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How the homeless bought a Rolls for Cornelius Pitts.


It is a typical 90-degrees-and-humid June day in Washington D.C. and Cornelius Pitts is an hour late. He bursts into the front office at the Pitts Motor Hotel, apologizes, then sits down in a maroon leather chair behind a large desk with lion-head drawer handles. A plastic plaque on his desk reads: "The trouble with some people is that they won't admit their faults. I'd admit mine . . . if I had any.' Pitts asks one of his staff to get him an ice cream sandwich. Maybe two. He is a very big man and his voice is deep and raspy. On one hand he wears a large diamond on a gold band, on the other, three slightly smaller diamonds on a silver band. He wears a very, very thin gold watch.

The only hints that Pitts's prosperity comes from an unconventional enterprise are the images on small black and white monitors in the corners of his office. They show what was once the hotel's luxurious Red Carpet Lounge slowly filling up with his newest--and most lucrative-- clients, homeless families getting their chicken dinner.

The homeless have been good to Pitts. If the city of Washington D.C. hadn't given him its sole-source contract for providing emergency shelter for homeless families in 1982, he might never have achieved what he calls his "100 percent occupancy' rate. He and his wife would probably not have made $245,000 in salaries, benefits, and profits from the contract last year. And if the city hadn't renewed his multi-million-dollar contract each year--even after mounting evidence of fiscal irregularities--he might never have been able to build all those additions on his upper Northwest Washington home, which is now assessed at $399,562. Or buy his five cars, particularly the $61,000 Mercedes 560 SEL and the $117,500 1987 Rolls Royce Silver Spur. (Both cars have three-digit license plate numbers, a sign of access to the top city officials who dispense them.) Indeed, without the contract, Pitts might have lost his hotel.

Pitts doesn't understand why people have been critical of his business practices. He says he runs a class place, that his hotel at 14th and Belmont, is as fine a shelter for the homeless as anyone could find anywhere. And if he makes a good profit, well, that's nobody's business. He is not, he points out, one of those nonprofits. His business, he says, emphasizing each syllable, is "a pro-fit-mak-ing-en-ter-prise.'

Rooms at the top

Living off government contracts was not the dream Cornelius C. Pitts brought with him when he came to Washington from New Orlens during World War II. At first, he worked as a clerk-typist for the War Department and moonlighted as a cab driver, saving his money for something bigger. He wanted to be successful in a white man's world. "I was determined to break through the color barrier,' he said in 1968. "I was born into business. My mother and father ran a mom-and-pop grocery store in New Orleans.'

In 1950 he made the leap, buying his first building on Belmont Street, then a middle-class black residential neighborhood. He converted his new property into a tourist home for blacks, who were not welcome in downtown hotels. Nine years later he bought another building on Belmont. Meanwhile, like the immigrant hero in a thousand American success stories, he went to college, and in 1964, at the age of 41, he graduated with a degree in business administration from Howard University. The next year he bought three more buildings on Belmont Street, then tore down all his buildings and constructed the Pitts Motor Hotel.

In the sixties, the Pitts Hotel was a showplace, and Cornelius Pitts was one of Washington's most successful black entrepreneurs. His hotel attracted not only tourists and traveling businessmen but local customers, black and white. They lined up at the Red Carpet Lounge--which featured valet parking and a maitre d'--to listen to the likes of Aretha Franklin. "The place stayed packed,' a former regular said. "The drinks weren't that high. You didn't feel like you were getting ripped off. The music was great. And the minute you walked in, you felt comfortable there.'

Pitts viewed himself as having a definite role to play in his community. "Whenever he could, he did something for the neighborhood,' says Leroy Hubbard, a local civic leader and long-time friend of Pitts. "He would donate food and space for neighborhood functions, sponsor kids in camps. He trained some summer youth employees in hotel work. He was what they called a progressive businessman.' Calvin T. Rolark, president and founder of the United Black Fund, publisher of the weekly community newspaper, The Washington Informer, and a close friend of Cornelius Pitts since the early fifties, agrees: "He always offered lots of employment to the black community. He definitely shared his income with numerous blacks. There have been many times I called on Pitts to help out a family and he did it, only asking that we keep his help anonymous.'

Pitts achieved his success in the face of the same racism any black entrepreneur of his generation experienced. Back in 1961, for instance, two white police officers from the department's morals squad tried to have Pitts's tourist home license revoked on the grounds that two women had been arrested there the previous year. Businessmen rallied to Pitts's defense. The D.C. Chamber of Commerce pointed out that the incident seemed to be part of "a pattern of questionable police tactics which are directed principally toward Negro establishments with integrated clientele.' Pitts's efforts to expand his business were frustrated by the reluctance of banks to give loans to blacks. "I've seen white men get bank loans in this neighborhood,' he said in 1968, while he was forced to pay "as much as a dollar for a dollar in interest. The only bank that really helped me was the Industrial Bank of Washington, a black bank.'

As one of Washington's premier black businessmen, Pitts naturally drifted into the orbit of prominent black political figures. A month before his 1968 assassination, Martin Luther King rented 30 rooms at the Pitts for a board meeting of the Southern Leadership Conference. That same year Ralph Abernathy and other members of the Poor People's Campaign stayed at the hotel during their march on Washington.

Cornelius Pitts's slide from the top began with the assassination of King. News of the killing triggered rioting, and what had been a vibrant shopping district near the Pitts became a gloomy mass of burned-out buildings. "Location-wise he was beat,' says Leroy Hubbard. "He was considered one of the more successful businessmen during that time, but after the riots things went downhill. The street deteriorated.' Most businessmen whose stores were not destroyed quickly moved to other neighborhoods.

Pitts is still admired by many of the city's black leaders for remaining loyal to his neighborhood. But the neighborhood never rebounded, and Pitts never again made the profit he had enjoyed catering to middle-class customers. Ironically for Pitts, the effects of the neighborhood devastation were heightened by the success of the civil rights movement. After the riots, blacks who formerly had no alternative but to stay at the Pitts Hotel increasingly were allowed into the white hotels downtown.

Pitts's respectable clients were replaced by prostitutes and junkies. Within months of the riots, he could no longer keep up his $4,064-per-month payments on a Small Business Administration loan. As a spokesman for the D.C. Alliance of Active Black Businessmen, he pushed for city assistance to revitalize the battered neighborhoods, but little help came. By 1981, Pitts owed more than $415,000 in back federal and city taxes and his hold on the Pitts Motor Hotel was weak.

Suite deal

Most cities were unprepared for the crisis of homelessness that erupted in the eighties. The combination of slashed federal low-income housing support, deinstitutionalization of mental patients, neighborhood gentrification, and hard economic times for poorer Americans created a homeless population that by 1985 was increasing by 25 percent a year, according to the U.S. Conference of Mayors. Within that population, homeless families comprise the fastest growing group. It was not clear whether federal funds available for emergency sheltering of the homeless could be used to build shelters or to create more permanent housing stock. As a result, many cities turned to an obvious expedient: hotels.

In Washington, officials turned to Cornelius Pitts. For a number of years he had occasionally sheltered homeless families for the District. Renting a few rooms to the homeless, he explained in 1969, was good business, especially "during the hard winter season.' By 1982, the District needed more than a few rooms. It needed an entire facility devoted to homeless families and an "intake center' to centralize the Department of Human Services (DHS) processing. DHS asked for bids on a contract; Pitts submitted his and won. The price: $1.3 million. Soon, though, the Pitts was overflowing, and DHS began placing families in other hotels. But the Pitts remained the only intake center and the only hotel with a fixed-price contract.

There were some who doubted the wisdom of choosing the Pitts. After the 1982 contract was announced, The Washington Post reported that police had made 17 arrests at the Pitts in the previous 14 months for crimes such as drug possession and assault with a deady weapon. "I would question the judgment of that decision [to move families into the hotel],' a D.C. narcotics sergeant told the Post; "It's right off 14th Street . . . drugs and prostitution are in that area.' It also seemed odd that such a contract would go to someone who was paying off $415,000 in back taxes.

City officials, however, say they had little choice in the matter. "Back when we first made the award, we felt our backs were really against the walls,' explains Robert Allison, deputy controller of DHS. "We asked the program people what to do and they said there was nowhere else to put them.' That is not entirely true. Pitts had competed for his contract against two other bidders: the House of Ruth, an emergency shelter for women and children, and the 10th Street Baptist Church. Pitts won even though, as the Post reported at the time, the House of Ruth's proposal was lower than Pitts's.

The person least troubled by the contract award was, of course, Cornelius Pitts. "The contract was an absolute must for me,' Pitts explained when the award was announced. "I just don't know how I would have been able to make it without it.'

Pitts says he is proud that today, after more than five years as a home to the homeless, the Pitts Motor Hotel is again a showcase, much like it was in the sixties. "This is the best temporary shelter for homeless families in the city. There is no shelter in this city that is as fully equipped,' he says. "I don't cut corners.' In the staff area behind the thick bullet-proof window are several computer systems with the latest software. His hotel offers a completely renovated kitchen that the chef claims "is more well-equipped than any of those kitchens downtown.' There is a small store, a first-class security system with monitors scattered throughout the building, and a video system that can feed any one of the more than 90 movies in the Pitts video library into each room.

The public areas of the hotel are relatively clean and cheerfully painted. The restaurant still has some of the panache of the Red Carpet days, though there is no red carpet over the white linoleum floor. A children's playroom is decorated with children's drawings of houses with bright roofs, curlicues of smoke, and single shade trees.

But the rooms where homeless families live are not so well maintained. A city inspection report of the hotel from last February repeatedly cited loose plaster, leaks, lack of ventilation, holes in the walls and floors, rooms infested with roaches, bedbugs, and other insects, and inoperable fire alarm system, and broken lights.

Although the Pitts contract specifies no more than four persons in each room, Angela Robertson says her family of six was crammed into one room. She shared a bed with her two youngest sons, her two older sons slept together, and her daughter slept on a roll-away cot. The room, she says, was infested with roaches and rats. A current resident, who was sitting with a crowd on the front steps, was reluctant to describe what it was like to live there because "it causes trouble.' She turned her head and shook it saying, "I can't . . .' Then she said quickly, "It's hell.'

Booked up

For providing his first-class accommodations to the city's homeless families, Pitts has been guaranteed full occupancy; from 1982 to 1986, the city renewed his contract without bothering to seek other bidders. Two DHS internal memos from 1984 and 1986, which were leaked to the press, and a publicly released 1986 audit of the Pitts contract by city auditor Otis Troupe reveal where the millions were spent.

The 1984 memo says that Pitts was overcharging the city by one-third for the meals he provided his residents. Yet rather than demand that Pitts cut his prices, the city increased his volume: the following year, DHS began busing homeless housed in other shelters to the Pitts three times a day for meals. This extremely inefficient way of feeding people grossed Pitts more than a million extra dollars that year. DHS dropped the new system after the 1986 audit called it, and Pitts's meal prices, "diseconomical and excessive.'

The audit also disclosed that Pitts had been charging $97.07 per square foot for the office space used by DHS officials. By comparison, the audit pointed out, DHS leased space at 1875 Connecticut Avenue, a more desirable location, for $15 a square foot. Indeed, the best office suites in Washington's fancy new Harbor Place now lease for $42 a square foot. When questioned about this, Pitts launched into a long, convoluted monologue about the Economy Act of 1932 and the critical distinction between "raw space' and what he provides. DHS Deputy Controller Robert Allison, who wrote the 1986 memo, puts the overcharge at about $280,000. "We sent Pitts a letter asking for back space rental,' says Allison. "I doubt we will get it.'

The documents reveal dozens of other overcharges. Pitts's salary was too high--twice what DHS paid the administrators of the city's two largest nursing homes. Pitts charged the city $10,400 for damages, even though damages were already covered elsewhere in the contract. Pitts didn't keep track of furnishings, equipment, or household items purchased with DHS funds. When asked about such complaints, Pitts bristles. "We had a fixed price contract with the city. If we found that our expenses exceeded our income, we had to eat the expenses. Conversely, if we made an adequate profit, the government had nothing to do with the way we spend it.' The government, however, paid Pitts $21,677 a year for three years to have CPAs do independent audits of his books. Pitts took the money but somehow never got around to commissioning the audits.

In total, the auditor concluded, the city's contract with Pitts was "sufficiently egregious and exploitative of the taxpayers' interest as to allow only a conclusion that the Agency was grossly derelict in its responsibility to guard the taxpayers' resources.' Says Allison: "The guy was simply making too much money off the homeless.'

"The fruits of my labor'

Those who work with the homeless recognize the absurdity of sheltering homeless families in hotels like the Pitts. At $42 a night, plus $12 per person per day for meals, the government is paying almost as much per month to keep a family at the Pitts as it would cost to put them in public housing for a year. But with so little public housing available, families are kept at the Pitts for months on end. If this is frustrating for independent-minded families eager to get into their own apartments, it's even worse for those suffering from welfare dependency. "Putting families in these hotel shelters is unconscionable,' says Reverend Tom Nees, who runs a 15-apartment nonprofit facility for homeless families called Community of Hope. "As desperate as some are to get out, others, sad to say, get hooked on it.' Even Ricardo Lyles, chief of D.C.'s office of Shelter and Emergency Services, agrees: "It's not the ideal for a family to live in a hotel. A family should be in an apartment.'

Other cities have learned to be "creative' with their federal emergency funds, using them to rehab apartments into which shelter residents can be moved. Washington, D.C. has been a slow learner, even though it has working alternatives as models.

The Community of Hope is just down the street from the Pitts. Its contract with the city is to provide "transitional,' or medium-term, shelter for homeless families. The long stays at the Pitts--an "emergency,' or short-term, shelter--make the distinction largely theoretical. There are differences, though. A homeless woman familiar with both the Community of Hope and the Pitts put it simply: "The difference between those two places is the difference between heaven and hell.' A Community of Hope apartment is not only more livable than a room at the Pitts, it's also much less expensive. A month's room and board at the Pitts for a family of four costs the government $2,748. A month's rent for a Community of Hope apartment, where families have their own kitchens, costs $500. "We've been pressing the city for over a year to expand our contract,' said Nees, "I told them the worst it could do is save you money. But we just haven't gotten anywhere.'

According to Pitts, those who complain that the city has ignored better options are blind to the greatest virtue of his program: his program is necessarily the best because it is run by blacks. "98 percent of the recipients of services are black people. These are my people,' he says. "It is difficult for a white business person to care for my people. But as a black business person, I am doing a better job.' When asked about the Community of Hope program down the street, he responds, "It's nothing personal. I just don't believe that any white person can be as interested in the welfare of poor black people as a black person.'

The issues of race and class inform Pitts's judgments. He explains that his neighborhood and business went into decline after the riots because "after Dr. King was shot, the whites left and they have yet to return' and because The Washington Post "kept writing about what a high crime area this was and never retracted it. What makes an area safe is people; when the press makes people scared, people stay away.' He also blames his middle-class black clientele, who stayed away and starved his business. "Poor blacks have always supported black businesses. It is the middle-class blacks we have always had problems with. Maybe it is because we compete socially with each other and we don't want to give each other an edge. We meet up at parties and discuss the type of car you drive and the type of home you have.'

He says critics of his program are racists or are swallowing a clever strategy of white real-estate developers. "Whites who have moved into this area are whites who want to build expensive condominiums on Belmont Street,' he says. "They want to buy my property. I refuse to sell. So they try to discredit me so that the D.C. government would withdraw my contract.'

Ask Pitts's many friends in Washington's black power elite about the criticisms of his program and the answers are almost always the same: white racism and not gross mismanagement of a public poverty program, is behind the complaints. "I don't know why the man is criticized,' says an indignant Calvin T. Rolark of the United Black Fund. "Racism is still sticking its ugly head up. Some people, some white people, are not desirous of blacks achieving anything. They think, if they achieve it, they have to steal it.'

Pitts works to keep support like that. When he still owed hundreds of thousands of dollars in back taxes, his hotel managed to come up with $2,000 for Mayor Marion Barry's 1982 reelection campaign--a few months before the DHS contract was awarded. Leroy Hubbard explains that this is a skill Pitts had to learn. "Sometimes he would catch the mayor's ear at special events. He wasn't very political before; now he is at every special event. He is very supportive politically and he will support the existing politicians.'

The television monitors in Pitts's office show the staff clearing the tables. A number of homeless families have moved to the hotel's front stoop where they will sit talking until the 11 o'clock curfew. Pitts wades through the children eating fudgesicles and the women sipping Orange Crush on his way to his Rolls Royce. Their eyes follow him and conversation stops. "I have been in business for 37 years,' Pitts says. "I feel I have earned the right to drive the kind of car I can afford to buy and live in the kind of hoem I can afford to live in. If I will ever enjoy the fruits of my labor, I should enjoy them in this life.'
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Title Annotation:getting rich by housing the needy
Author:Szegedy-Maszak, Marianne
Publication:Washington Monthly
Date:Jul 1, 1987
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