By Karl Baker
This story was produced by Spotlight Delaware, a community-powered, collaborative, nonprofit newsroom covering the First State. Learn more at spotlightdelaware.org
New Castle County employees are taking over the day-to-day operations of the Hope Center homeless shelter from a hotel company that had held the contract to manage the facility ever since it launched during the height of the COVID pandemic.
The company, Hersha Hospitality Trust, is the same firm that sold the Hope Center building – then a Sheraton hotel located amid the Christiana River wetlands near New Castle – to the county in late 2020 for nearly $20 million.
In an email sent to council members earlier this month, Carrie Casey, the county’s community service department manager, announced that the takeover of the critical social services operation would occur April 19. She wanted the council to be “aware of the change” and that she expected a “smooth transition with minimal impacts.”
“The Department has been working on a plan for several months in the event of this occurring,” Casey said in the email.
Casey did not disclose in the email the reason that county officials are taking over the facility.
When asked about the reason for the change, a spokesman for County Executive Matt Meyer said simply that Hersha Hospitality in 2020 was the right partner for the Hope Center, but “is not the right partner going forward.”
The spokesman, Brian Cunningham, did not elaborate on the assertion, but said the county administration “anticipates significant savings” with Hersha Hospitality no longer operating the Hope Center.
Cunningham further stated that the county will contract out individual tasks at the shelter, such as staffing, trash service, and maintenance.
In 2020, Meyer led the acquisition of the hotel using the county’s allocation of COVID-era federal American Rescue Plan Act funding and has touted the Hope Center’s services since it opened.
Today, the Hope Center provides short-term housing, as well as certain medical care, and transportation for unhoused people, but DART Transit buses do not stop near the facility.
The county takeover of the Hope Center is occurring just after the publication of an audit that showed that Hersha Hospitality did not properly report all money flowing into the facility, and failed to charge for certain services that had been provided.
During a meeting of the New Castle County Council’s Executive Committee on Tuesday, County Auditor Bob Wasserbach outlined the findings, describing in detail how one unnamed client of the Hope Center was not properly billed for 36 rooms they were contractually obligated to pay for – leading to a temporary shortfall of more than $240,000.
Ultimately that issue was corrected, and the bill paid, he said.
Following his testimony, Wasserbach declined to state the name of the client, but ChristianaCare reportedly had a contract to rent 36 rooms from the Hope Center, according to a Delaware Live report from last year.
Finally, while Wasserbach said Hersha failed to follow financial reporting rules, he also noted that he was “not aware of any fraud or misuse of funds.”
Nevertheless, Wasserbach’s testimony Tuesday sparked a string of probing inquiries from council members about management at the Hope Center.
Councilman George Smiley said he wasn’t accustomed to seeing county audits that pointed out significant deficiencies.
Councilman Jea Street asked whether the county might have to return certain dollars to the federal government as a result of the poor financial reporting. Casey, who also attended the meeting, said it wouldn’t.
And, Council President Karen Hartly Nagle, who is now running for county executive, questioned why the county had “hired a company that manages hotels to manage a homeless center.”
Later on Tuesday, the County Council also heard the introduction of an ordinance that would, among other actions, amend the Fiscal Year 2024 operating budget by appropriating $626,000 from a portion of the General Fund to pay for Hope Center’s operations.
In his email to Spotlight Delaware, Cunningham said the ordinance is intended “to record the financial transaction occurring in the checking account overseen by Hersha.”
He said that account is “maintained outside of the County’s financial system.”
Hersha Hospitality’s annual expenses at the Hope Center amounted to nearly $2.5 million, according to a county budget presentation from 2022.
Those expenses were paid for through a mixture of room rental revenue, a grant from the county’s Housing Trust Fund, and dollars from the federal government’s COVID relief program, according to the budget presentation.
Hersha Hospitality was taken over by KSL Capital Partners, a private equity company, last year.
Hersha Hospitality’s departure from the Hope Center follows the ouster from the facility in past months of what was its second largest contractor, the Delaware Center for Homeless Veterans, according to that organization’s CEO, David Mosley.
Last year, the City of Wilmington sued the Delaware Center for Homeless Veterans alleging the group fraudulently diverted more than $300,000 to its staff salaries and away from its intended uses of paying for meals and services at the Hope Center.
Cunningham said the county now contracts with Goodwill to provide staff for those meals and services. It also has separately hired three case managers.
“The Hope Center is sustainable. As of February, the Hope Center is financially sustainable through 2026 and beyond,” Cunningham said.
