In Controversies’ Shadows, Council Decides What to Ask of HUD

Above: the City Attorney's office at 601 Abbot Road, showing the retaining wall that was originally funded with CDBG money.

East Lansing’s City Council is set to use a new method tomorrow night to decide what to ask for in terms of federal Community Development Block Grant (CDBG) funding. This move comes in the shadow of local CDBG-related controversies involving the Avondale Square housing project, cuts to funding of local social service agencies, and the use of CDBG funds to construct a retaining wall alongside the City Attorney’s private property.

The U.S. Department of Housing and Urban Development’s (HUD’s) CDBG program “provides annual grants on a formula basis to states, cities, and counties to develop viable urban communities by providing decent housing and a suitable living environment and by expanding economic opportunities, principally for low-and moderate-income persons.”

Each year, East Lansing applies for funding under the program. In the past, before approving the City’s annual request to HUD, Council took advice from a dedicated citizens’ CDBG advisory panel. That panel took citizen input and told Council what they thought the City’s grant application should propose to fund with HUD funding.

But this year, for the first time, Council will decide without such a group, instead holding two public hearings.

The first hearing is set for the very end of tomorrow night’s meeting – which promises to be a long one. It has not been announced on the City’s public hearings page, nor via news release. As a consequence, few citizens seem to know it’s even happening.

Last year, the City was forced to give back $134,330 in CDBG funds that had been used to reconstruct a sidewalk and retaining wall alongside the private property on Abbot Road owned by City Attorney Tom Yeadon and his partners. The “Abbot Road sidewalk project” – toward which Yeadon and his partners paid nothing – ultimately cost East Lansing taxpayers about $150,000, not counting a $20,000 settlement plus tens of thousands of dollars in legal bills.

In that case, following a fraud suit brought by a citizen and joined by the Department of Justice, HUD determined “that there was a conflict of interest stemming from the contracted attorney’s property receiving a direct benefit of the city’s re-construction of the retaining wall” using HUD funds.

City Manager George Lahanas tried to argue that low-to-moderate income would benefit from the project because they might walk on the sidewalk.

But HUD determined “that the project itself is an ineligible activity and should not have been paid for with CDBG funds. There has been no national objective met with the rebuilding of a retaining wall on private property.”

For this year’s CDBG application, City staff is proposing to ask for $100,000 for “neighborhood sidewalk improvements.” The materials provided don’t indicate where those improvements might happen.

Staff also suggest asking for another $274,230 in funds that would be used to repay a loan from HUD for the Avondale Square housing project. That development – a favorite project of Mayor Mark Meadows and the Capital Area Housing Partnership – has ended up costing East Lansing taxpayers $5 million more than originally intended.

Things have recently gotten worse with that debt. That’s because paying off the Avondale debt has depended in part on tax-increment financing (TIF). Under TIF, property taxes captured on a project are used to reimburse development costs for that project.

But, because the City’s new income tax was paired with a property tax reduction, there’s less TIF revenue coming in from homeowners’ real estate taxes from Avondale Square, and that means more debt problem for the City on Avondale Square.

Historically, the City also used CDBG funding in part to help fund local social-service nonprofit agencies like Haven House – the region’s only homeless shelter for families – and Helping Hands Respite Care – which provides respite care for families including members with significant disabilities.

In light of the City’s major financial crisis, Council moved to cease funding to these groups, instead directing funding to infrastructure needs, particularly the debt on Avondale Square.

The proposed budget from the staff does include $10,000 for one social service group – the Capital Area Housing Partnership, the local nonprofit organization that helped with Avondale Square and on whose board Mayor Meadows sits.

The $454,550 total proposed budget also includes about $71,000 to pay salary and benefits for East Lansing staff administrators.

Comments on this issue can be conveyed to City Council at the start of tomorrow’s meeting during public comment, during the public hearing at the end of the meeting, and in writing to council@cityofeastlansing.com.