This is how it works at City Hall. The city gives a mixture of city money and federal money to a community group — or even a for-profit company —to build affordable housing. The group sucks down the money. But the group barely nibbles away at the construction project — doesn’t get it done, in other words.
Then when the contract completion date lapses and the housing isn’t there, the group tells the city it wants more time and maybe some more money. If the city says no and pulls the plug, the project stops, half built; the group has not one dime that the city can claw back from it, but the city is on the hook to repay the feds whatever federal money has gone into it.
So guess how that one turns out.
On April 22, 2015, East Dallas Community Organization signed a deal with the city to build five senior citizen rental units in southern Dallas three miles southeast of downtown. The city agreed to give EDCO a subsidy of $608,331 in federal grant money channeled through the city’s Housing Department. EDCO chipped in $5,444, giving EDCO an equity position of 1 percent in the project. The work was supposed to be complete in February, according to the contract.
A briefing to the City Council’s economic development committee Monday revealed that EDCO has consumed 60 percent of the money, but two months after the contracted completion deadline, EDCO has finished only one house. Now, EDCO is one of 10 community housing development organizations asking the city for contract extensions.
EDCO failed to live up to the original terms of the contract, city staff told the committee, because of weather delays, rising construction costs and “significant delays negotiating with a land owner who ultimately refused to sell, [causing] delays with the replat process.”
The staff warned the council in the briefing: “If council does not amend the contracts, then development will halt. There will be incomplete houses. The city will be liable for repayment in instances where federal funds were utilized. Further, the city could be required to initiate foreclosure actions.”
On May 25, 2015, BOSCO Investments-Sandyland signed a deal with the city to produce 35 housing units on Sandyland Road in far southern Dallas, in the northwest crook of the intersection of U.S. Route 175 and Interstate 20, with a completion date of May 25, this year. BOSCO received $402,819 as subsidy from the city, but this deal had no federal money in it. All of that money came straight from Dallas taxpayers.
To date, of the 35 homes that were to be complete by next month, one has been finished. BOSCO has drawn down 90 percent of its city money.
BOSCO did not buy the lots for its development until a year and a half after signing its contract with the city, midway into the life of the contract. Staff told the council committee Monday, “The main cause of delay for this development is it took eight months to close on financing, and the existing agreement did not factor in the time it takes to build out the homes.”
So, that would be: 1) No land. 2) No money. 3) No idea how long it takes to build stuff. Otherwise, ready to go.
Of the 10 entities — some non-profit, some for profit — seeking amendments to their contracts, some are dealing with relatively minor issues common in development projects. Habitat for Humanity is on time with completing 17 of 18 planned houses in the Joppa neighborhood five miles southeast of downtown but needs a delay to allow for one lot that had to be swapped for another because of a zoning issue.
But a majority of the 10 have serious deficiencies, and it’s instructive to look at the reasons why, according to the staff briefing. Some of the excuses for the groups’ failures to live up to their contracts are sort of unbelievable.:
“Change in executive staff twice in the past 2 years and challenges with financial capacity.”
“Weather in February 2018; platting; and difficulty obtaining contractors due to competitive opportunities among contractors.”
“Changed general contractors; scope of work changes; and Developer unaware of the requirement to replace the sidewalk in front of the building.”
“Contract deadlines did not anticipate timing for the City’s development processes such as platting, zoning, and/or infrastructure plans review.
“Some lots acquired were either tax foreclosures or land bank lots and clearing title was a challenge due to lien releases or issues with heirship.”
“Contracts were brought forward to Council for consideration and executed prematurely.”
One bit of background is essential to understanding all this. When I talk about “city staff,” I am speaking of a whole new posse of people in charge of the day-to-day at City Hall.
Almost as soon as City Manager T.C. Broadnax hit the ground here in February of last year, he carried out a wholesale housecleaning of the housing and economic development staffs. The people he shipped out were the ones responsible for the deals we are talking about. Monday’s presentation to the economic development committee was the new staffs' effort to get the council up to speed and ready to tackle these issues officially next month.
A debate that broke out among council members at the committee meeting provided a pretty good window into how City Hall wound up here in the first place. You might wonder, for example: How and why did the city ever get into development deals with people who don’t have any money and don’t know how long it takes to build a house? Wouldn’t that be easy to vet with a few questions?
“How much money do you have?” “How long does it take to build a house?” If they flunk those, you give them a city of Dallas lapel pin and a nod toward the door. Am I right?
The answer to how we got here, on full display at the committee meeting Monday, is that the groups with the deficient contracts possess an asset worth more than money at City Hall — political clout. Some council members at the meeting, notably Tennell Atkins, the committee chair, got very uncomfortable when council member Scott Griggs started asking tough questions.
Atkins has expressed unhappiness in the past with some of the staff changes made by Broadnax, even suggesting it might be a good idea to reinstate some former staffers who were involved in these housing deals. At Monday’s meeting, he was visibly unsettled when Griggs began asking about the elephant in the room — a yearlong federal investigation of some of the housing groups in question.
Everybody at City Hall knows that the Department of Housing and Urban Development Office of Inspector General has completed its investigation and is about to issue a report. Everybody seems to think that the housing groups, called community housing development organizations, or CHODOs in City Hall slang, will be one focus of that report when it comes out.
A problem already briefed to the council by the city manager’s staff, for example, is that some of the CHODOs that have received city largesse over the years are what the new staff is calling “fake CHODOs.” There is a federally dictated legal definition and certification process for becoming a legal CHODO, and some groups have collected big checks from City Hall without going through the certification process or meeting the requirements set by federal law.
If I were asked to come up with an acronym for those groups, I would suggest that, instead of being called CHODOs, the fake CHODOs should be called SGs instead. SG stands for Some Guys.
It’s like this. Some guys go down to City Hall. They ask for half a million bucks. City Hall asks what they want it for. They say “some stuff.” The city cuts them a check.
Griggs told Atkins he didn’t think the council should even talk about extending the contracts for the SGs until the OIG report comes out. Griggs was objecting to an effort by Atkins to get the committee to give its wholesale approval to the 10 contract extensions.
Council member Lee Kleinman backed Griggs up.
“I don’t think I can make a decision on this motion unless I know what staff has provided to HUD on these CHODOs," he said. "How can I make a valid decision on moving these contracts forward?
“Just following the same old beaten path of failure after failure in the housing program is not a good policy.”
In the end, Griggs prevailed. Before the contracts can be considered by the full council in the second week of May, the city manager’s staff must provide the full council with a briefing on the OIG report.
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Griggs told me later, “Staff has to fully brief council on which ones are under investigation. That information is important because I don’t want to vote on a contract extension for a CHODO that’s under investigation.”
Right. Let’s put that one together. Pretend that three years ago, an SG came in and got $400,000 from the city as a subsidy for a project they promised to do to build 100 houses. Now the due date is up, and they’ve only built one house. The 400 large is gone. They want some more time and probably some more money. And they may be under investigation by a federal law enforcement agency.
Oh, what to do, what to do? This is a tough one, isn’t it? What would you do if it were your $400,000? Oh, I forgot. It is!
So are you having a really hard time right now deciding whether to keep doing business with the SGs? Some people at City Hall are, and that fact alone goes to the heart of the whole mess. The SGs are not the real problem. It’s the SOBs who gave them the money.