Two developers trying to do redo the old LTV Tower downtown a decade ago ran into trouble with the city because they wanted to obey federal law and include affordable housing in their project.
Two developers trying to do redo the old LTV Tower downtown a decade ago ran into trouble with the city because they wanted to obey federal law and include affordable housing in their project.
Jim Schutze

Feds Are Full Time at Dallas City Hall, but City Flips Them the Old Bird Anyway

Not my place, but would somebody else who knows what’s what please step forward and offer to give the new Dallas city manager and his top people a 45-minute seminar on recent city history? They seem to be good people, but they’re kind of traipsing out with a basket and a blanket for a picnic on the field where all the landmines are.

HUD! THUD!

At last week’s City Council meeting, council member Scott Griggs tried to give a hint to City Manager T.C. Broadnax, who, like many of his recent top hires, is from out of town. Alarmed that the council was about to do exactly the same stuff again that got City Hall into big federal trouble in the first place, Griggs asked the city manager’s staff if they were aware their building is still crawling with agents from the Office of Inspector General of the U.S. Department of Housing and Urban Development.

First, let me make sure we know what that’s all about. HUD controls a vast amount of annual federal funding granted to the city. HUD’s Office of Inspector General is its internal equivalent of the FBI. The OIG sends out investigative agents to look for people or institutions or local governments playing fast and loose with federal funds.

If they find criminal behavior, the OIG agents turn that over to the Justice Department and the real FBI. If they find civil noncriminal matters, they may recommend that HUD cut off funding. In some cases, HUD is required to cut off funding to entities that can’t account for federal funds.

Dallas is in so much trouble and under such suspicion at present that the OIG is maintaining a permanent staff at City Hall to look into it. They have their own office space within City Hall. They even have their own parking passes.

Think about it. That’s like you come to work; you see a bunch of strange suits working at desks in the office where the boss’ boyfriend, the so-called treasurer, used to be; you ask who they are; and somebody says, “Oh, that’s just the FBI.”

At last week’s meeting, Griggs pointed out to the entire council and the city manager that the council was about to engage in an official, on-the-record and fully documented legal lie. In order to justify creating a special tax break for a developer, the council was going to officially certify — think of it as swearing under oath — that a certain area of North Dallas was so poor and neglected that it would never be improved “but for” the tax break.

“But for” is the key legal principle there. State law says the particular kind of tax break the council wanted to hand out to the developer is only legal for an area where no development would take place but for the incentive. Griggs waved in his hand a copy of the city manager’s research showing that the area for which the tax break was intended is affluent, top notch, already being developed and, in fact, the site of $8.5 million in new homebuilding in the last year, without the tax break.

Furthermore, Griggs pointed out that the proposed development is entirely upside down, is wrong and flies in the face of federal law on affordable housing — exactly the kind of offense and trouble that brought the OIG to City Hall in the first place. The proposed development deliberately crams all of its required affordable housing into already segregated, economically deprived areas in southern Dallas and sweeps it out of affluent North Dallas.

That’s a violation of the law and a breach of an out-of court agreement the city entered into with HUD three years ago. Similar behavior was the beginning of what brought the feds here almost a year ago with their magnifying glasses and their Sherlock Holmes hats to scour City Hall for clues.

Griggs asked city lawyers at last week’s council meeting if it was true that “the Office of Inspector General of HUD is still in this building conducting a survey on what should be investigated.”

One more important footnote: The term “survey,” used by Griggs, is a technical one. The OIG originally came to town to carry out what it calls an “investigation” — a focused probe of a particular program or activity. It soon found it needed to look at way more than one program.

So now it is doing what it calls a survey, an overall review of many city activities to see how many and which ones deserve investigations. In that sense, a survey is worse for the city than an investigation. It’s the mother of all investigations.

An assistant city attorney (sorry, didn’t get her name) went to the mic to answer Griggs’ question and said, “Yes. The inspector general is still in this building.”

“So why is this relevant?” Griggs said to the council. “These types of deals are the types of deals that get us in trouble with the feds.”

Here is where we come to the picnic on the field of landmines. Raquel Favela, one of Broadnax’s top new lieutenants from out of town, told the council that the feds in the building are not looking at anything connected to the tax break the council was about to vote on. The tax break falls under something called “tax increment financing,” or TIF.

“What the Office of Inspector General is reviewing right now,” Favela said, “has absolutely nothing to do with our tax increment finance policy. What they are reviewing specifically is our home investment partnership program, and that’s it.”

BOOM! All of a sudden, it’s raining pickles, hotdog buns and severed human feet! TIF districts are how it started! Tax increment financing is how Dallas got into trouble with the feds in the first place.

A decade ago, two developers who were converting an old downtown office building called LTV Tower into apartments got into trouble over a downtown TIF because they wanted to include a substantial amount of affordable housing in their project. TIF tax breaks are parceled out by special quasi-governmental bodies called TIF districts, with their own boards of directors. The downtown TIF wanted developers downtown to take lots of money from HUD, but it didn’t want them to build any subsidized housing downtown. The TIF board wanted downtown to be fancy-pantsy.

The two developers, Curtis Lockey and Craig MacKenzie, launched a body of litigation against the city and against HUD, including a lawsuit that is still working its way through the federal courts. They also filed an administrative complaint with HUD accusing the city of deliberate, programmatic racism by policy.

That complaint was the first landmine. It is why a team of federal gumshoes now all have parking passes at Dallas City Hall.

HUD OIG is kind of like the FBI for HUD for hanky-panky with HUD funds. In fact, a lot like.
HUD OIG is kind of like the FBI for HUD for hanky-panky with HUD funds. In fact, a lot like.
hud.oig.gov

How could Favela, who is chief of economic development and neighborhood services, not know that? Pretty easy. Ever since Lockey and MacKenzie first ratted out City Hall to HUD, the old, entrenched city staff has done everything it could to deny the importance of their complaint.

All of the city’s current policy on placement of affordable housing, calling for it to be put into “high opportunity” or diverse, affluent areas, comes straight from an informal out-of-court settlement with HUD on the Lockey and MacKenzie complaint, called a “voluntary compliance agreement.”

Rather than admit that, the old city staff has always insisted that the high opportunity placement policy flows from a different and irrelevant lawsuit about something called “disparate impact.” They don’t like the Lockey and MacKenzie stuff because it includes accusations of criminal behavior. Disparate impact is just kind of like having a bad attitude toward desegregation. Hey, getting called out for a bad attitude beats jail time any day.

Favela’s remarks at the council last week told me that some of the old staff may have been pouring her Kool-Aid for her in the lunch room. Or maybe somebody just thinks all those OIG gumshoes down the hall are stupid.

Griggs opened by holding up a page from the city manager’s brand-spanking-new super-scientific planning tool, called Market Value Analysis, to prove that the City Council would be lying and engaging in a fraud when it certified that North Dallas is poor. Then again, who needs a high-tech planning tool for that? Just drive around for an hour.

It was depressing, frankly, to hear a top city staffer, Favela, assure the council the feds won’t notice, anyway, because they’re probably not looking in that direction. (Please imagine me loudly tweeting on my police whistle, jumping up and down and jabbing in that direction with both index fingers as we speak.)

But you know what was even more depressing? After Griggs warned them against what they were about to do, the mayor and the entire city council except for Griggs voted to do it anyway. They supported a measure certifying that North Dallas is poor and will never be developed but for tax breaks, and, by the way, all the new affordable housing should be crammed into already racially segregated neighborhoods in southern Dallas.

Oh well. Next time I’m down there, if it starts raining people-guts and smartphones on me from their picnic, I know what to say. “Did anyone think to bring relish?”

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