AUGUSTA — Allegations about misspent funds and investments in high-priced housing projects by the Maine State Housing Authority fueled arguments Tuesday over a proposal to reform the agency.

The bill, if passed, would mean directors of the agency no longer get appointed to four-year terms and instead can be fired by the governor-appointed Board of Commissioners at any time.

Those who spoke at a public hearing clashed over whether the change would fix problems at the housing authority, or just make matters worse.

“With each passing day, it appears the scandal plaguing the Maine State Housing Authority grows in scope and severity,” said Les Gibson of Sabattus, a supporter of the bill. “The current director is accountable to no one.”

Carol Kontos, a former member of the board of commissioners who opposes the change, said the politically charged accusations show why the agency needs its independence.

“After just four months, (new Republican members of board of commissioners) have determined that they should have the authority to hire and fire the executive director …. They have decided they know best,” said Kontos, also a former Democratic legislator. “There is no evidence of wrongdoing, and I do not believe any will be found.”

The bill, An Act Relating to the Governance of the Maine State Housing Authority, is a reaction to the accusations that have been swirling around the $1.6 billion agency for months.

Republican Treasurer Bruce Poliquin and new board of commissioners members appointed by Republican Gov. Paul LePage have harshly criticized the existing director, Dale McCormack, a Democratic holdover from the Baldacci administration.

Critics initially focused on the agency’s investments in affordable housing units costing well over $200,000 each. More recently, the criticism has focused on money spent on massage services, at hotels and for donations to special interest groups.

McCormack and others at the housing authority have responded that the accusations of mismanagement are purely political and false.

The Legislature’s Government Oversight Committee agreed last week to take up the spending questions as quickly as possible.

Meanwhile, Senate Majority Leader Jonathan Courtney, R-Springvale, sponsored the oversight bill — L.D. 1778 — to make the director more accountable to the board of commissioners.

“This issue has to be dealt with as soon as possible,” he said Tuesday during the hearing held by the Legislature’s Labor, Commerce, Research and Economic Development Committee.

Michael Doyle of Falmouth was one of several citizens who said the agency, and McCormack, need to be held accountable.

“This thing is an organization out of control and it’s out of control because nobody can fire someone who needs to be fired,” Doyle said.

Carol Weston, state director of Americans for Prosperity, said Maine State Housing Authority is the only quasi-governmental agency in state government to give directors a term in office.

“Only one has no direct link of accountability to the people paying the bill, and that is the Maine State Housing Authority,” Weston said.

Opponents of the change argued that the agency has been successful in attracting private investments and developing housing because it is known for stable, consistent leadership.

Rick McCarthy, a lobbyist for the Mine Affordable Housing Coalition and Maine Real Estate Managers Association said the four-year terms insulate the agency from political swings in state government.

“We …think you should retain the four-year term, which is good for the organization,” McCarthy said.

Officials with Maine State Housing Authority have been fending off the accusations in recent months, and did again at Tuesday’s hearing.

“We are confident that when an independent review is completed, it ill be clear that none of our expenditures were illegal, unethical or inappropriate,” said Peter Merrill, the agency’s director of planning and communication.

Merrill, however, did not testify against the bill. He offered some amendments, including one that would give the board of commissioners the right to hire, as well as fire, future executive directors.

But, Merrill said, the Legislature shouldn’t eliminate the four-year terms until after McCormack’s term is up in two years.

“Taking people at their word that this is not about the current director, then it makes sense to have these changes take place at the end of the current term,” he said. Firing the current director before the term is up also would raise concerns about a breach of contract, he said.

Courtney, the bill’s sponsor, said he is willing to work with the committee to shape the final bill. But the increased accountability is needed sooner than later, and he’s not inclined to wait until 2014, he said.

“I think this needs to go forward.”

John Richardson — 620-7016

[email protected]

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