An Anchorage-based soup kitchen made big profits during the pandemic, courtesy of city contracts financed by federal taxpayers. This included the city’s officials claim to have received several hundred thousand dollars worth of compensation for services that the organization didn’t provide.
However, the city’s efforts to settle that dispute in the billing process seem to be in a rut the investigation of Alaska Public Media and APM Reports has revealed.
Bean’s Cafe, a nonprofit that received more than 15 million dollars in city contracts to run and provide meals at a massive temporary shelter for homeless people in an indoor hockey stadium of the municipal government in the midst of the pandemic.
Bean’s company, which was previously as a break-even business, picked more than $10 million in profits between the years of fiscal 2020 and 2022, based on an examination of its tax filings as well as financial reports. This money later enabled it to establish a new food service and warehouse to serve those in need.
Although the shelter saw growth in donations, grants from the government and a federal pay protection program loan which was paid back, its agreements with Anchorage were the most significant factor behind the cash flow. The revelations of the huge amounts that were poured into the shelter in a time where the city is pondering how to fund the long term solutions needed to address its ongoing homelessness problem.
The controversy surrounding the contract for shelters raises doubts regarding the city’s management of federal funds in the role of mayor Dave Bronson and two predecessors who’s administrations have repeatedly prolonged Bean’s contracts. The story also reveals a degree of partisanship and huge financial stakes for the city’s approach to homelessness that have not been disclosed previously.
Bronson who campaigned on the promise of addressing the homelessness crisis in the city and fired the city employee who expressed concerns about charges of Bean’s Cafe’s contract to manage the shelter. This action, cited in the scathing letter publicized earlier this year by the attorney representing former municipal manager Amy Demboski, was part of the what Demboski claimed was a wider series of “illegal and unprofessional actions” during the Bronson administration during the first 18 months in the office.
A representative from the Bronson’s office did not respond to the claims and did not provide a reason as to why it took so time to settle the dispute over billing with Bean’s. The spokesperson also refused to disclose the exact amount of money at in the dispute.
” Municipality officials and Bean’s Cafe continue to discuss the matter of paying for services provided in the Sullivan Arena,” the spokesperson, Hans Rodvik, wrote in an email.
Bean’s top official didn’t offer any details on the current state of negotiations.
“We offered the services, and we’ve been paid, and completely content,” Lisa Sauder, the organization’s chief executive officer, stated during an interview. “I’m satisfied with the work we, along with all our participants at the (city) completed in that period.”
She also said that “nothing’s flawless.”
Big bills empty beds
At the beginning of spring 2021 an Anchorage city employee in charge of Bean’s contract was struck by something odd the company’s monthly charges to the city did not seem to be adding up.
Shawn Hays, who was the city’s mass-care branch director, was confident to see that Sullivan Arena shelter’s cost would fall as winter wore out and people began to stay outside.
Instead, Hays said, Bean’s claimed that the shelter remained almost completely.
It was a huge sum of risk of losing money. Bean’s earned at a rate per day of $40.79 per customer. In the event that all of their beds were used this would amount to more than $16,000 daily in addition to payments for other services like security staff, equipment as well as laundry detergent.
In the early hours of one the morning Hays determined to take a count of shelter inhabitants. Then she found out that less than half of the arena’s cots were in use.
Hays addressed the issue with Bean’s, however Bean’s denied in any way violating the law in accordance with the city’s document that summarizes Bean’s responses. Bean’s explained that they recorded residents for 24 hours, not at one particular date and the time. The majority of customers had to check in on a daily basis to keep their rooms however they were not required to sleep in the premises in accordance with the contract.
In a follow-up letter in a subsequent letter to Bean’s Hays declared the response “sufficient,” noting that she had “seen an improvement” in the number of people Bean’s was releasing. The number of shelter clients Bean’s had reported decreased by nine percent after she voiced concerns.
However, Hays was also unsure regarding staffing levels, missing information and the reporting of police calls, as per the city’s communications with Bean’s made public as a result of the public records request.
In one instance, Hays wrote that a Bean’s executive acknowledged that the company was shutting down an internal security program by the end the month of March in 2021. The nonprofit was able to charge the city $130,000 for security during May and April as per the correspondence.
After months of lengthy legal letters from Bean’s lawyers Bean’s eventually submitted documentation for the City proving that Hays doubts over the security fees were justifiable.
The records showed that it was billing the city for more security personnel than the staff it actually employed.
“What company was completely employed in COVID?” Sauder asked in an interview. “There was no industry that was fully staffed.”
But Bean’s analysis suggested the issue wasn’t as significant as the city had claimed. Bean submitted an audit internally which revealed that it had billed the city for approximately $110,000 worth of security work it did not provide more than half of what the city estimates.
The battle raged for a number of months, growing to the point where city stopped paying $817,000 in the amount Bean’s claimed it owed. Bean’s’ lawyer also threatened with suing the city in order to make it pay.
Bean hasn’t ever filed the suit But he’s never filed the suit. Even after the two parties appointed a mediator over one year ago, the Bronson administration has said it’s trying to negotiate a settlement.
Rodvik the mayor’s spokesperson has not released details on what the city’s plans are for attempting to settle the issue.
At the time of this writing the municipal attorney assistant assigned to the case had not communicated with Bean’s attorneys in more than one year, as per an examination of the email records obtained through the public records request.
from break-even point to the bonanza
Bean’s Cafe has been serving Anchorage residents who are homeless since 1979. Anchorage in need since.
Prior to the outbreak was discovered, the organization operated a smaller temporary shelter for homeless people during winter. However, its main business was an emergency soup kitchen, which served food for those in dire need. Anchorage residents.
As the threat of a coronavirus outbreak loomed and city officials realised they required more public shelters to ensure guests’ security, given that the virus can spread easily in close proximity.
They chose Sullivan Arena — a 100,000 square-foot, heavily-used, city-owned indoor rink as well as an location for gatherings — when sought Bean’s Cafe to operate it. (The city also enlisted Bean’s to manage an additional rink, adjacent to, Ben Boeke Arena, for use as a refuge during initial season of pandemic prior to when operations were integrated at Sullivan Arena.)
Since the city decided that there were no other suppliers, it hired Bean’s without any competitive bidding procedure by amending an existing contract to cover the bigger arenas’ shelters.
The expense was hefty The maximum amount per month paid by Bean increased by more than tenfold up to $889,999 instead of $74,000 however, the number of clients they could serve grew by much less, up to 480 instead of 150. The bill would eventually be subsidized by the federal government.
“I recognize that it’s an amount of money however it was actually as if you were on another world,” said Robin Ward who was an official of the town’s real estate department. He also assisted in the negotiation of the contract. “We weren’t aware of the risks we were taking but they definitely didn’t. The risk was very high.”
Ward stated that the arena for hockey was the “vastly different setting” in comparison to the smaller facility Bean’s operated prior to that, and required a more extensive personnel. Sauder stated that the company grew from 47 to 197 workers within just 1 month and a 1/2.
“No one could predict what was to take place within the coming 30 days or 60 days, let alone 3 years,”” Sauder said.
Bean’s accounts reveal that the contract was completed.
In the past decade, Bean’s annual revenue was around $3 million. At times, Bean’s was able to post a modest surplus, and sometimes it was it was in deficit, but the revenue generally was in line with expenses in the prior years to the outbreak as its tax forms reveal.
When the Sullivan shelter in 2020, Bean’s earnings increased by more than doubling up to $7 million. By 2021 they grew to nearly $14 million, largely driven by the city contract, then slowed to $9.5 million by 2022.
Bean’s expenses grew at much lower rate in the time. The result was that the company made an income of $9.8 million over its three fiscal years, which ended June 2022, the financial statements and tax forms demonstrate. The main driver behind those gains was the city contracts.
Other programs of the federal government also contributed to Bean’s bottom line, such as over $2 million of federal grant revenue during the fiscal year 2022 as well as more than $500,000 in the federal program to protect paychecks loan, which was repaid in fiscal year 2021.
Sauder acknowledged that the contract was gave Bean more than what it would have cost to run the shelter. However, she justified it by pointing out that the shelter was facing issues when it launched a huge new shelter in the midst of the pandemic.
“Our group, as an independent, grassroots group was able to take on a huge danger,” she said.
The money from the contract increased Bean’s financial reserves Sauder stated, and also contributed to the financing of the $7 million cost of the construction and renovation of an massive industrial kitchen as well as a warehouse that the company currently uses to prepare daily 5,000 meals.
“That’s the beauty of the nonprofit sector,” Sauder said. “We invested back to the community, and to our initiatives.”
Although Bean’s earnings have increased significantly however, her salary of $123,000 is roughly at the same amount since she was hired 10 years ago.
Sauder was paid a commission of $5,000 and $4,000 around when the shelter contract was set to come to its end in 2021, according to her testimony in her divorce proceedings in the year prior.
The bidding war
Hays is now convinced that her decision to contest Bean’s Cafe set off a sequence of events that culminated in Bronson dismissing her.
It all began according to Hays in her attempt to make Bean’s contract open to bidding on a competitive basis at the end of summer 2021. Before Bronson’s time the city had extended Bean’s contract by more than dozen times without a bidding process that was competitive.
“I wanted to know whether there were other responsible bidders, those that we could collaborate with in a way that was transparent in a ethical manner,” Hays said.
She was hoping that an organization such as that of the Salvation Army or Catholic Social Services could be able to assume the task. However, when bidding ended there were only two companies competing: Bean’s and a brand new business for profit, only one year old named 99 Plus 1.
Hays who was an alternate on the panel that analyzed the bids, stated that just as the panel was about for the announcement of the winning bid she bumped into the Dr. John Morris, the chief homelessness advisor for the mayor in the moment, in the City Hall elevators.
Hays was able to recall the time when Morris who wasn’t part in the group, informed Hays the panel that it “would be the worst” that Bean’s did not stay as the operator of the shelter.
And Hays added that Morris suggested that she was in a conflict of interest since she previously worked at Bean’s Cafe.
“‘You know the problem you can see the issue, don’t you?” she recalls his words. “‘You worked for them. Now they are working for you. You have power over them that can cause them to be destroyed.'” The message of the conversation was very clear, Hays said: She should ensure that the panel grants the shelter administration contract Bean’s again.
“I believed that was a mistake. It was unprofessional,” Hays said. “It was so highly politically charged.”
Hays stated that she immediately notified her boss, Bob Doehl, about her interaction with Morris. Doehl who was reached via Alaska Public Media, confirmed that Hays had reported her encounter with Morris to him.
Despite the pressure that was felt the panel decided to award the contract to 99 Plus and abruptly ended Bean’s contract on September 20, 2021.
Morris an anesthesiologist who was employed by the Bronson administration for a mere four months, refused to talk with reporters.
However, in a response to various questions, the defendant stated that he “at never” was acting “in the manner as claimed to be the case by. Hays.”
Morris admitted to speaking with city officials about a variety of concerns he had regarding bids. However, he claimed he did not recall sharing these concerns directly with Hays directly, or if Hays was in the room when he discussed the concerns with other people.
Morris claimed he would like Bean’s to remain under the shelter contract as it was the recipient of “years of on-the-job, real-time training.”
“I warned the municipal leadership that a change in operator could be a major danger to the existing operations as well as the loss of years of expertise and experience,” he said in his reply.
Morris added that Hays previously working for Bean’s could be a conflict of interestthe same issue she claimed Morris expressed to her in an elevator at City Hall.
Hays’ account of events is very similar to the allegations that are contained in an Jan. letter that was written by a attorney for Demboski, who is the municipal manager who was then in charge.
The letter claimed that an unidentified “close friend” of Bronson tried to influence an unidentified employee who was in charge of a bidding process technically referred to as an RFP, during the same timeframe as Hays was looking over bids to win an Sullivan shelter contracts. The associate, as the letter claimed, instructed the employee to refer that the bid be given through “his close friend.”
“This employee was extremely uncomfortable with the decision she took and complained to a variety of individuals including her supervisor in the immediate vicinity,” the letter said. “The contract was finally granted, but one of the friends from your closest associate didn’t get it. Then your associate’s close friend was unhappy with the person who was on the RFP panel and you arranged for the employee dismissed.”
Rodvik Bronson’s spokesperson, Rodvik has declined to discuss Demboski’s story and cited a potential lawsuit filed by her. Demboski as well as her lawyer declined to comment.
Morris in his defense in his response, called the allegations about his stint as Bronson’s homeless deputy “wildly absurd,” and he denied any interference claimed in the case of Hays as well as Demboski.
Sauder has been once mentioned as saying that he regards Morris as Morris was a “genius,” and in an interview, Sauder said that Morris and the actor have become “friendly.”
“That’s Anchorage,” she stated. “It’s the same degree of separation anywhere you move within Anchorage.”
Sauder also contributed the Bronson mayoral campaign and also to Bill Evans, another conservative candidate for the race, according to campaign report on finances show.
Morris did not directly address the motive behind why Hays was dismissed. He did, however, point out that it took place just a few days following an article in the Anchorage Daily News reported that a man aged 62 was suffering from dangerous infections inside the Sullivan hospital, which was then managed by 99 Plus 1.
Morris was fired from Morris’ departure from the Bronson administration just a few weeks after Hays was fired. Sauder said to journalists in the midst of his interview that Morris tried to convince the city of his desire to renew Bean’s contract prior to his departure.
It did not take Hays time to locate a new job. 99 Plus 1 quickly hired Hays to manage their Sullivan Arena shelter in November 2021.
She’s now running a brand new non-profit organization, Henning, Inc., that took over the shelter’s operations in the month of October.
This article was developed by APM Reports HTML2as as part of Public Media Accountability Initiative which promotes investigative reporting in local media outlets across the nation.
