$3.5M still in dispute

GALVESTON — A restriction on Community Development Block Grants could keep the Galveston Housing Authority from getting $3.5 million of a restricted $25 million allocation from the city.

The housing authority, the organization in charge of rebuilding 569 public housing units, is meeting with city staff and others today to determine whether proposed uses of the $3.5 million conflict with a limitation on community development block grants. Previously, the housing authority said it needed the money for “soft costs” to start the rebuild.

But the roughly $160 million community development block grant, awarded to the city to help rebuild from Hurricane Ike, allows the city to spend only 10 percent for services related to planning, predevelopment expenses and soft costs, according to the state.

The city already has agreed to pay CDM, a consulting company, about $16 million for its work managing the disaster housing recovery program on the island.

That 10 percent limitation is flexible, said Jim Suydam, press secretary for the Texas General Land Office, which has taken over management of disaster recovery programs from the Texas Department of Housing and Community Affairs.

“It’s not a hard 10 percent,” he said. “The state has flexibility to adjust those caps for the individual subrecipients if the need is justified. That said, justification is hard to get.”

Officials from the Galveston Housing Authority wouldn’t comment Thursday, saying they were meeting today to assess the situation. While the meeting already was set for today to discuss the budget, it will come just days after City Auditor Glenn Bulgherini sent an email that questioned whether the $3.5 million was available to the housing authority.

Because of the contract with CDM, Bulgherini said that the city had “reached its limitation with respect to predevelopment costs, certain soft costs and permits.”

A CDM spokeswoman redirected interview requests to the city.

Alicia Cahill, spokeswoman for the city, said city staff had not received the housing authority’s proposed budget for the $3.5 million.

“We’re going to comb through it (today) and make sure that everything is OK and the money can be spent,” she said. “We certainly don’t want to start going to go down a road that wouldn’t work.”

Cahill also said that the housing authority can request the money for outside consultants, but if the money is used for “internal staff, then the city would have to look more closely at the budget.”

Starting work

The $3.5 million would mobilize the housing authority’s plan to develop a mixed-income community on the island and start work on homes placed on scattered sites.

In 2009, the council voted to release the $25 million in federal disaster recovery dollars but restricted use of the funds, noting council would approve disbursement of the money only after a final rebuilding plan was completed.

Betty Massey, commissioner for the housing authority board, told council on July 14 that of the $3.5 million about $535,000 will be used for soft costs, such as environmental reviews and design work for the scattered sites. Another $1.42 million would be used for acquisition costs.

For the mixed-income community, $640,000 will pay for predevelopment expenses, including a market analysis. About $82,500 will pay for soft costs, and another $320,000 will be used for acquisition costs.

About $450,000 will be used for professional fees, including architect fees for work to begin.

Council hesitation

But city council has been hesitant to release the money without a final rebuilding plan. On July 28, representatives from McCormack Baron Salazar, the master developer selected to draw a final plan for the mixed-income community, will attend council’s workshop to answer the council’s questions.

Using a blend of public and private funds, McCormack Baron Salazar will build a community of market rate, tax-credit and public housing units. The company and the Galveston Housing Authority have not decided on how many of each type of rental unit will be built.

Also at the July 28 meeting, council members Elizabeth Beeton and Steve Greenberg are asking council to consider adopting a resolution that says it does not support and will not provide funds for the expansion of the number of units beyond the 569 public housing units.

Critics of the housing authority have argued that the additional rental units will compete with other island apartment complexes already struggling to maintain occupancy.

“(This) is in response to public preference that GHA just rebuild the 569 — preferably including some mainland sites — and not add additional sites beyond that number,” Beeton said.

However, at debate is a claim from legal counsel from GHA that the housing authority cannot build back a “concentration of poverty” on the island.

The housing authority is expected to attend Thursday’s council meeting to again request the release of $3.5 million.