Dallas Fudges Numbers to Put HUD Money in Favored Pockets

Dallas Fudges Numbers to Put HUD Money in Favored Pockets
Alvaro Diaz-Rubio

From this rag and that bit of bone, a picture emerges of what Dallas has really been doing with hundreds of millions of dollars in federal housing money all these years. It's not a portrait of theft or castles in Spain, but it's not a pretty picture.

Instead what we see emerging from mists of secrecy is an entrenched system of political patronage in which the city bends rules and maybe even fakes things up a bit in order to channel federal money into favored hands. The city argues it isn't doing anything wrong or bad. The U.S. Department of Housing and Urban Development says it's plenty wrong, and it wants its money back.

You may or may not remember some stories Eric Nicholson and I were doing last winter on a housing project called "Patriot's Crossing" across Lancaster Road from the Dallas VA Medical Center. We told you how the city, acting as lender, wrote checks to developer Yigal Lelah to finance his purchase of lots in two city blocks across from the hospital. The consistent theme was that the city loaned him amounts twice what he really paid for the lots.

In 2009 the city loaned Lelah between $4 million and $5 million to buy two entire city blocks, paying an average of $13 a square foot for land that county appraisals said was worth $1 a square foot or less. But that didn't mean Lelah was putting the excess in his pocket. Not exactly, anyway.

Lelah paid $120,000 for one property, for example, that should have gone for $50,000 or less. On closer examination, however, federal loan documents showed that the seller got way less than $120,000 from Lelah. Tacked onto the sale price — and fully financed by HUD — were add-ons including $3,612 to an unnamed person for an unnamed purpose, payments of $6,500 and $22,050 to an architectural firm and a payment of $24,768 to another person for an unnamed purpose for a total of $56,930 in selling expenses not including closing costs or title insurance. All this for a lot that would be bulldozed and is a weed-clotted patch of dirt today, five years later.

At the time Nicholson and I were doing our reporting, the city either grudgingly conceded our numbers were accurate or declined to talk about it at all, but they never gave an explanation for the overall phenomenon, leaving unanswered the question typically represented on social media as WTF.

In the last few weeks, another City Hall story has unfolded to provide a window on the WTF question. A month ago an anonymous commenter on our news blog, clearly a City Hall insider, commented that the HUD Office of Inspector General was in the house at City Hall and that Dallas already had been forced to pay back hundreds of thousands of dollars in federal assistance to HUD. Dallas City Council member Philip Kingston saw the comment and went to work papering city management with questions about whether it was true and, if so, why.

After a process Kingston described as extremely frustrating, the city manager finally released to him a series of communications between HUD and City Hall regarding more than $800,000 the city has paid back to HUD in a roughly one-year period.

The correspondence covers five different program areas in which HUD said Dallas had misspent federal money. All are intriguing, but one is especially interesting because of the light it may shed on WTF.

HUD inspectors have been in the house at City Hall because of the Curtis Lockey segregation complaint against the city. Lockey is an apartment tower developer who accused the city five years ago of misusing federal funds and engaging in an under-the-table policy of deliberate racial segregation.

HUD conducted a four-year investigation of Dallas' housing policies and concluded that Lockey was telling the truth and the city was lying. Since then the HUD inspector general has been auditing all of the city's programs that use HUD money.

People close to the HUD investigation tell me that the paybacks revealed by our anonymous commenter — a secret not disclosed to the City Council until Kingston insisted on answers — probably are a scant down payment on what this scandal will cost Dallas before it's done. Dallas spent hundreds of millions of dollars in HUD money in the period investigated by HUD, and any settlement will involve paying back a significant chunk of whatever HUD decides was misspent.

A relatively small item among the five problem areas revealed in the documents provided to Kingston was for $67,811. HUD said the city had misspent it on a redevelopment project in South Dallas carried out by former Dallas City Council member Diane Ragsdale through her nonprofit housing agency, Innercity Community Development Corp. or ICDC. The city used HUD money seven years ago to fund Ragsdale as developer of 11 city lots on the site of the old Frazier Courts Public Housing Development, demolished a decade ago.

Ragsdale told City Hall she was going to pay an average of $26,500 each for the 11 lots — their value as appraised by the county appraisal district for property tax purposes. The city provided her $291,500 to cover all 11.

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8 comments
Annonnymous
Annonnymous

So what else is new? This crap happens all day, every day. The City staff is never held accountable. Evidence: Queen Mary is still roaming the building like she owns it. Amarillo Cab (City Manager Gonzalez) and little Joey Zapata still have jobs after the Mayor's "investigation" found these two idiots were working on behalf of Yellow Cab to push Uber out of the Dallas market.

There is corruption up and down the city's organization chart to keep "certain" council members happy. Every single employee who deals with a contractor should be investigated by someone other than the city's internal auditor or someone who contributes money to Mayor Rawlings! Looking at you Aviation Department, Park and Recreation Department, Public Works Department, Building Inspection Department, Water Utilities Department and Purchasing Department. But start with that one guy in the Public Works Department whose sole job is to keep the "southern sector" council members happy by doing all sorts of suspicious "work." Using the term "work" very loosely. That bad smell is more than just the Trinity River. Go get 'em, Scott, Philip and Lee!

dallasdrilling.wordpress.com
dallasdrilling.wordpress.com

It appears that some folk wake up in their middle ages after playing the scene while they were much younger and without a career path, or being on City Hall payroll. Suddenly they see that unless they start hustling for money via creative financing and making deals, they will be living on the streets. Hence this type of situation. Some make it longer than others. It will be interesting to see who gets caught doing what next after 6 of the city council members term off in May 2015. I already see three of them leading the pack.

riconnel8
riconnel8

I remember Mayor Rawlings bitterly complaining not too long ago about Toyota choosing Plano over Dallas and how he tried to blame only the school system.  I hope he is looking at the corruption spread thick like oleo throughout Dallas politics and gets a clue.  It's not like all this fudging is beneficial in any way to the city as a whole instead it seems to keep Dallas a dump.


I have always found it interesting that Fort Worth always cites Dallas as an example when they want to do some project.  I never understood why they would want to emulate a system that has had rabid corruption showing up in the papers over and over for the 20 years I have been here.  I hope the Feds show up in Fort Worth next.

86753099
86753099

I'm betting her relationship was with South Dallas Council members and certain City Hall staff that pushed it through under cover.

yamonrtc
yamonrtc

"My question (not Hall's) would be this: If Habitat was standing right there at Frazier Courts with an ability to do 40 houses with no upfront fees, why bring in someone else who needs all kinds of bending-over-backward fudging-the-HUD-docs help just to get started?"


Great question Schutze, and we know the Answer: 


She had the right relationship(s) with City Hall insiders to get the favors while putting the City in a very dangerous position. 


secretburrito
secretburrito

@yamonrtc 

Great question indeed.  There's some shady dealings going on over at City Hall, but what's new?  And who's going to pick up the tab for these HUD reimbursements?  Why, the City of Dallas taxpayers, that's who.  City government needs to be more transparent instead of perpetuating underhanded backdoor dealings.  Crooks - every single one of them (except maybe Philip Kingston).

yamonrtc
yamonrtc

We just need to know who those insiders were?

 
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