Council Looks to Shift HUD Funds from Nonprofits to Debt Payments

From left: City Manager George Lahanas and Council Members Shanna Draheim, Erik Altmann, Ruth Beier, and Aaron Stephens at last Tuesday’s meeting.

East Lansing’s City Council wants to change how citizens weigh in on the City’s use of annual funds from the U.S. Department of Housing and Urban Development’s Community Block Development Grant. Council also wants to stop using funds to support local social-service nonprofits in favor of paying down the City's debt to HUD on Avondale Square and paying for infrastructure repairs.

Last Tuesday night, East Lansing’s City Council held a meeting to discusses many issues, including this one. One concern has been a citizen advisory panel making recommendations on social service funding that Council is unlikely to follow, because Council's priorities lie elsewhere. 

Until now, local nonprofit agencies that provide one-on-one services have been able to apply to East Lansing for some of the City’s Community Development Block Grants (CDBG) funding which comes each year from Housing and Urban Development (HUD). The City has also sometimes used money from the City’s general fund to help local nonprofit agencies.

HUD allows municipalities to determine how CDBG funding will be spent but under a specific formula, and for the past 15 years, East Lansing has generally chosen to allocate 15% to public service agencies, 65% to public infrastructure, and 20% to staff salaries. But Council's priorities now favor paying down debt and fixing public infrastructure.

Amy Schlusler-Schmitt, the City’s Community Development & Engagement Manager, explained to Council that reviewing applications from nonprofits eligible to receive funds has been a labor-intensive process. A press release is sent out by Schlusler-Schmitt around the third week of November, and applications are due back the third week of December.

Schlusler-Schmitt holds a budget workshop during that time where people can come in and ask questions about applying. An East Lansing CDBG advisory committee is formed, drawing members from existing boards and commissions, typically with a representative from the Historic District Commission, Planning Commission, and Human Relations Commission.

That committee receives the applications in January. They generally conduct four to five meetings and they finish work sometime in March, holding a public hearing and forwarding their recommendations to City Council.

Schlusler-Schmitt told Council that it could amend the City’s citizen participation plan for CDBG funding. If Council members choose to make changes to the plan, they would need to allow 30 days for the public to weigh in on the changes. Public notice would likely be provided in newspapers and via notices posted at City Hall and the Library. After that, the City could submit the updated citizen-participation plan to HUD.

Council Member Erik Altmann asked Schlusler-Schmitt if a volunteer-citizen CDBG advisory panel is required, and Schlusler-Schmitt responded that what’s required is some form of citizen participation, not necessarily such a panel. One concern has been that, last year, Council moved to largely override what the panel recommended after much work by the panel.

Schlusler-Schmitt explained that “some municipalities have a very staff-driven process and then just hold a community meeting.” She explained that she could, for example, attend a Red Cedar or Bailey neighborhood meeting and ask their priorities, and then go back and make a recommendation from that to Council.

In a case like this, the City staff could post a proposed action plan early so people know they can comment.

Altmann asked Schlusler-Schmitt, if the Council decided to take all of the CDBG funds to put to the Avondale Square Section 108 loan, “we could post that as an action plan and invite feedback, and that would satisfy the citizen engagement portion?”

Schlusler-Schmitt said yes, and in that case, Council would amend the citizen participation plan. To stay on track, she noted, it would be good to make a decision about the process by the end of September or early October. This would give staff the opportunity to communicate to agencies that there is a new process – in other words, to let them know not to expect funding.

For this year’s budget process, there was a lot of discussion over whether now is a good time for City Council to stop funding local nonprofits, because of the City’s financial problems. Organizations that have been funded include Haven House, the region’s only homeless shelter that accepts families with children. (Read more.)

In discussion of the matter, Council Member Ruth Beier said, “I’m really focused on using every dollar to pay down debt.” She thinks all the available money should go to the Avondale Square loan.

Council Member Shanna Draheim believes the focus should be on infrastructure as well as the debt.

Council Member Aaron Stephens agreed, and added, “Maybe we’re not in the position as a city to fund this from federal money.” He suggested that if the Council took action on medical marijuana before the state-wide vote on legalization in November, a scheme could be developed by City Council to use taxes on marijuana sales to help fund agencies. That would allow the City to use CDBG funds to pay down debt at the same time.

Altmann said when it comes to infrastructure projects, he is comfortable with the engineering department making recommendations about what to use funds on, and he doesn’t see a need for the advisory committee on that. He preferred the idea of using some other form of citizen engagement by having citizens comment on staff recommendations.

Draheim said if there is no advisory committee, she isn’t comfortable with the staff coming up with the plan and having it simply go straight to a public hearing. She said she “would like to be a little more proactive with citizen engagement. These are community grant dollars.”

Altmann said contacting the Council of Neighborhood Presidents seems like a natural choice. They could also ask neighborhood organizations that have benefited from CDBG in the past, he said.

Tuesday night’s discussion of the agenda item listed as “Human Services Agency Funding” ended with Altmann saying an amended participation plan may show up on the Council’s agenda for a vote soon.

You may also be interested in:

ELi’s explanation of debt on the Avondale Square project

ELi’s reporting on this year’s decision to reverse a CDBG funding decision

ELi’s reporting on a federal fraud suit involving the City’s use of CDBG funding