More Federal Money Problems for Trenton. BIG Money Problems.

The City of Trenton owes Millions of Dollars to the Federal Government. To be precise, $3,322,313.00, to the US Department of Housing and Urban Development (HUD), principally in connection with its Community Development Block Grant (CDBG) and Home Investment Partnerships (HOME) programs.

This is, in the words of Trenton’s Mayor Eric Jackson in a letter to HUD on December 20, 2016, “for disallowed expenditures during the 2010 and 2014 monitoring visits conducted by Housing and Urban Development staff for the program years 2007-2013.” [Emphasis mine – KM]

jackson 12-20-16 grab

In addition to this money we owe HUD, over the last 14 months the City of Trenton has, in 15 separate Council actions from March 2016 up to its meeting a few weeks ago on May 4,  written off another $2,431,094.70 in HUD funds it failed to spend, over the decade of 2007 through 2016. These are funds we never drew down, so they do not require repayment. But this does represent over $2.4 Million in lost opportunity, about a quarter million dollars per year in funds that could have easily been – but weren’t – spent in this desperately poor city over the last decade.

To be clear, all of the “disallowed expenditures” and most of the unspent funds predate the Jackson Administration, and the current City Hall crew have been working since its very first days in the summer of 2014 to address and resolve with HUD the horrible mess it had inherited from  the previous administrations of former mayors Doug Palmer and Tony Mack.

However, after nearly three years of working to clean things up, the Jackson Administration hasn’t made much progress. In a letter to Mayor Jackson dated February 2, 2016, HUD’s regional Director of Community Planning and Development Annemarie Uebbing frankly confronted the Administration, writing,

“The City repeatedly misses deadlines to submit the Annual and Consolidated Plans, annual performance reports, required monitoring review responses and other correspondence, and to respond to HUD requests for information. While many of the deadlines passed during prior administrations, the deadlines that were set and agreed upon since July 1, 2014 have also passed without an adequate response.”

Five months later, in an internal HUD memo to a colleague dated July 14, 2016, Ms. Uebbing had not changed her opinion. Addressing Marion Mollegen McFadden, HUD’s then-Deputy Assistant Secretary for Grant Programs, Uebbing wrote,

“We concur with the City that many of the timeliness issues begin [sic] with the previous administration, but the current administration has not implemented corrective actions or dedicated the resources required to resolving its timeliness issues. The City has not demonstrated that it has the capacity to run a compliant program…

The City needs experienced leadership and sufficient staff capacity to address outstanding issues, reallocate funds to compliant projects and move the grant programs forward. An analysis of outstanding payments, balances and ineligible activity expenses should be compiled and supported by [sic] the City can move into administering a compliant program. The urgent nature of these issues must be stressed to the Mayor so that all involved parties are aware of the conditions and consequences of the current response level.”

These opinions expressed last year by HUD have not shifted to any great extent, at least up until February of this year, the last month for which correspondence has been made available.

All of the more recent developments – at least those occurring after October 2015 – have occurred under the shadow of the City of Trenton’s designation as a “High-Risk grantee of Federal funds,” in that month. We became aware of that designation in connection with grants administered by the US Department of Justice. Now we know that the “high-risk” label was also applied to the City in all its subsequent dealings with HUD as well. Back in October 2015, I noted the development in this space:

What is clear is that the Jackson Administration – for all of the bold vision and tentative progress outlined in last week’s State of the City Address – still has basic, and significant, problems with many of the day-to-day Basics of running the City’s government. And that is the case even without the excuse of the Musical Chairs and the frequent personnel turnover we saw during the Hunger Games.

Being labeled “a high-risk grantee of federal funds” should be a wake-up call for Mr. Jackson and his Administration to get their act together. We should hear from Mr. Jackson what he – with I would hope as frequent a use of the first person singular pronoun as he used in the State of the City Address – and his Administration will do, and when they will do it, to get back in the good graces of the Federal funders on whom the City relies upon for so much of its funding.

Nothing seems to have changed since then. From October 2015 through today, that Federal Government-wide designation of the City of Trenton has apparently not yet been lifted or changed, and the consequences of that designation continue to affect our dealings with the Federal Government.

All of these developments concerning the City’s current relationship with HUD:

  • The $3.3 Million in disallowed expenses
  • The request for a Voluntary Grant Reduction
  • The potential exposure to repay some or all of that $3.3 Million if the VGR is refused
  • The many missed deadlines to detail corrective actions
  • The absence of “capacity to run a compliant program”
  • The need for “experienced leadership and sufficient staff capacity to address outstanding issues;”

All of these developments have taken place out of the public eye since the Jackson Administration took office. Apart from the very low-key and piecemeal actions taken by Council to write off unspent HUD funds, there has been absolutely no open public discussion, before now, of any of this. Council did conduct at least one closed Executive Session on the topic of the City’s CDBG contract, on December 13, 2016, one week before the Mayor sent his letter to Ms. Uebbing. No details of that meeting have been released, but we can assume that the Mayor’s upcoming proposal may have been discussed in the context of the overall situation with the Federal Government.

The reason for this air of secrecy isn’t at all clear. Relations between the City and Federal governments are – or rather, should be – open and transparent. Nothing we discuss on the City side is intended to be withheld from the Feds, and the folks in HUD have been transparent with the City. There isn’t any proprietary nor personal information contained in any of the documents linked above.

The only ones left in the dark about what is going on with the City’s CDBG and HOME funds are the citizens of Trenton, and the many local community-based organizations that have been recipients of these funds over the years. It’s certainly an embarrassing situation for the City and the Jackson Administration. But embarrassment isn’t a legitimate reason for the cloak of secrecy that’s been covering this issue.

So, what happens next? As of today, HUD has not yet responded to Mayor Jackson’s request for a Voluntary Grant Reduction (VGR), as seen in the screen grab above, to resolve the $3.3 Million in “disallowed expenditures.”

What is a VGR? If the Mayor’s request is granted, then means that amount will be recouped by HUD by reducing future HUD grants to the City over a three-year period, about $1.1 Million per year for each of 2018, 2019, and 2020. These years, perhaps conveniently, all will fall after the next city election, during the next Mayoral and Council term of office, and will represent an effective reduction of about 50% in those program grants for those years. A whopping amount. And that’s the best case scenario.

If the Mayor’s request is denied by HUD – not least because there is a significant chance that the CDBG and HOME programs may not exist in those future years, as they are proposed to be canceled outright in the Federal Budget prepared by the Trump Administration – there is a good chance we may have to pay back some or all of that $3,322,313.00. And this situation comes to light only a little over a year after the Jackson Administration faced a payment to the Federal IRS of over $4 Million Dollars that had been embezzled by the City’s then-payroll service, an obligation the City was able to meet only by floating a long-term bond to raise the cash.

Obviously, we don’t want to be in that kind of multi-million dollar hole to the Federal government again, so soon after the last time! But the City has a very limited set of alternatives at this point, having come close to exhausting the patience and goodwill shown the City by HUD over the last several years. And HUD, in turn, faces an uncertain future under a new Administration in Washington most decidedly unfriendly to the kinds of problems faced by the primarily urban communities served by the Department.

This morning, I wrote to Mayor Jackson and Housing and Economic Development Director Diana Rogers, offering them an opportunity to comment on the topic, as well as asking a few additional questions. Director Rogers replied on behalf of the City:

Thank you for your email and interest in the CDBG/HOME program.

As noted this Administration and staff have been aggressively working on the cleanup and reconciliation of past projects and HUD findings. We have made considerable strides to address outstanding concerns while also improving the management of the program with the limited staff and resources available.

The VGR and its impact will be discussed during our required public hearing scheduled for this Friday (June 2nd) as we move forward to plan for HUD approved activities for the 2017-2018 program year.

I will be happy to discuss the improvements to the program, the VGR and the overall program in general.

The CDBG and HOME programs, and their funds, have been vitally important to both the City of Trenton as well as the many community groups in Trenton which have been able to receive sub-grants from the City to conduct their own work in town over the last several years. The future of those organizations is now at risk of being badly impacted by the potential loss of future funds from the VGR proposal. What happens to them?

This is a big, important, complicated issue, one that can’t be adequately addressed in a single piece on this page.

Today’s  piece can serve as an overview of the whole matter, and provide some sense of scope and the issues involved, even if by skimming over the surface of them.

Over the next days, this space will examine the issue, in somewhat greater detail as made possible by the release of hundreds of pages of documentation by the Housing and Urban Development Department – some of which have been discussed and linked in this piece – in response to a Freedom of Information Act request filed on April 7 of this year by this writer. At that time, representatives at HUD’s local New Jersey office informed me that the full file of material concerning the City of Trenton amounts to thousands of pages. The manpower and effort required to assemble and copy it all was daunting, both for HUD and for this writer. Instead, the Department offered “major correspondence between HUD and the City of Trenton related to the CDBG program from 2014 to the present.” This selection has resulted in a more manageable, but still greatly informative, 216 pages.

I hope to shed some light on the background of many of these issues, the programs and activities supported over the years by HUD’s grants to the City, and the problems brought to the surface since 2010, with special attention given to the history of the relationship of the current City Administration with the Department.

It is a compelling story, one I hope you will also find to be important and informative.

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