By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
Just sitting here drumming my fingers on the desk. It's been six weeks. I asked City Hall a simple question. I'm still waiting for their call. This is starting to remind me of my teenage dating career.
My question to the city six long weeks ago was this: How many guaranteed low-/moderate-income housing units have been created downtown?
Six weeks. Radio silence. They're busy giving me the old cold stare treatment. But I'm looking over their shoulders, and I see somebody very large coming up behind them. He keeps repeating my favorite wisdom:
"Fee fi fo fum."
Sure, go ahead. Ignore me, City Hall people. I don't think you're gonna ignore Mr. Fee Fi, otherwise known as "The Administration," for very long.
So who am I, Mr. Affordable? Not really, not especially. I like the idea. But I wish government-sponsored affordable housing programs didn't always turn out to be so scammy.
And that's my real interest. I'm trying to figure out whether Dallas City Hall has scammed the U.S. Department of Housing and Urban Development out of hundreds of millions of dollars over the years by submitting what the law calls "false claims."
Fair housing isn't really at the heart of this for me. The meat of the issue facing City Hall downtown right now, thanks to a formal complaint made to HUD by two Dallas developers earlier this year, is the question of false claims.
Here's why it's so simple. HUD gives money to cities every year under four grant programs, the main one being community development block grants (CDBG). Dallas gets about $35 million a year from HUD and spreads the money around all over town. For the last decade or more a good deal of the CDBG money has been poured into downtown, where the city has been struggling to convert a moribund office center into an enclave of yuppie high-rise apartments.
In order to get this money, Dallas must "certify" or swear to the feds every year that it is using the money to "affirmatively further fair housing" and that it has carried out certain legally prescribed procedures toward that end.
For example, the city has to certify that it has studied all of the things that could stand in the way of the creation of fair and affordable housing and that it has developed strategies for getting past those hurdles. At the top of that list would be making sure the city itself is not putting up the hurdles.
If the city swears it has carried out that step when it has not carried out that step, then it has made a false claim in seeking payment from the federal government—a crime since Abraham Lincoln persuaded Congress to make it a crime during the Civil War.
HUD regulations call for developers who use HUD money to produce buildings in which 51 percent or more of the units are offered at rents affordable to people of low to moderate income, according to HUD standards. The city can seek waivers of that requirement. But the waiver can't be based on a false premise—like the city saying there is no way to do a deal if it has to meet the regs when the real reason is that the city doesn't want to meet the regs.
Developers Curtis Lockey and Craig MacKenzie have told HUD that the downtown Dallas tower conversions financed with loans backed by CDBG money have not met the 51 percent rule. They claim the amount of affordable housing in most of these projects is zero. They say Dallas has not done the due diligence it claims to have done in its annual certifications to HUD and that in fact its own policies work against compliance with HUD requirements.
So who are Lockey and MacKenzie, some kind of freelance affordable housing angels? I'll try to explain their motivation later. But for now, Lockey and MacKenzie are developers with solid track records in this city and elsewhere who had a deal to redevelop the old LTV office tower at 1600 Pacific Ave. into an apartment building. I wrote a column about them May 6.
Lockey and Mackenzie thought they had the financing locked up for the LTV Tower deal—a total of about $112 million, including $19.5 million in a loan from the city for which the city would pledge its CDBG money as collateral. Because CDBG money was involved, Lockey and MacKenzie came in originally with a plan that would have included 51 percent "affordable" units, according to the standards set by HUD.
They have provided HUD with what they say is evidence that City Hall beat them up for proposing that much affordable housing and eventually gutted their deal. In fact they have shown HUD—and me—document after document in which the city states more or less explicitly that it doesn't want anybody to do that much affordable housing downtown.
Here is where we get to fee fi fo fum. How could the city get away with telling people not to meet HUD guidelines while it was certifying to HUD every year that it was "affirmatively furthering" HUD guidelines?