No Account

Secrecy and lack of oversight plague housing programs

Every June, as the city prepares its budget for the fiscal year that begins July 1, one particular piece of business appears on the City Council agenda. Officially known as an "Ordinance Providing for the Continuation of Appropriations," it gives the city legal authority to keep operating if there are delays in passing a new budget. The ordinance is among the more routine matters considered by Council each year and, invariably, it is approved unanimously without discussion. Such was the case June 17, 1997, when City Council authorized more than $30 million.

What councilmembers didn't know was that the $1.1 million authorized for housing-related expenses was later used to pay a hefty penalty levied against the city's Department of Housing and Community Development.

In February 1997, the federal Department of Housing and Urban Development, or HUD, published an audit finding city housing officials exercised "no contractual control and little or no oversight" over a $1.1 million block grant to renovate two apartment buildings bought from the Resolution Trust Corporation, the now defunct agency that managed the assets of failed savings and loans. HUD ordered the city to document about $400,000 in unexplained costs paid to the housing department's contractors, Duddlesten Management Corporation and Cornerstone Construction, or risk having to reimburse the feds the entire grant.

City housing officials disputed the audit, and in May 1997, asked HUD for six months to review the contract. Yet, a month later, they submitted to City Council a continuing appropriation that transferred exactly $1.1 million in city housing monies to a federal grant fund. The actual transfer, however, was not made until this past February, when, as expected, HUD ordered the city to repay the block grant.

City Council members say they were never told of the HUD audit, nor did housing department director Margie Bingham seek their approval before she transferred more than $1 million in city funds to reimburse the federal housing agency.

"How could that kind of repayment back to HUD never appear on Council's agenda?" asked at-large City Councilwoman Annise Parker. "Why were the audit findings never brought to Council's attention?"

The HUD audit is just one example of city housing officials withholding from public scrutiny problems associated with multimillion-dollar redevelopment projects initiated by the administration of former mayor Bob Lanier.

For instance, most councilmembers are not aware that the housing department has foreclosed on a taxpayer-funded, 110-unit single-family development in north Houston. The project collapsed early this year when the contractor, Mastermark Homebuilders, went out of business after finishing just 39 homes. Another 19 homes, on 20 acres of land owned by the city, are in various stages of construction.

To date, the Mastermark project has cost the city close to $6 million -- double the $3 million housing officials agreed to loan Mastermark in 1996 to cover construction costs. The city will recoup some of that loss after more homes are completed and sold. But the housing department has yet to select a new contractor to finish the subdivision, and until that happens, the city is obligated to pay off Mastermark mechanics' liens -- estimated by one housing source to be about $300,000 -- as well as to cover the costs of warranty repairs sought by the owners of the occupied homes.

Moreover, a similar taxpayer-backed deal to redevelop the historic Fourth Ward/Freedmen's Town area, just west of downtown, is in danger of failing. In that instance, housing officials have struggled to hold the contractor, Houston Renaissance, Inc., accountable for a $3.5 million city grant to develop a mixed-income neighborhood that would include 250 units of housing for first-time homebuyers of limited means.

Renaissance, a nonprofit corporation, owns about 1.2 million square feet of property in the Fourth Ward, all purchased with taxpayers' money. Today, the nonprofit is broke and unable to secure additional financing to carry out a so-called "master plan" commissioned by Renaissance and local ministers last fall.

However, Renaissance has demolished 18 homes in Freedmen's Town, which was named to the National Register of Historic Places in 1985. That, despite repeated attempts by councilmembers and local preservationists to forestall the destruction of homes built by descendants of the slaves who settled the area more than 100 years ago.

Ironically, the councilmember most concerned with the possibility that Freedmen's Town could lose its national historical designation to the wrecking ball is not Jew Don Boney or Michael Yarbrough, who are African-Americans, but Parker, who is white.

Parker points out that a March 27 report issued by a team of Brown advisers recommended an audit and performance review of the city's contract with Houston Renaissance. That has yet to happen. Nor has Parker, an elected official, been able to extract much information about the status of the Fourth Ward project from either Renaissance or housing officials.

"This has been one of the most frustrating situations I've ever dealt with," says Parker, who describes the city housing department as a "nasty can of worms."

"It's a combination, I think, of the contractor not caring and no one [being] willing to step up and hold them accountable for what they're doing."

By now, Lee Brown should realize that succeeding Bob Lanier as mayor of Houston is not all it's cracked up to be.

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