CAIRO — U.S. Sens. Dick Durbin and Tammy Duckworth wrote another letter to Housing and Urban Development's investigatory arm, this time calling HUD's "negligent oversight" of the housing authority “inexcusable” and asking that their probe include an evaluation of HUD’s interactions with the ACHA from 2010 to present.
In their letter to HUD Inspector General David Montoya, Durbin and Duckworth note that HUD recently conducted a financial assessment of the ACHA where it found that the local housing agency is “insolvent and unable to pay its bills due to exposure from litigation claims and settlements, high utility costs, and the ACHA’s governance and financial management practices.”
“While we believe that former ACHA officials should be held responsible for apparent abuses of power, fraud, and negligence, based on HUD's recent financial assessment it is clear that HUD shares responsibility for the gross mismanagement that created the current federal public housing crisis,” they wrote in their letter dated Thursday to Montoya.
The newspaper also obtained a copy of HUD’s financial assessment of the ACHA that is dated April 27. It states that the ACHA is insolvent and unable to pay its bills in the ordinary course of business and there is “substantial doubt about its ability to continue as a going concern. (‘Going concern’ is accounting speak to describe, generally speaking, an entity assumed to be able to operate long enough to fulfill its commitments and obligations).
The report states that current projections indicate that the ACHA will likely run out of cash between April and May of this year, and lists as one of several options to be considered to explore the ACHA’s options for filing for bankruptcy protection, and to develop strategies for winding down ACHA’s public housing program. Those more serious options have been avoided at this point.
The 18-page report provides an analysis of many of the serious issues facing the housing authority, which HUD has served as the administrative receiver of since February 2016. Durbin and Duckworth refer to these concerns in their letter to Montoya.
“The report, as well as assessments and evaluations conducted by HUD over the past six years, repeatedly highlighted concerns with the governance of the ACHA, including improper payments, conflict of interests, unauthorized use of funds, failure to comply with HUD policies and federal civil rights laws, and generous employment and benefit contracts,” their letter states. “According to the recent report, ACHA was designated as a ‘troubled performer; in 2013, has failed HUD's physical assessment tool used to determine the habitability of public housing units since 2012, and has failed HUD's financial indicator every year since 2013.”
“Based on these findings, it is clear that HUD had knowledge of the mismanagement of the ACHA, misuse of federal funds, and the deteriorating conditions of ACHA housing. Despite HUD's claims that it repeatedly pushed local authorities to fix the well documented problems at the ACHA, it did little to intervene until it took over the ACHA in February 2016. At that time, the damage had been done and options to adequately address the situation were few.”
“HUD's negligent oversight of the ACHA is inexcusable and its actions warrant a comprehensive review to make certain that those responsible are held accountable and the necessary reforms are implemented to prevent this from happening at other housing authorities.”
They conclude their letter by telling Montoya they await his “timely response.”
The sentiment expressed in the letter is Durbin’s strongest rebuke to date of the HUD officials who were charged with oversight of the ACHA. Just close to a year ago, former U.S. Sen. Mark Kirk, whom Duckworth defeated last November, wrote a similar letter to Inspector General Montoya calling for an investigation into why HUD continued to allocate millions in federal dollars to the ACHA despite documents showing HUD was aware of issues there dating back years.
Kirk’s office said at the time that a staff review found that HUD had allocated $20 million over a seven-year period to the ACHA, from 2008 to 2015, while correspondences between HUD — including its offices of Public and Indian Housing and Fair Housing and Equal Opportunity — and the ACHA cited serious deficiencies dating back to at least 2010.
In Cairo, many residents and city leaders have expressed as much frustration at the local ACHA managers as they have as those from HUD’s Region V office in Chicago who they feel should have done more sooner to protect families and the ACHA’s financial standing.
Up until the point of this letter, Durbin has been relatively complimentary of federal housing officials, applauding their February 2016 move to place the ACHA under administrative receivership, and for their contributions since that time in Cairo.
He previously said that HUD needed time to assess the situation after its takeover, and blamed President Donald Trump’s call to slash federal assistance programs for the fact that the federal government was displacing families from Cairo rather providing funds to rebuild in the city. This is the first time he has offered an opinion suggesting that HUD may be as culpable for the housing crisis as the former managers of the ACHA.
Jereon Brown, HUD’s deputy assistant secretary for public affairs, said on Friday that the federal agency has no comment on the letter. “I’m not getting into any political debate whatsoever,” he said. “That’s their (Durbin’s and Duckworth’s) opinion and the IG will put forth their opinion sometime in the near future. That’s between them and the IG and not HUD. The IG reports to Congress and not us.”
To the broader question of why HUD did not act sooner, Brown said there’s plenty of blame to go around. But HUD did act he said, noting that to the question of to what degree did HUD act, that letters were sent noting deficiencies and offering guidance, and voluntary compliance agreements entered into.
“I don’t know that the guidance was always followed,” he said. For close to two years, the newspaper has outlined many of the ways in which the ACHA failed to follow that guidance and misspent federal funds while residents suffered in squalor.
Brown noted, as he has on several occasions, that placing a local housing under administrative receivership is a rare move, and taken as a last resort. HUD is responsible for oversight of more than 3,200 housing authorities nationwide that are generally managed under the jurisdiction of a city government. In Southern Illinois, most housing authorities operate via an independent board that is appointed by the respective chair of the county board in which it is located.
He said if the question is why HUD didn’t move sooner to takeover the ACHA, the answer is that “it’s got to be a dire situation before HUD actually puts it into receivership.”
“The federal government does not oversee each housing authority until we feel like the federal dollars being put into them are not being spent to really help the residents in the way that they should,” Brown said, in a separate April interview with the newspaper. On Friday, Brown said that HUD’s review of local housing authorities includes regular inspections and reports, and problem areas typically result in guidance and return visits to ensure the problem has been fixed.
Looking at the vast problems associated with the ACHA’s Elmwood and McBride complexes, as well as others, it’s difficult to comprehend how they would have fallen into such disrepair only recently. Issues date back years and years, and calls for improvements have gone unanswered, many residents say. The financial issues also seem to stem back years, though grown much more serious since 2012 as the former executive director, and in some cases, board members, approved excessive spending in benefits, retirement contracts and travel for himself and others.
In further detailing the many issues facing the ACHA, the HUD financial assessment states that recurring deficit spending has caused it to deplete its cash reserves. The local housing authority’s total cash and investment balance decreased 87 percent — by $831,883 — over the past five years, from $955,520 in 2012 to $123,637 in 2016.
Because the ACHA cannot pay its bills in the ordinary course of business, in March of this year, HUD’s administrative receiver requested an operating subsidy advance equal to one month’s eligibility — roughly $140,000 — which was approved. But while that aided the authority temporarily in meeting its obligations, it will result in no operating subsidy being advanced in December 2017, according to the report.
“In effect, ACHA is spending its December operating subsidy allocated to cover its March bills and, therefore, will not have any subsidy left to pay its December bills.”
In detailing its financial concerns, the report also cites a pending federal civil lawsuit against the ACHA brought by numerous residents of Elmwood and McBride Place, a resident rent strike in which close to $218,000 has gone unpaid by residents, and high utility costs paid to Cairo Public Utilities.
The report suggests that of rent owed by residents, about 65 percent of that amount is more than 90 days past due, and is not likely to ever be collected. Furthermore, it states, delinquent rents owed by residents of McBride Place and Elmwood Place — from which HUD will begin to move residents in short order because they are a health and safety risk — could be abated at a future date by court order.
On the issue of utility costs, the report states that the ACHA’s total utilities expense of $197.04 per-unit month for 2015 was more than double the $86.78 per-unit month of its Public Housing Authority peer group. Contributing factors, according to the report, include excessive consumption due to deferred maintenance needs, obsolesces of the units and ACHA’s isolated rural location.
Further, the report states that Cairo Public Utility charged the ACHA a higher base rate for electricity than the average price in Illinois. And it notes that CPU is an Illinois not-for-profit corporation that, as a municipal utility, is not regulated by the Illinois Commerce Commission, and is therefore able to pass on most, if not all, of its costs to its customer base. Sill, Brown said Friday the ACHA is in talks with Cairo Public Utility about solutions to reduce the housing authority’s utility costs and that those conversations have been productive.
In its conclusion, the report offers the following options for consideration:
• Move the tenants out of the McBride Place and Elmwood Place developments as soon as possible using tenant relocation vouchers or any other relocation mechanism available to ACHA and/or HUD.
• Move the remaining tenants out of ACHA’s other properties using tenant relocation vouchers or any other relocation mechanism available to ACHA and/or HUD.
• Prioritize the payments of financial obligations based on available cash flows. First priority should address the health and safety of ACHA residents, then utility providers to assure continuation of service at the properties, followed by payroll and other operating costs.
• Negotiate a suspension or reduction of monthly payments from ACHA’s utility providers until the relocation effort is complete.
• Restructure and/or reduce ACHA staffing.
• Explore ACHA’s options for filing for bankruptcy protection. Develop strategies for winding down ACHA’s public housing program.
Of note, the report states that the listed recommendations are only suggestions to consider. Other options and other federal, state and local resources “may be available to HUD to help facilitate the desired mission based outcome of providing decent, safe, sanitary housing in good repair to ACHA’s current residents,” it states.
Brown indicated Friday, as he has previously, that HUD’s goal remains avoiding some of the more extreme options listed in the report. He said the planned demolition of Elmwood and McBride after residents have moved out, and ongoing talks with Cairo Public Utility about ways to lower utility costs may help stabilize the ACHA so it can continue to manage its other housing authorities, including the family site in Thebes, the high-rises that house seniors and people with disabilities, and the other scattered site developments, plus any additional housing it may take on to provide for those being moved.