Update: HUD Says Paterson May Lose $1.8 million in Federal Grants Because City Failed to Spend the Money
Tuesday, September 4, 2012 • 11:28am
PATERSON, NJ – The city is in danger of losing $1.8 million in federal housing grants that have not been spent yet.
Letters from the United States Department of Housing and Urban Development (HUD) say Paterson may lose $912,550 of its 2012 Community Development Block Grant (CDBG) allotment and $892,600 from the city’s 2007 HOME Investment Partnership program.
[Edito's note: This story now includes comment from the chairman of the city council's community development committee.]
Senior HUD officials are planning to come to Paterson this month for a meeting to try to resolve the problem, said federal spokeswoman Olga Alvarez.
“They’re trying to work it out,'' so they don’t have to re-obligate the money, said Alvarez. “HUD tries very, very hard not to have to (de-obligate) the funds. But if they have to, they have to.’’
“It’s unfortunate that the (community development) department seems not to be able its hands around these projects,’’ said Councilman William McKoy. “With all of the issues and concerns we have, I’m sure there are ways we could find to spend this money. That should be the least of our problems.’’
Councilman Kenneth Morris said the city council members have not been briefed by the administration about the potential loss of funds. "We usually only find out about it after it's allready been done,'' said Morris, chairman of the community development commitee.
Mayor Jeffrey Jones said he recalled seeing some letters from HUD but wasn’t familiar with all the details on the money at stake. “If it happened under my watch, I’ll have to take a look at it,’’ the mayor said.
Under the HOME program, recipients must use the money within five years or risk losing it, according to the HUD letters. The federal agency is looking at taking back funds that were not used since 2007.
Under the CDBG program, HUD says that recipients must not have a cumulative balance of unspent money that exceeds 150 percent of the current year’s total allocation.
In May 2011, HUD warned Paterson that its unused CDBG balance was 157 percent greater than the 2011 allotment, according to one of the agency’s letters to the city. The initial review of the city’s CDBG balance in May 2012 showed Paterson’s unspent money at 89 percent of the 2012 grants, which would have put the city well within compliance.
But the federal officials later learned that Paterson withdrew more than $2.5 million from its CDBG account before the money was ready to be spent – a violation of agency standards, according to the HUD letter. At HUD’s direction, Paterson put the $2.5 million back into its CDBG account, which resulted in a balance that was 184 percent larger than the 2012 allotment, the letter said. As a result, Paterson may lose the $912,000, the letter said.
“The city may avoid a sanction if it demonstrates to HUD’s satisfaction that its untimeliness resulted from factors beyond the city’s reasonable control,’’ said the letter, signed by Yolanda Chavez, HUD’s deputy assistant secretary for grant programs.
The $912,000 would come from Paterson’s 2012 CDBG allocation of $2.4 million, and would represent a loss of about 40 percent of that year’s city funding under the program.
Jones said part of the problem has that his community development department has been so busy addressing issues inherited from the previous administration. “It seems like we’re always in danger of losing HUD money,’’ said the mayor.
In 2010, HUD took back $1.1 million of Paterson’s 2006 HOME funds. In 2011, the agency decided Paterson must repay $2.2 million for problems uncovered in a 2009 audit.
Morris said the Jones administration has not put competant staff members in charge of monitoring the city's use of HUD funds. Morris said Jones has been in office too long - more than two years - to continue blaming problems on his predecessor. "At what point do you become responsible?'' Morris asked.