HUD's in-house auditor has joined the chorus asking what now becomes of assets funded through California redevelopment agencies.
In a report naming specific assets in three cities, HUD's Office of Inspector General (OIG) voiced concern that successor agencies might lose track of which assets had partly federal antecedents, and hence might cut the federal strings attached to their use. It mentions "concerns that affordability covenants related to CPD-funded assets may be ignored during the transfer of control" and a possibility that federally funded assets could be folded into state government sales of assets it regards as its own.
Many cities loaned HUD funds to their redevelopment agencies, which then used them to create or purchase real estate assets. HUD has been concerned as to what will happen to those assets now.
The February 28 report said HUD's own Office of Community Planning and Development (CPD) needs to extract more documentation from local California grantees, and keep a formal list of CPD-funded assets, to safeguard some $99 million in CPD-administered funds that redevelopment agencies have distributed, including Community Development Block Grants, brownfields redevelopment assistance, Sec. 108 loan guarantees, and grants supporting Sec. 108 projects under the Economic Development Initiative.
The report focused on a spot check of 20 large San Francisco, San Jose and Los Angeles assets. Among these, it said 15 of the grantee entities could not prove they had the required "binding and enforceable rights" to assets funded by the CPD programs. Assets mentioned included parts of San Francisco's Yerba Buena Center redevelopment project such as the Metreon shopping and entertainment complex; San Jose's 84 South First Street office building rehab; and, in Los Angeles, elements of the Marlton Square, Noho Commons, Slauson Central Shopping Center and Goodyear Tract projects.
In a rebuttal that formed part of the report text, HUD Deputy Assistant Secretary Yolanda Chavez wrote that OIG's recommendations misunderstood HUD regulations, attributing too much oversight responsibility to HUD CPD and too little effectiveness to CPD's existing risk-based monitoring. Her response recounts HUD's efforts to track transfers of assets in a state-mandated unwinding process not of the agency's choosing. And it protests that some concerns about specific Los Angeles projects, including the Goodyear Tract, were already being addressed after previous audits.
The report is at http://www.hudoig.gov/reports-publications/audit-reports/cpd-did-not-monitor-grantees-cpd-funded-assets-transferred-former .
