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A look back at PHS: Empire building

The Courier’s 2003 story on the rapid growth of the PHS Community Services Society
In Sept. 14, 2003, then Courier reporter David Carrigg dug into the phenomenal rise of the PHS Community Services Society, detailing how questions about perceived favouritism and lack of public accountability emerged after its rapid growth in the Downtown Eastside.

In Sept. 14, 2003, then Courier reporter David Carrigg dug into the phenomenal rise of the PHS Community Services Society. He examined how questions about perceived favouritism and lack of public accountability emerged after its rapid growth in the Downtown Eastside. We’re running that story again in light of recent developments. — Editor.

A man sits on the windowsill in the upstairs foyer of the city-owned Stanley/New Fountain hotel, looking up at another man, discussing how he's going to get money to pay off a debt.

Around the corner, in one of the 103 tiny rooms that make up the complex, five young men are smoking crack, the door wide open.

In the common area on the same floor, a young First Nations girl lies on a couch, pus and blood seeping through a bandage roughly applied around her leg, just below the knee.

She declines an offer to fetch a street nurse, saying she'll be OK. She's bandaged the wound herself each day since an operation, and it's not hurting her too much today, she says.

The girl has small sores on her arms and legs and is offered help from another resident, a friendly guy with a beard and sores on his face.

Asked what it's like to live in the Stanley/New Fountain hotel, he smiles and looks around.

"It's a zoo, it's madness," he says, before wandering off down the hall, the sound of heavy metal music blaring in the background.

The Stanley/New Fountain is operated by PHS Community Services Society — formerly the Portland Hotel Society — a non-profit lauded by city council and staff for its innovative methods of providing housing for about 360 people in the Downtown Eastside, many with a combination of mental health and drug addiction problems.

However, the organization's rapid growth, its powerful political connections — links with Coun. Jim Green and NDP MLA Jenny Kwan — and lack of public accountability has drawn criticism from other groups about perceived favoritism and prompted a call for legislation to open up large non-profit societies to public scrutiny. The team running the society, executive directors Mark Townsend and Liz Evans (a common-law couple), chief executive Dan Small and society president Sarah Evans, for example, refused to provide any information for this story.

The Portland society is the brainchild of city councillor Jim Green, who in 1989 leased out rooms in the old Pennsylvania Hotel at the corner of Hastings and Carrall streets — then called the Rainbow Hotel — to provide social housing. At that time, Green was an organizer for the Downtown Eastside Residents' Association.

In the early 1990s, Green secured funding from the NDP government through the Ministry of Health to provide mental health services for the residents, employing psychiatric nurse Liz Evans to run the show.

Townsend — who, according to a Vancouver Sun story knew Evans through a friend of a friend in London, England — arrived on the scene and began doing volunteer renovation work at the Pennsylvania, before being given a full-time job at the hotel. According to the Sun story, Townsend's previous experience was as a college lecturer and doing lighting at the Old Vic Theatre in Britain.

In August 1993, after Green stopped working for DERA, the Portland Hotel Society was formed and Townsend was appointed society coordinator. The Portland changed its name to PHS Community Services Society on July 2, 2003.

Townsend is now the spokesman for both the society's management and board of directors. He is on the board of Tradeworks Training Society — which provides construction training opportunities for disadvantaged youth — as well as the health and social development advisory board of the Vancouver Foundation, which has granted the Portland almost $200,000 over the past few years.

The society's political connections run deep. Dan Small, who is married to Vancouver Mount Pleasant NDP MLA Jenny Kwan, is the society's chief executive. Former director Jim O'Dea and former president Roberta McCann played a key role in getting Kwan elected to the legislature in 1996.

McCann, who is Green's partner, resigned from the Portland board prior to the civic election to avoid the perception of conflict of interest.

Green — who claims he has never discussed with Roberta McCann, Townsend or Small the workings of the society he created — said the Portland has taken over from DERA as the voice of the neighbourhood.

"DERA went sideways and the Portland followed in the tradition that we once had there. DERA wanted to be a company that managed things; the Portland wanted to be a grassroots development corporation. They have two different philosophies."

The society's rapid growth began in 1997, the same year Jim O'Dea was appointed chair of B.C. Housing by the NDP government.

During O'Dea's tenure — which ended when the incumbent Liberal government fired him July 13, 2001 — B.C. Housing helped the society build the New Portland at 20 West Hastings St., then contracted the society to operate the building. B.C. Housing also contracted the Portland to operate the renovated Washington and Sunrise hotels.

During that period the Greater Vancouver Housing Corporation gifted the Stanley/New Fountain hotel to the society, enabling it to later sell the building to the city.

Society revenue jumped from $327,500 in 1997 to $6.8 million in the year ending March, 2002, according to the most recent publicly available financial records for the society.

Five months after O'Dea was fired, B.C. Housing conducted a rare special audit of the society that was completed in April 2002.

B.C. Housing and the society have refused to release that audit to the Courier, despite a Freedom of Information request and subsequent mediation attempt. The Courier is currently challenging that decision through the B.C. Information and Privacy Commissioner.

The society owns the soon to be renovated Pennsylvania Hotel and the historic Merchant Bank building, and leases the Interurban building for its art gallery — all at the intersection of Hastings and Carrall streets. The society also owns the New Portland Hotel, just west of that intersection, and has been earmarked to operate a social housing project on city-owned land at 980 Main Street.

The Portland has management contracts with the city, B.C. Housing and the Greater Vancouver Housing Corporation to house people in the Stanley/New Fountain, Sunrise, Washington, New Portland and Regal hotels. The society also operates Katherine Sanford House on East 16th Avenue, which provides supported living for 18 people with serious mental illness and five homes for people learning life skills.

Along Hastings Street the society manages two cafes and a dental clinic.

The Portland has operated the $380,000-a-year LifeSkills Centre on Cordova since 1999 for the Vancouver Coastal Health Authority, with whom it has several other operating contracts. The health authority has also recently contracted society employees to offer peer support for drug users at the city's pilot safe injection site, opening next week.

The Portland's Interurban art gallery has received several hundred thousand dollars from the three levels of government and donors for renovations and lease payments for the building. The site was originally intended as an artists drop-in centre and work space, but currently operates as an art gallery open 16 hours a week.

When the Courier visited the Interurban in late June, the gallery was empty except for a volunteer who was upset because a garbage can had been thrown through one of the gallery's five-foot-by-five-foot plate glass windows the night before. On the concrete base at the front of the building, someone had scrawled: "Just what the 'hood needs, an art gallery."

The Portland's growth has been so dramatic, the society cited it in  explaining to the Corporate Registry why it was tardy in submitting its 2001/2002 financial report and held its annual general meeting late.

Making matters worse, John Cheetham, the society's financial controller, died of septic shock on July 10, 2001, following nasal surgery.

John VanLuven is executive director of St. James Community Services Association, one of the largest providers of emergency shelter and social housing in the Downtown Eastside.

He was at first reluctant to comment on the Portland's growing Downtown Eastside empire, but decided to speak out after the City of Vancouver bought the Stanley/New Fountain hotel from the Portland in March, netting the society a $1-million profit. The city then immediately struck a 10-year deal making the society the hotel landlord, in charge of running the 103 rooms and 18 commercial spaces on the ground floor. Under the agreement, any profits will be split equally between the society and the city.

VanLuven said St. James would have been interested in operating the Stanley/New Fountain hotel, given a chance. "If there was a tender to operate the Stanley/New Fountain, I never saw it. I would have expected that it went to tender, but I'm not surprised it didn't," VanLuven said.

"Other service providers and I have asked the question, why didn't it go to tender? We've all scraped around our sources to try and find out what's going on and it's mired very deep in the politics of the Downtown Eastside."

Richard Page, secretary of Ray-cam Cooperative Community Centre, was also concerned about the possibility of preferential treatment after discovering city council on June 12 awarded the Portland $60,000 to buy festival equipment that it could rent to other non-profit societies.

While he accepts the society has staged festivals and cultural performances over the past few years, Page said it was unusual that word had not gotten out that the money was available.

"We put on 40 public events last year and we are a group with 4,000 members that would have loaned out festival equipment if we had received a grant to buy it. It would have been good to at least tender for the equipment," said Page, adding he found out about the grant after perusing minutes from the June 12 meeting.

The day council unanimously granted the society the money for festival equipment, the Downtown Eastside Residents Association was denied a $10,000 grant to help put on a 30th anniversary festival.

In May, council rejected an application for $10,000 from the long-established Vancouver Rape Relief organization to help compensate for provincial government cuts. It also turned down a request from Prostitution Alternatives Counselling and Education for $10,000 to continue an education program outside the Downtown Eastside.

Ben Johnson, the city planner who recommended the society get the festival equipment grant, said city staff believe that the Portland is well qualified to manage festival equipment. The society has not yet received the money from city hall because it has not completed a management plan.

Mayor Larry Campbell says the reason the society gets city money without going to tender is because there are no other groups in the area that compare to the society in terms of getting work done on time and on budget.

"It's classic Downtown Eastside politics. There's a whole bunch of little splinter groups that all want to be players in the Downtown Eastside, but they can't. So if they aren't included, they complain," Campbell said.

But according to Cameron Gray, the city's housing manager, the society was up against the wall financially prior to the city's purchase of the Stanley/New Fountain.

At the end of March 2002, the Portland had more liabilities than assets, including a combined overdraft and line of credit debt of more than $1 million. The society also spent $550,000 more than it received between March 2000 and March 2002, and was 18 months late in opening its Interurban art gallery.

VanLuven said the Portland keeps its distance from other non-profit organizations, and its staff attend few of the meetings other organizations that receive mental health funding attend-including the Association of Mental Health Serve Providers, Adult Mental Health Service Providers Group and Urban Core.

"There's very little networking and very little involvement. To a large degree, they are stand-alone."

Neither Heather Hay, Vancouver Coastal Health Authority manager responsible for the Downtown Eastside, her boss Maureen Whyte or health authority chief executive Ida Goodreau would speak to the Courier for this article.

Spokesman Clay Adams said the authority doesn't want to comment on the way the society conducts its business. "We don't want to compromise our working relationship by getting involved in those sorts of matters," Adams said.

He said the Portland was awarded the contract for the LifeSkills Centre after a request-for-proposals process, while it was asked to provide peer support at the safe injection site because the society held the lease on the building being used.

Ray-cam president Steve Bouchard — a former Portland resident with an impressive resume of community involvement in the Downtown Eastside — said he has long asked the society for information on its own tendering process for contractors who've performed the millions of dollars in building renovations coordinated by the society over the past several years.

"I lived in Portland buildings for eight years and I only know what's going on and how they go about doing it from what I see," said Bouchard, who says he does not have a mental health or drug problem, but does suffer other chronic health problems. "They don't answer questions the community brings forward; they've bypassed the community structure. I can't even find out when their AGM is or what their membership base is. Every week, we are getting calls from different people regarding the lack of community process in funding allocation."

Corporate Registry records show the Portland had 123 members as of January 2003, up from nine members in 2001. By comparison, the Vancouver Area Network of Drug Users — which is funded through the Portland — had 1,000 members as of March 2002.

Nancy Chiavario, former parks board commissioner and city councillor, is part of a coalition — the Network of East Vancouver Community Organizations — that's trying to unite groups in the area in applying for and managing government funding.

Chiavario was also surprised when the Portland was automatically awarded the Stanley/New Fountain hotel management contract, shortly after the city paid the society more than $100,000 to manage 80 former Woodward's squatters for five months. The society also received at least $20,000 from the province and city to relocate the squatters.

"The city didn't put it out there and I'm pretty faithful at monitoring housing opportunities in the area. I know there are people who belong to other organizations that feel the Portland receives money for things they believe they could do the same job for," Chiavario said.

She added there should be an open process for the delivery of any service in the community.

"The Portland doesn't have a membership like a community group and it's not appropriate for other organizations in the community not to have the chance to compete to deliver those services."

Chiavario said questions have also been raised about the society's decision to spend $30,000 of donated money to build a mock safe injection site that was later removed by the health authority. The site was not built to code and was the cause of conflict between Townsend and a city building inspector who attended the site Feb. 4. A police report of the incident was filed but no charges were laid.

Says VanLuven, "If I went out and blew $30,000 and didn't do the appropriate homework to prevent what I did getting ripped out and started all over again, the board would be looking for a new executive director. And I'd deserve everything I got."

Lorne Mayencourt, Liberal MLA for Vancouver Burrard, is the driving force behind an effort to ensure the public has access to annual general meetings and board minutes for large, taxpayer-funded non-profit societies.

Mayencourt says his interest was prompted by calls from constituents complaining they couldn't get access to information on the Portland, including the special audit.

Mayencourt said questions were raised over how the Portland was able to purchase the Merchant Bank building at Pigeon Park and how it pays for legal assistance.

The society has sought legal help to prevent the special audit being released to the public, and to threaten a defamation suit against the Courier. (the society claims the Courier and editor Mick Maloney defamed the society during research for this story). The society is also involved in a five-year legal battle with Key Engineering, the company that built the New Portland, over the final $200,000 payment to the firm.

Mayencourt is trying to get a government bill passed that would require all non-profits that receive a certain amount of taxpayer money to hold open annual general meetings.

"Maybe no-one would come. But for some societies that are of great interest to people, non-members could actually see what an agency is doing and how it is doing it and why it does it in a particular way," Mayencourt said.
"That's reasonable to expect when you are putting millions of dollars into a non-profit agency every year. There is a need for accountability to the membership and board, but also to the general public that is paying for that agency's existence."

At this stage, Mayencourt has discussed his proposal with caucus members whom he hopes will raise the issue with Premier Gordon Campbell.

Former Portland director Jim Thorsteinson, who resigned in May to take a position with the Vancouver Coastal Health Authority, said the society has very strong leadership and its management team is underpaid.

"Mark [Townsend] could be earning in the hundreds of thousands of dollars a year in the private sector. He has tremendous skills."

The society's executive salaries are not public information and the society does not have a web site explaining its operations.

Kim Kerr, DERA's newly appointed executive director, wants to ensure that the Portland isn't the only group being touted to represent residents in the area. Kerr is trying to rebuild the residents' association after its executive director, president and treasurer all resigned earlier this year amid controversy over DERA's involvement in the Metropole Hotel and pub development.

"The Portland does not represent residents in the same way DERA does," says Kerr. "We have 4,000 members, DERA has board meetings that members are welcome to attend. If you are a DERA member and you want to sit in on our board meetings you are welcome."

Chiavario hopes city council will ask more detailed questions about the society and its operations, particularly given the society's emerging role in the Carrall Street Greenway project, which is turning Carrall Street into the main tourist route between Gastown and False Creek.

The society has become a key player in the project because it owns or controls several properties on or around the corridor.

"I can't understand how the bureaucratic system and people that have been elected on council don't see what they are doing," said Chiavario. "At least on the surface, they are favouring some over others."


1996 — assets $2,400; revenue $46,000; admin and staffing $43,500.

1997— assets $54,000; revenue $380,000; fees and staffing $320,000.

1998 — assets $1.3 million; revenue $1 million; admin and staffing

1999 — assets $5 million; revenue $2.1 million; admin and staffing $1

2000 — assets $9.1 million; revenue $3.1 million; admin and staffing $1.7

2001 — assets $9.8 million; revenue $4.8 million; admin and staffing $2.3

2002 — assets $13.6 million; revenue $6.8 million; admin and staffing
costs $3.6 million.


- Jim Green — City of Vancouver councillor, founder of the Portland Hotel

- Roberta McCann — Green's partner, former president of the Portland Hotel
Society and former president of NDP MLA Jenny Kwan's riding association.

- Jim O'Dea — Director of the Portland Hotel Society between 1993 and 1997,
resigned after being appointed chair of B.C. Housing by the former NDP
government. Chair of nomination committee for Kwan's 1996 election.

- Dan Small — chief executive of PHS, married to Kwan.

- Donald MacPherson — Portland director until 2000, resigned to take a
position as the city's drug policy coordinator. Former director of the
Carnegie Centre.

- Dr. Jim Thorsteinson — Inaugural director, resigned in May 2003 to take
a position with the Vancouver Coastal Health Authority.