Behind the Headlines – March 22, 2019

Behind the Headlines – March 22, 2019


– (female announcer)
Production funding for Behind The Headlines
is made possible in part by: the WKNO Production Fund, the WKNO Endowment Fund, and by viewers like you,
thank you. – The intricacies of
federal housing programs and questions about how
some money was used, tonight on Behind the Headlines. [dramatic orchestral music] I’m Eric Barnes, president
and executive editor of the Daily Memphian. Thanks for joining us. I am joined tonight
by Paul Young, Director of Housing and
Community Development for the City of Memphis,
thanks for being here again. – Thanks for having me.
– Along with Bill Dries, reporter with
The Daily Memphian. So, we’ll talk about
a bunch of things that HCD is involved in,
that you are involved in, everything from the fairgrounds to Downtown TDZ, Pinch District, a whole lot of small housing
and affordable housing projects that are going on, so we’ll
walk through as much as we can, but we’ll start with a story, an issue that came
out in the fall, and a story that
Bill did recently, about federal HUD wanting back
as much as $17 million in funds, and we’ll
walk through all that and the intricacies
of how this works, and all the different
programs that are going on. Let me say, and I’ll turn
a lot of that over to Bill, but to start, what they’re
saying is, the money was used on projects that
weren’t approved, but let me say that
it is not a thing where HUD is saying
someone lined their pockets with this money, a
developer or an official, or something like that, we’ll
get that out of the way. But they are expressing concern about how certain
money was used, so walk us through that, and
I’ll let Bill help us out. – So there were technical errors in how the funds were applied. Just to take a step back,
we’re talking about HOME funds, H-O-M-E, these funds
are allocated to cities across the country
based on formulas, and the funds are
intended to be used for developing
affordable housing. We’ve used them with
small non-profits, we’ve used them with larger,
multi-family developments, and the two projects
that are in question, that are under review,
were Cleaborn Pointe, which was formally
Cleaborn Homes, and the former Marina Cove,
which is now Eden Square over off Winchester
in Mendenhall. And so on these projects,
with HOME funds, you’re supposed to meet what they call a
commitment requirement. You have two years to commit
your funds to a project, and there’s a very
technical definition for what it means to
commit funds to a project. And so, under that
definition, you must have an executed contract with
the owner of the property. You must have an environmental
that’s completed, you have to do a cost analysis,
all these different things that you have to
check the box on, and the issue in
these instances were that all of the
boxes weren’t checked by the time the
funds were committed. And so, based on
HUD’s definition, they said, you don’t
have a true commitment on these projects, at the time
that you issued the funds, so we want you to pay
back all of those funds because they don’t
see themselves as having much
wiggle room, because the commitment definition
is outlined by Congress. It’s statutory. – And this is all with
spending that was done between, what, 2012 and
2015, is that correct? – It was a little bit earlier. It started in 2011, and the spending went
through about 2015, 2016. – Okay, Bill.
– And to be clear on this, the rules for
committing the funding, how it is supposed
to be committing, that has changed over
the years, hasn’t it? – Yeah, so now they have
suspended the requirement for commitment, because many
cities across the country have had this issue, and
there’s been a lot of coverage that’s taken place on how
cities have had issues with the commitment requirement. Many cities have been
required to repay funds. The issue in our instance is
that it’s a sizable amount, and so, just to dig
a little bit deeper on the issue on Cleaborn, was
that the city had an agreement with the housing authority for the development
of the projects. This is similar to all of
the agreements we’ve had with all of the different
HOPE VI projects. We have a master agreement
with the housing authority as the developer,
and we would have, whether it’s capital
funds, city dollars, federal funds, all of the
dollars that we’re using for the project, from
the city perspective, that we’re applying to MHA, would be through this master
development agreement. And the issue with HOME funds was that MHA doesn’t
technically own the property because it’s a tax
credit property, and when you have a
tax credit property, it’s actually owned by an LLC, that’s getting the tax benefit. And so, our agreement should
have been with the LLC. So we’re going back and now
trying to revise agreements and make sure that the agreement
is with the actual entity and so that will allow
us to be able to preserve some of the funding. The issue on Cleaborn, I
mean, not Cleaborn, sorry. The issue on Marina
Cove was that, if anybody remembers what
Marina Cove looked like and all of the issues that
were outlined on the property, you remember that it was
in pretty poor shape. The city used HOME funds to
demolish the whole property. We built housing, it
was about 24 acres. We built housing on about
one and a half acres in partnership with
Power Center CDC and Habitat For Humanity. But HUD’s issue there
was that we possibly over-subsidized the property, because we only
built nine houses. – So in essence,
used that HOME money to subsidize the creation
of the Power Center School and so on.
– Right. So that’s part of their concern. – So, in the case of
Eden Square, Marina Cove, which was an apartment complex that actually had
water canals in it, which became a breeding
ground for mosquitoes when the property was abandoned. In the case of what
is now Eden Square, is it possible that there
could be more housing built as part of that development?
– Yeah, absolutely. That was always the plan
was that more housing was going to come. We had to meet, not only is
there a commitment deadline, there’s also an
expenditure deadline. You have two years
to commit HOME funds, and you have five
years to spend it. We were pushing up on
the five year commitment, we needed to get homes
delivered on the site, so we built what we believed
were the requisite number of housing units at nine, based on the amount of
HOME funds that we used, but there were still some issues that they identified in the end. – In one instance, they
came to look around. The HUD folks came
to look around, and when they saw the
school, they were not, some alarm bells went off. – Yeah, I mean, if
you look at the site, the biggest thing on the
site is obviously the school, and so they assumed that
the city put HOME funds into the school, which
technically we didn’t. We put the funds
into the demolition and clearing of the site, and our position is that
it’s a mixed-use development. It’s a 24-acre site with
multiple uses on the site, and mixed-use in
the City of Memphis is not necessarily the
way mixed-use looks in a city like New York or DC, where commercial is
on the bottom floor and residential’s
on the upper floor. When you have the suburban
style environment, like Hickory Hill, mixed-use
is more horizontal, so you have multiple
uses, schools, commercial, and housing all on one site. – So, walk me through
how this goes, because you’re
negotiating, it seems like, over essentially the amount. When do you think you’ll
know something on that, that is final? – Yeah, so we’re doing
a couple of things. We have a national expert
that’s working with us on digging into the numbers and trying to revise
the agreements to make as much of the
projects eligible as possible, which will reduce the number. One of the things that I have really been trying to work on, and I don’t wanna go
too deep into this, but, there was about
$10 million total that was spent on both
of these projects, that was ever committed,
$10 million. Of that $10 million,
we spent $6.8, and so what’s happening
is, HUD is saying, you violated the commitment
issue with $10 million, and, we don’t deem
these projects eligible, so the $6.8 goes on top of
the $10 million, which is what pushes us to 17. My argument is, the 6.8 is a
part of the $10 million, so once HUD reclaims
the $10 million, they have the full amount
that was ever allocated to the City of Memphis. It was not two separate amounts, so that’s one of
the conversations that the Mayor’s gonna be
having with the Secretary, and aside from that,
we’re still trying to make as much of these
projects eligible as possible, and that will reduce
the amount as well. – So that money, if HUD,
when will you find out, one, from HUD? Are you just in the
bureaucracy here? – I would say we’re
still negotiating, so I don’t have a firm deadline. I would think in the
next six months or so, we will know a little bit more. – That money, if it
has to be repaid, at whatever level, that comes
out of the general fund? – No, so that’s a
good clarification, thanks for asking that. So, the money, if
it has to be repaid, will come out of future
allocations, so each year, we receive about $3.5 million in home funds, and so
that would be reduced to somewhere around
a million dollars. – As they kind of take back,
as a penalty on those for that. – Exactly, and that
part is negotiable. Those are the things that
we’ll be talking to HUD about, is how much can we
pay back each year, how long can we spread this out? – In the meantime, the
money that you talked about, the $3 million a year,
is that on hold, or are they actually
allocating that money? – We have the
amount for this year that we were
supposed to receive. They have not
docked our pay yet. [chuckling] But, what happens is,
they will de-obligate. That’s the term that
they use, de-obligate. We have a federal account
where all of the funds sit, and they will go into the account
and pull back any dollars that are not committed
to a project. – You came in in 2016 with
the Strickland administration. All this was done, all this occurred under
the Wharton administration. – Yeah, all of the
commitments happened between 2011 and 2013. – When you came in,
did you recognize, or you or your staff recognize,
hey, there were problems, potential problems
from 2011, you didn’t? – No, this became aware to us. We became aware
of this last year. – When Federal HUD sent
the letter to Strickland. – We knew that there were
issues before September, but it was somewhere around
March when they started asking for further documentation
on those projects, which is what gave
us an indication that they are looking at them, but we didn’t know what
the specific issues were until we got the
letter in September. – Back during this time, Robert Lipscomb was
in your position. He was also over MHA, which was, and Robert Lipscomb was,
we won’t relive all that, but most people who
follow this show or follow Memphis politics, know that he was a
controversial figure. I mean, he was very
much associated with bringing a lot of
money into the city, federal dollars,
and leveraging them into some of these
big conversions of huge, pretty blighted
housing projects, which we’ve talked about
a lot over the years. But there was also
these questions of him wearing both hats, and
there were definitely people who were uncomfortable with
where the money was going. Does this go back to that? I mean, do you, and I guess
what I’m bouncing around, do you look back and
point your finger at the previous administration, and specifically,
Lipscomb and his staff, for what they did wrong? – So, certainly not
pointing fingers. I think that these
were technical errors in the administration
of the project, and staff was working on very, very complex projects, and when HUD talks
about this with us, they said that your
staff just does not have the sophistication for
these types of deals. So obviously, there, they also acknowledge the fact that having a public
housing director and the city housing director,
can create some conflicts. – Which, you do not
wear both those hats. – I do not wear both
of those hats, no. But I don’t think that was
the root of the problem. The root of the problem
was the technical issues. – And to clarify, we maybe
wrapping this up and move on to some of the other
projects you’re involved in. If people, as I said
at the top of the show, HUD is not saying that
someone lined their pockets, that someone embezzled money, that someone committed
a criminal offense. – That’s correct. Nobody, there’s nobody
that lined their pockets with this project. These were technical errors. The housing is attractive, affordable units
have been provided, people are living there. If you go and take
pictures of the units, or go talk to the people
that live in the units, you will see that
the funding was spent within the spirit
of the HOME Program, which is the case that
we’ve been making to HUD. – Yeah, Bill. – You talked some
about other cities, and the mixed-use concept. Just about everything that
garners any attention here, whether it’s done
publicly or privately or some combination of
it, today, in Memphis, involves mixed-use development. So are the federal regulations, I guess now they’ve caught up
with the concept of mixed-use. But was there some lag
time where it took a while for HUD to kind of
figure out, oh, okay, there are other uses
on the property, but there’s also
housing there, too? – No, I think they
fully understand it, and their funds can be used
for mixed-use projects. It’s just, you have to have all of these different
cost allocations to ensure that their
funding only went into the housing units, and not the other
aspects of the project, and that’s part of what
their concerns were on Marina Cove in particular. – Kind of begin to
segue out of that, but South City is one
of the last conversions of these, there were
originally 11, I believe, big housing projects
that were built, that have been torn down,
this is the last one. This is basically what
southeast of FedEx Forum, kind of to the, and
if people haven’t, it is a massive project. I drove by recently, in
the last week or two. What is the status of that? And talk about
that mix of funding for specifically South City. That is not just
federal dollars. It’s a mix of federal, local,
and private funds, right? – Yeah, absolutely, so
South City’s redevelopment of Foote Homes, Foote
Homes had about 420 units. They’re rebuilding 600
to 700 units on the site, and there are a number of
neighborhood improvements. Right now, we are
wrapping up phase one, which is roughly 120 units. Phase two is under
construction, another 120 units, and we should be
closing on phase three sometime this late
spring, early summer. So, you’ll start to see those
units begin to be occupied by the fall, so we’re moving
forward on the housing side. There are a number of
partners in terms of funding. HUD provided $30 million. The City matched
it at $30 million. The Women’s Foundation
has raised private capital to enhance the lives of
the people that moved away, in partnership with
the housing authority, Urban Strategies, and
McCormack Baron Salazar, and CommCap Advisors, so
there’s a lot of players that are coming together to
try to revitalize that space and it’s moving
forward very well. – Thinking about that
area around there, which was so blighted,
I mean, at one point in the history of Memphis
was a very active area, but Vance Middle School
is there now, empty. There was talk, when this
whole project was gonna happen, this redevelopment
was gonna happen, some money would go into,
or efforts to revitalize, not just the land itself,
but the area around it. So, what’s the status
on Vance Middle School, and what else might be
happening around there, to improve the quality of life? – Yeah, so there are three
vacant schools in the area, Vance, Georgia, and MLK. MLK is the old
Porter Junior High. The school board just
voted to demolish Vance. I think that was last month,
and so that is happening, and it will be a vacant
development opportunity. I think Inner City Rugby’s
using the space right now, which is a great use
for the property. We, the city, in partnership
with MHA had options on MLK and Georgia. We are going to go back
to the school board and release our
option on Georgia and try to move
forward with MLK, and try to get some offices
and mixed-use-type development in that space to activate
the neighborhood. – Okay, Bill, nine minutes left. – All right, where is the
response of private development in the area, and we
should point out, the South City, the
development area is more than just what used
to be Foote and Cleaborn. It’s a much bigger
area than that, so how is private
development responding now that you’ve got homes
coming up on Foote Homes and Cleaborn is what it is, a completely
different looking area than when it was public housing? – Yeah, I think the
development community is responding well. I don’t think projects
like Union Row would be in progress, but
for the work that we’re doing at South City, because
you are revitalizing a significant swath
of that community that’s immediately
adjacent to Union Row. You see things like Forum
Flats that’s coming up. Universal Life is in
very close proximity. – Forum Flats, people maybe see, even with the tournament
this last weekend, are the apartments that
are right at that corner across from Universal Life
and the church, as you’re… – Right, so the housing
units that are right there, at Danny Thomas and MLK, so the development
community is responding. We actually have a private
development opportunity that the city has put out along
with seven other proposals on memphistn.gov/pdl. [laughing] You can go and check those out, but there’s a development
opportunity there just south of Cleaborn Temple, so there are some
significant opportunities. And part of the beauty
of what’s happening in that neighborhood
and community is that we wanna be able
to preserve affordability while seeing the neighborhood
grow and prosper. – Now, the aid parcels
are spread around the city and these are areas of land that the city either
owns directly, or has some indirect
ownership of, and the idea is for those
areas to be catalyst, to get something going there, and then it spreads to
the surrounding area. – Right, so that’s the
concept behind Memphis 3.0. Our first comprehensive
plan for the city is to identify
anchors in communities and have those anchors be
the catalyst for development. So no longer will we try to
sprinkle funds all over the city and have minimal impact,
but let’s identify, where’s the heartbeat
of each neighborhood, of each community and use those
as investment opportunities. And so, these properties
are in anchor areas, and they go from Raleigh to
Fairgrounds to South City to Pinch District,
Binghampton, Crosstown, Orange Mound, so there’s a
significant swath of the city that’s going to see
private interest, and so we’re excited about that. – You mentioned a couple of
things that we’re gonna get to. Fairgrounds, where,
that redevelopment is essentially under
your purview, right? Where does that stand,
what happens next? – So, Fairgrounds, we
received approval in November for the TDZ from the state,
so now is the hard work where we put together
all the financials. We have to make
the numbers real. We have a RFQ out
for a developer to develop the northern
portion of the site. That’s the area along Central
where the track is right now, Central, Early Maxwell area. Our goal is to fill
up that 18 acres with commercial development. That commercial
development will provide the sales tax revenue to
support the rest of the site. – That could be restaurants,
stores, hotel, motel? – All of the above. We know that we wanna
see a hotel there. We’re sure that retail,
restaurant retail, would work very well there, given that we’re
looking to develop this youth sports facility. – And then, Downtown TDZ are
involved in that one as well? Where does that stand,
and what is your… That starts getting into
everything from the Pinch to the riverfront to
the convention center. I don’t know, what order
do you wanna take those? Where do all those stand?
– So Downtown TDZ, there are a lot of things
happening and a lot of players that are making it happen,
Memphis River Parks Partnership, obviously is doing the
work along the riverfront. The convention center
is coming up right now. We’re working in
the Pinch District to rebuild infrastructure
in the area that can facilitate development. So there are a lot of great
things happening in downtown. We have until 2031, and
so we’re trying to see as much activity as we can, to boost up those
sales tax revenues to allow us to do more
relative to tourism. – Before I go to Bill,
2031 is important because? – That’s the end of
the TDZ in downtown. – So at that point, all
of that sales tax revenue, instead of much of
it staying in Memphis for these kinds of projects, it starts going
directly to the state, like most sales tax revenue.
– Exactly. – And I should say,
Wayne Risher on our staff had a long, detailed
story about the history of those kinds of developments,
the TDZ and so on. But Bill, five minutes left. – So, there was also
recently some movement on the convention center hotel. There’s a little bit
of breathing room in that, as I understand. There was an original deadline
for the hotel to be open, and that’s now got, as I said,
a little more breathing room. – Right, yeah, there’s a little
more breathing room there. I think the deadline
initially was 2021 or 2022, and now they pushed
it back a year or two, so it gives them a
little bit more time to get all the things in place
to get that development done, so we’re really excited about
having a hotel to complement what will be a new and
improved convention center. – It’s a 450 room hotel? – I think it’s five.
– 600. I thought it was six.
– Yeah, but a massive hotel. Yeah.
– It’ll be a big one. – Yeah, Bill. – And so, what happens
to the area around it, which is of some interest
because your office is at 170 North Main. City Hall’s directly across
the street from this. Any longterm thoughts
about what happens to Civic Center Plaza
when a convention center, hotel and complex comes
to the neighborhood? – Well, I hadn’t been
involved in any discussions about any of the usage
changing at Civic Plaza. Obviously, it would change
the character of the plaza. It would make it more active,
which I think that’s a thing that we would all like to see,
is more activity out there. The space that it
is looking to occupy is not that highly used, and so I think it would
just be a complementary use to all of the other things
that are on the plaza. – You talked about some
of the big projects, and obviously the South City and some of the huge
housing projects. There are smaller ones,
too, neighborhood level, and we’ve had you on
before talking about that, of, talk about your
role or HCD’s role with much smaller,
even home improvements for people who are
low income, and so on. – Yeah, so we have
a host of programs. We just finished
our grant round, where we’re supporting
non-profits across the city, whether it’s a block club that wants to do an
afterschool program, to community service agencies
that are battling homelessness and so we do that type work. We have non-profit partners,
many of them were on last week, that are out in the
neighborhoods fighting blight or rebuilding housing
units one at a time. People like Steve
Lockwood and Frayser, or Roshun Austin at The
Works in South Memphis, so there’s a host of agencies
that we partner with, to try to rebuild
neighborhood and community. We understand that
housing is one aspect, and that’s obviously the
biggest space that we play in, but in order to make
a complete community, you have to ensure
that the families that are going to occupy
those housing units have opportunities, and so
we try to support those, to the extent we can
through our grant programs. – What percentage of the
money you’re talking about, with grants and that is passing
through, is federal money? – So we have a budget
of about $16 million, and about 12 of it is,
11 of it is federal. – The rest is city?
– Is city, yeah. About $5 million
is city funds, and the remainder is federal. – Okay, and you
talked about blight and the show we did last
week with Steve Barlow, Neighborhood Preservation,
Inc., and some other folks. Has the city done
enough on that? I mean, is there, and what
more do you think could be done through your office or through
the city administration with blight and
blighted properties? – I think the city has
worked within the confines that we have been given. I think one of the things
that we are looking at now is trying to figure
out, are there ways for us to find more
flexible funding? I would think this issue that
we started the show with, with HOME funds, has
demonstrated to us, that we can dictate the
needs of our community better than the
federal government can. We just have to have
more flexible tools that will allow us to be
able to administer the funds in the way where we are
able to help people. And so, we’re exploring,
are there other tools that we can put in place
that can support that? – And is that, with that, does that also come
accountability? Back to how we started the show. I mean, is that…
– Absolutely. It definitely comes
down to accountability. We wanna make sure that
the funds are going towards the intended use. If the use is affordable
housing, we wanna make sure that it’s in the hands of people that are delivering
the housing units. – All right, thank
you very much, that’s all the time we have. Thank you, Bill, and
thank you for joining us. Join us again next week. [dramatic orchestral music] [acoustic guitar chords]

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