Only on 10: Insolvent city bought foreclosed properties

By: Bill Rappleye | NBC 10
Published: May 24, 2010

CENTRAL FALLS, R.I. -- One of the most financially troubled cities in Rhode Island -- Central Falls -- has been spending money to buy up foreclosed properties.

This story came to light when a real estate agent found out Central Falls was buying property. Bruce Gagnon said he offered his services for free to save the city the brokers' fee.

But then he said he found himself bidding against the city for a property he wanted to save but that the city wanted to tear down.

Hundreds of homes in Central Falls have been foreclosed and boarded up.

Last year, five sellers got rid of their foreclosed properties by selling them to the city. The money to buy the homes came from federal taxpayers. It was part of a program to improve housing by tearing down foreclosed homes and rebuilding affordable units on the empty lots.

The city planner said only the worst and most undesirable houses are targeted and that the city would never bid against another buyer.

But there was interest in a single-family home on Lincoln Avenue.

"The one on Lincoln needed some repairs -- probably to the tune of about $25,000 to $30,000. But at the price that I was bidding, the rehab was feasible and could have been put back on the market for resale," Gagnon said.

But he lost it to the city.

The five properties sold for a total of $223,100, most within several thousands dollars of the asking price -- a level that Gagnon said was unusual a year ago when the purchases were made and when he bought a foreclosed property for much less than the listed price.

"It was listed for $58,000 or $59,000, and I was able to get it for $28,000," Gagnon said.

Each of the properties was supposed to be bulldozed, but they are still standing. The city planner said demolition will take time.

But as soon as the houses were purchased, the city paid board-up fees of more than $29,000 to Mike Bouthillette, a friend of Mayor Charles Moreau.

Bouthillette had liens on each of the properties bought by the city, a total of more than $84,000 and none of the houses have been demolished.

What Gagnon said frustrates him the most is that his offer to help the city elicited no reaction whatsoever from city officials. Not even a courtesy call, he said.

Central Falls last week went into receivership.