Urban County Gets Grim Funding Update

Washtenaw Urban County executive committee meeting (Feb. 22, 2011): Leaders of local municipalities got a grim update on Tuesday about looming federal funding cuts that will likely affect projects in many of the county’s low-income neighborhoods.

“I am bringing you some troubling news,” said Mary Jo Callan, director of the Washtenaw County/city of Ann Arbor office of community development. “Do you want to start with the bad news, or the worst news?”

Callan reported that the two major programs that fund projects for low-income neighborhoods – the Community Development Block Grant and HOME Investment Partnership programs, both operated by the U.S. Dept. of Housing and Urban Development (HUD) – have been targeted by Congress and President Obama for significant cuts in both the current fiscal year and in 2012. Washtenaw County communities receive about $2.4 million annually from the CDBG program alone.

Though at this point it’s unclear exactly what the final federal budget will include, Callan said it’s nearly certain that some funding cuts will occur – her staff is planning for a 10% reduction in grants from those two programs for fiscal 2012. “It’s pretty bleak,” she said.

Federal Funding Outlook

The Urban County is a consortium of 11 local municipalities that receive federal funding for low-income neighborhoods. Members include Washtenaw County, the cities of Ann Arbor and Ypsilanti, and the townships of Ann Arbor, Ypsilanti, Pittsfield, Scio, Superior, Northfield, Salem, and Bridgewater. “Urban County” is a designation of the U.S. Dept. of Housing and Urban Development (HUD), identifying a county with more than 200,000 people. With that designation, individual governments within the Urban County can become members, making them entitled to an allotment of funding through a variety of HUD programs.

Two HUD programs – the Community Development Block Grant and HOME Investment Partnership – are the primary funding sources for Urban County projects. Based on a quarterly report presented to Urban County members at their January 2011 meeting, since July 2009 roughly $5.6 million in CDBG and HOME projects have been completed or are underway in Urban County jurisdictions, ranging from housing rehab or acquisition to road improvements and sidewalk repair. [.pdf file of Urban County quarterly project report]

At Tuesday’s monthly meeting of the group’s executive committee, Callan updated members on both the funding status for the current fiscal year 2011, as well as the upcoming 2012 fiscal year.

President Barack Obama recently released his 2012 federal budget, which proposed a 7.5% cut to Community Development Block Grant funds and a 10% cut to HOME funds. The budget provides for increases in some other HUD programs, she said, but the funds coming to the Urban County will almost certainly be decreased.

For the remainder of the current 2011 fiscal year, the U.S. House of Representatives recently passed a continuing resolution – a bill that calls for 65% cuts to the CDBG program, from about $4 billion to $1.5 billion nationwide. A less dramatic decrease is proposed for HOME funds, from $1.85 billion to $1.65 billion. That bill is expected to be modified in the Senate – but the final version will still likely contain cuts, Callan said.

There are a lot of advocates for CDBG and HOME funding, she said, and supporters managed to kill an amendment that would have eliminated the CDBG program entirely. Callan urged Urban County members to contact their federal representatives to let Congress know how important the funding is for the community.

Dramatic decreases have also been proposed for the Community Services Block Grants (CSBG), Callan noted. Obama’s budget calls for a 50% cut to that program, which provides job training and other services for low-income workers. The other 50% will be available only through competitive grants – currently, the funds are allocated through entitlement programs. [Locally, the Washtenaw County Employment Training & Community Services (ETCS) department is designated to receive all CSBG funds for this county. In a follow-up email to The Chronicle, ETCS interim director Patricia Denig said CSBG funds account for about 6% of the department's annual budget, or nearly $600,000.]

At Tuesday’s meeting, several members of the Urban County executive committee had questions about the funding. Bill McFarlane, Superior Township supervisor, observed that it looked like funding for 2011 was uncertain, and wondered what that might mean for projects that had already been approved but that hadn’t yet started. Callan said they should keep moving ahead with their planned projects. Her staff is getting regular updates about the situation, and they’ll reach out to Urban County members to keep them updated as well, as things change.

For the 2011 CDBG and HOME funding, Callan said they hope to know by April what changes will occur. It’s less clear when they’ll learn about cuts for 2012 – Callan said her staff is planning for a 10% drop in funding, though it could be more than that.

She noted that another complicating factor is that they’re dealing with differently defined fiscal years. For example, HUD operates on a fiscal year that begins July 1, as do many local entities like the city of Ann Arbor. The fiscal year for the overall federal government, however, begins Oct. 1 – that’s also the start of the state of Michigan’s fiscal year. Washtenaw County’s fiscal year mirrors the calendar year.

Leah Gunn, a Washtenaw County commissioner who chairs the Urban County executive committee, clarified with Callan that in the event of cuts, all jurisdictions that are members of the Urban County would see funding cut proportionately, based on population size.

After the meeting, Callan told The Chronicle that they’ll need to explore all options in response to the decrease in federal funding, including possible staff cuts to her office, which employs 13 full-time workers. While they’ll try to keep as many of the projects, programs and services as possible, at some point funding cuts will inevitably affect the people who deliver those programs and services, she said.

Public Hearing: 2011 Needs Assessment

The office of community development is putting together an annual plan for the U.S. Dept. of Housing & Urban Development (HUD), which provides funding for low-income housing and neighborhood projects in the county. The plan will include a list of proposed projects located within the Urban County area that would be eligible for HUD funding.

As part of that process, Tuesday’s meeting included a public hearing to gather input from residents about community needs. Lily Au was the only speaker. As she has in the past at meetings for many different public bodies, Au criticized the amount of administrative fees that are used by the office of community development staff to administer their grant-funded programs.

Saying she was worried about those who live in poverty, Au also objected to the demolition of Parkhurst Apartments at 1500 Pauline in Ann Arbor, a low-income housing project spearheaded by the nonprofit Avalon Housing. [The project's site plan was recommended for approval at the Jan. 20, 2011 Ann Arbor planning commission meeting and approved at the Feb. 22, 2011 city council meeting.] Au criticized Avalon’s plan to demolish the existing apartment complex, which is located west of Fritz Park, between Seventh and West Stadium and has 48 apartment units that house federally subsidized low-income residents. The plan calls for constructing a new five-building complex with 32 units, a playground and community center, at an estimated cost of $8 million. Au showed photos of the exterior of the current complex, saying it had been renovated just a few years ago and was in good shape. She also criticized another Avalon housing project – Near North, on North Main Street. She said that developers made Avalon pay too much to acquire the property for its project.

Public Commentary: Staff Response

Later in the meeting, Jennifer L. Hall, housing manager for the office of community development, responded to some of Au’s comments. The exterior of the Parkhurst complex – which Au had shown in photos – tells you nothing about the condition of the buildings, Hall said. The buildings are constructed on land that slopes, she said, and for years water has been infiltrating the structures, causing walls to bow and support beams to rust. Emergency repairs had been undertaken to keep the buildings from being condemned.

Neither Avalon nor the Urban County had sufficient funds alone to embark on a major renovation or reconstruction, Hall said – they needed the resources of the Michigan State Housing Development Authority (MSHDA) for the project. However, after MSHDA engineers inspected the complex, the state agency refused to put more money into the housing unless it were torn down and rebuilt, she said. If MSHDA had walked away from the project, she added, they would have lost that housing completely. The new project has fewer units because that’s the number of units that conform to current zoning, she explained.

As for Near North, Hall said that private developers bought the nine parcels at that site in 2003-04, when the local real estate market was still robust. The developers had planned to build market-rate housing, she said, but when the economy tanked, they couldn’t get financing for their project. Hall said that Avalon’s funders required them to get an appraisal for the property, and she guaranteed that they didn’t pay more than market rate at the time. She also said it was misleading to take the cost of the entire Near North project and divide it by the number of units there, to calculate a cost-per-unit. The project also included retail and office space, as well as a greenway – there are multiple funding sources that involve non-housing portions of the project, she said.

Misc. Updates

Staff of the office of community development gave brief updates on several housing-related projects at Tuesday’s meeting.

Deals have been negotiated on two apartment complexes – Parkside, at 701 Miller in Ann Arbor, and Gateway on West Michigan Avenue in Ypsilanti Township. Both were formerly owned by the Washtenaw Affordable Housing Corp., now an all-but-defunct nonprofit. Gateway in particular has been a problem for well over a year – Jennifer L. Hall, OCD’s housing manager, had briefed the Urban County in detail at its March 2010 meeting:

It was the first and largest rental project undertaken by the Urban County, which allocated $310,000 in 2002-03 to the Washtenaw Affordable Housing Corp. WAHC, which owns Gateway Apartments, had used the Urban County money to rehab the 43-unit property.

WAHC had taken out a $1 million loan to buy the property, but now the nonprofit is “essentially out of business,” Hall told the Urban County executive committee. Avalon Housing, an Ann Arbor nonprofit, has taken over WAHC’s operations, including management of Gateway. WAHC’s board will be deciding how to dispose of its properties, Hall said. And if Avalon isn’t interested in buying Gateway or continuing to manage it, another buyer or property manager will need to be found.

The loan to WAHC is held by three banks: National City, Michigan Commerce Bank and the Bank of Ann Arbor. If a sale is made, the bank loan would be paid first. And if the sale to a party other than Avalon isn’t sufficient to cover the remaining loan balance plus the $310,000 Urban County grant, then the county would be on the hook for repaying that amount to HUD.

Why would HUD need to be repaid? Because the HUD funding stipulates that all of the apartments must be offered at affordable housing rates through December 2012. If not, the Urban County would be considered out of compliance, and would have repay the entire $310,000 to HUD, according to Hall.

On Tuesday, Hall said the three lenders that held liens on both Gateway and Parkside agreed to renegotiate terms. That allowed the nonprofit Avalon Housing to acquire Parkside, she said, and Gateway has been listed for sale. The banks were willing to lower the Gateway mortgage and give them another six months to find a buyer, Hall said – she hopes they’ll be able to sell the property for a price that will cover the debt. Leah Gunn described Gateway as a “big bugaboo,” and hoped they found a buyer quickly.

Hall also reported that the homeownership assistance program managed by the OCD has used up all its Neighborhood Stabilization Program (NSP) funding, which was part of the federal stimulus package. OCD staff is now talking with its partners to see how they can fund future homebuyer education programs. As part of that effort, they’re meeting with local lenders who might be interested in participating in order to receive Community Reinvestment Act credits.

In Ypsilanti Township, OCD is working with township staff and Habitat for Humanity of Huron Valley to deal with the township’s long-term abandoned residential properties. There might be funds available from the Michigan State Housing Development Authority (MSHDA) and Federal Home Loan Bank, Hall said.

Damon Thompson, OCD operations manager, said their office continued to get calls from low-income residents in need of emergency furnace repair or replacement. Last week they’d received a call from a man who was taking care of two small children and was heating their home with his stove, Thompson said. He urged Urban County members to refer residents to the OCD if they need help. In a follow-up phone conversation with The Chronicle, Thompson said that grants are provided – generally in amounts up to $3,000 – through an emergency repair program that’s paid for with CDBG funds. Residents who need this assistance can call 734-622-9025.

Next meeting: Tuesday, March. 22, 2011 at 1 p.m. at the Washtenaw County Learning Resource Center, 4135 Washtenaw Ave. [confirm date]