization encourages residents to support a project, or asks for tax-deductible donations, the public should understand the relationships among the organizations involved. 

When residents are deciding whether to support a project, they deserve to know whether the organization asking for their support is connected to those financing or developing that project. 

Earlier this year, HSCC urged residents to attend a county supervisors meeting in support of 841 Capitola, without, as far as I could determine, disclosing the organizational relationships between HSCC, New Way Homes, and companies involved in the project. I asked whether HSCC publicly discloses its organizational relationship with New Way Homes when advocating for projects connected to that network. I did not receive a direct answer. 

I asked whether there are written records showing when Simon recuses himself from HSCC discussions involving projects connected to New Way Homes, Workbench or Envision Housing.

Simon told me he is required to recuse himself from those discussions, but did not believe formal meeting notes exist documenting those recusals.

I also asked if HSCC has considered governance changes to strengthen organizational independence or address actual or perceived conflicts of interest.

No reply. 

I sent detailed questions to Johnson, HSCC’s executive director, and to Simon, who is president of New Way Homes, asking that my questions also be shared with the boards of both organizations. None of the board members have emails listed on the website. I also sent the questions to HSCC’s general staff email, requesting that they be forwarded to the HSCC board, including Board President Elisa Orona, and I reached out to Orona directly on LinkedIn. 

Eight days later, Simon is the only person who has responded. 

Those unanswered questions affect public trust.

Without a doubt, Simon has done real good for the community as a social entrepreneur. 

Overlapping boards, related-party loans, and advocacy roles folded into lending organizations are common across the U.S.  When the federal government starves public housing of money for more than 40 years, it grows structures like these to survive. They are creative, complicated, hard to follow, built by people improvising against impossible math. I believe many of them are working in good faith on a crisis the government walked away from.

Good intentions, though, are not a substitute for transparent governance. As Housing Santa Cruz County’s influence grows, so should the public’s ability to see how it’s connected to the organizations financing and building the projects it champions.

After weeks of reading public records, here is what I still can’t tell you.

I can’t tell you how much Workbench and Envision are paid to build the projects funded by the public charity New Way Homes. I can’t tell you whether HSCC notifies the public when it asks people to support a project that its own network could benefit from if the project is built. I can’t tell you whether New Way Homes provides additional financial support for HSCC beyond the grants and donations designated for its work. And I can’t tell you what the conflict of interest policy is or whether anyone writes down when a conflict of interest is supposed to be set aside at HSCC board meetings.

These are simple questions. The organizations could answer them this week. I asked eight days ago. So far, only one person has answered anything at all.

Kevin Norton is a renter who lives in Santa Cruz and has a background in public health. He welcomes your feedback and suggestions at healthysantacruz@gmail.com.