(October 3, 2003, initial post) -- Documents obtained by LB activist Traci Wilson-Kleekamp under state freedom of information law show the U.S. Dept. of Housing and Urban Development (HUD) has directed LB City Hall to repay over $1 million in federal taxpayer money after the city failed to produce over 300 low and moderate income housing units promised in a competitive Homeownership Zone grant application.

To our knowledge, the loss of a million dollars in HUD grant funding -- for City Hall's inability to deliver on promises made to the feds -- has not been seriously discussed publicly by the LB City Council or any other city agency.

The documents, obtained by Ms. Wilson-Kleekamp under the CA Public Records Act, indicate City Hall promised to deliver 381 units of low and moderate income home opportunities but produced only 44, then sought to modify its grant arrangement to shift the money to other projects.

In February 2002, City Hall requested a material amendment to the grant...and HUD considered the proposed revisons of such scope as to constitute a new Homeownership Zone proposal. HUD gave the city 45 days to submit an acceptable amendment.

In May 2002, City Hall submitted a request for an amendment...which HUD considered so significant as to require a re-rating and re-ranking of the city's Homeownership Grant proposal...adding that the proposal "does not appear to be within the competitive range."

On Sept. 30, 2002, then-City Manager Henry Taboada advised HUD that inasmuch as "it will not be possible for the City to meet the remaining grant agreement objectives by December 2002, my staff and I have reluctantly come to the conclusion that the best course of action for the City of Long Beach is to close out the grant agreement on terms that are mutually acceptable to HUD and the City."

In November 2002, HUD terminated the grant and required the city to repay HUD all Homeownership Zone grant funds not expended for eligible expenses, or $1,380,577.

HUD ultimately agreed in early 2003 to accept slightly over $1 million repaid over three years.

LBReport.com posts public record documents between HUD and city management on links below. The documents speak for themselves.

The following documents were provided to Ms. Wilson-Kleekamp by City Hall in request to a CA Public Records Act request. She has provided them to LBReport.com:

• Sept. 7, 2001 letter from HUD to City Mgr. Henry Taboada:

  The Renaissance Walk project reflects the type of creative design and new homeownership development we hope to see throughout the [Homeownership] zone...

  HUD is concerned that the City of Long Beach appears to be unable to implement its approved plan by its contractual completion deadline of December 2002. Although 40 housing units in the Renaissance Walk project have been developed, little progress has been made in completing the remaining 341 new units promised by the City and approved by HUD.

  HUD appreciates the City's need to rethink its development strategy and housing action plan for Central Long Beach. However, the City should be mindful that any significant changes to the City's approved Homeownership Zone Plan will require a re-rating and re-ranking of the City's proposal...

  In response to your request, HUD will authorize an extension until January 18, 2002, or six months from our meeting, for the City to submit a propose amendment to its approved Homeownership Zone proposal...

• February 1, 2002 letter from City Mgr. Taboada to HUD:

  In September 1997, the City of Long Beach applied for $3.5 million in Homeownership Zone Grant funds offered by HUD in the July 7, 1997 Homeownership Zone NOFA...

  The requested $3.5 million was to be combined by no less than eight public financing sources totaling over $87 million and private funding of nearly $77 million. The original HOZ [Homeownership Zone] plan was to provide 381 new homeownership opportunities, two major anchor retail centers, a school, parks, green streets, community gardens, expanded transit facilities, a hospital expansion, and an aggressive commercial revitalization program.

  [cites completion of Wrigley Marketplace, 40 single family homes and community childcare facility at Atlantic/Hill, three Habitat for Humanity homes with another under construction and a new int'l elementary schools]

  ...Although we have no accomplished our target goals in terms of new housing units, we have made considerable progress toward the visual improvement and economic transformation of the zone...

  [cites reasons for request]

  While we forge ahead with our efforts in the existing Zone boundaries, the City is proposing to amend the HOZ as follows:

  1) Extend the southern and western boundaries of the HOZ to include the East Village Arts District, portions of downtown Long Beach, and the historic Willmore City Neighborhood...The expansion will allow us to do the following:

  Add additional ownership housing units in an amount greater than provided in the approved plan, and in a mix of condominium, townhouse, and loft housing

  Add rental housing and two new hotels, and provide live-work opportunities for low-income artists

  Develop additional parks and a new school

  Expand our efforts toward commercial revitalization, green streets/tree planting, housing rehabilitation, and in-fill housing development

  2) Eliminate certain projects from the approved plan due to lost development sites.

  3) Add City Place, a new major commercial development center in place of the unsuccessful American Marketplace development

  4) Extend the completion date for three additional years to December 2005 to implement existing and proposed new programs and projects.

• March 5, 2002 letter from HUD to City Mgr. Taboada:

  ...The city's proposal was selected based on the comprehensive quality of its proposal design, the demonstration of its ability to implement its proposal in a timely manner and its commitment to the significant leverage of other funds...The approved proposal committed the city to develop 281 new homeownership units, 51 percent of which would be sold to low and moderate income families, on various sites identified within the American Market Place/Wrigley Homeownership Zone boundaries.

  Since the approval of its Homeownership Zone in 1998, the City of Long Beach has taken very limited action to implement the homeownership portion of its approved proposal. To date, only 43 homeownership units have been completed of which 15 units or 35 percent have been sold to low and moderate income families. Forty of these units are located within a single townhouse development, Atlantic Hill, located in the American Market Place portion of the approved zone. The city expended $1.6 million or 84 percent of its HOZ grant on this development. Only 20 percent of the units were sold to low and moderate income families.

  On a number of occasions, HUD has expressed its concern about the City of Long Beach's lack of progress in implementing its approved proposal...

  On February 1, 2002, the City of Long Beach submitted its amendment request...

  HUD finds that the City of Long Beach's submission proposes revisions of such scope as to constitute a new Homeownership Zone proposal. HUD has no authority to accept new proposals.

  HUD is granting the City of Long Beach an additional forty five days from the date of this letter to submit an acceptable amendment to the approved Homeownership Zone...

  As stated in HUD's September 7, 2001 letter, the City of Long Beach also has the option of declining the Homeownership Zone designation and repaying to HUD any grant funds it has expended.

• May 1, 2002 letter from City Manager Taboada to HUD:

  ...[W]e propose the following:

  1. Reduce the number of units from 381 to 205 units (this is directly proportional to the HOZ grant amount requested and the actual grant awarded)

  2. Allow the creation of homeownership opportunities by new construction, acquisition and rehabilitation and resale to low and moderate income homebuyers

  3. Extend the grant period for another three years to allow completion of the new housing development; and,

  4. Reduce the requirement that 51% of the HOZ grant assisted units be targeted to low income households and replace it with a 30% low income (<80% of AMI) and 21% moderate income (< 120% AMI)...

• July 1, 2002 letter from HUD to City Mgr. Taboada"

  ...I am sympathetic to the city's desire to rethink its neighborhood revitalization priorities and strategy for the American Market Place/Wrigley neighborhoods. Nevertheless, the changes you propose are so significant as to require a re-rating and re-ranking of your HOZ proposal by HUD. While no final determination can be made until this process is complete, your current proposal does not appear to be within the competitive range.

  In order to undertake a re-rating and re-ranking of your proposal, a detailed amendment must be submitted...

  The revised, complete amendment should be submitted to HUD no later than ninety days from the date of this letter...

• Sept. 30, 2002 letter from City Mgr. Taboada to HUD:

  ...The City of Long Beach has carefully considered your letter dated July 1, 2002...Considering...that it will not be possible for the City to meet the remaining grant agreement objectives by December 2002, my staff and I have reluctantly come to the conclusion that the best course of action for the City of Long Beach is to close out the grant agreement on terms that are mutually acceptable to HUD and the City...

• November 1, 2002 letter from HUD to City Mgr [by this time, Jery Miller was acting city manager]

  ...For some time, it has been evident to HUD that the city of Long Beach has not been actively implementing the homeownership portion of its approved Homeownership Zone proposal...

  Since the city was unable to meet the terms of its Homeownership Zone initiative, the grant cannot be "closed out." Rather, HUD is terminating the June 30, 1998, Grant Agreement between HUD and the city of Long Beach...[and] as authorized by [citation] HUD is also requiring that the city repay to the Secretary [of HUD] all HOZ grant funds not expended for eligible expenses, or $1,380,577.

  ...HUD recognizes that the city made progress in the non-housing components of its Homeownership Zone proposal. However, the city took limited actions to achieve the 381 promised homeownership units. Furthermore, of the 44 completed units, only 14 or 32% were sold to low and moderate income families.

• January 30, 2003 letter from acting city manager Miller to HUD:

  ...We propose that HUD allow the City to retain 32% of the $1,600,000 grant expended, in proportion to the number of low and moderate income units it produced, or a reduction by $512,000 of the required repayment. We propose a repayment amount of $1,088,000 over the next five years...

• March 26, 2003 letter from HUD to Acting City Mgr. Miller:

  ...HUD is willing to accept the City's methodology for prorating eligible HOZ costs, provided the city returns $1,088,000 in HOZ grant funds to HUD within three years. [emphasis in original]

• April 23, 2003 letter from Acting City Mgr. Miller to HUD:

  ...The City of Long Beach will repay HUD the agreed upon portion of the Homeownership Zone grant, or $1,088,000 in three installments. The first two installments of $363,000 each will be paid on April 30, 2004 and April 30, 2005 respectively. The final installment of $362,000 will be paid on or before April 30, 2006.

  ...The City of Long Beach requests, that, by accepting this repayment schedule, HUD acknowledges that the City has settled and resolved any issues regarding the receipt and/or use of HOZ grant funds and, that when we mutually close out the grant, these issues will not be raised again.

In a closing May 21, 2003 letter from HUD to City Manager Miller, HUD "acknowledges that the city of Long Beach has resolved all issues with respect to the receipt and use of its HOZ grant funds. Once the city has completed repayment of $1,088,000 from non-federal funds, all obligations to HUD with respect to HOZ grant HZ 97-011 will be met."

LBReport.com is unaware of any public City Council or other city agency meeting at which the million dollars in federal grant money which City Hall is effectively being required to repay was candidly explained or discussed.

LBReport.com telephoned the office of Community Development Director Melanie Fallon to ask for a citation of any such instance. We were told she would return to the office on Monday.

LBReport.com will update this article as newsworthy. Check back with this page, click refresh or reload on your browser to ensure latest update.

Developing.