Dave Rice 11:35 a.m., July 30
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Redevelopment Agency Block Grant Scandal: the Carolyn Smith Legacy
In a recent article published in our distinguished daily paper, it was disclosed that "nearly $2 million" in federal community development block grants (CDBG) may have to be paid back by the City of San Diego's Redevelopment Agency as a penalty for non-existent paperwork and civic mismanagement of those federal funds.
Don't believe it: the total is more like $13 million, and we can thank our strong mayor's insistence on keeping our twins SEDC and CCDC in business for raising our penalty stake. There goes the new Central Library money.
Actually, it was mostly SEDC. Specifically, deposed ex-president and executive bonus guru Carolyn Smith.
HUD found that the City of San Diego "failed to administer its CDBG funds provided to the [Redevelopment Agency] according to HUD requirements." Of the funds cited as questionable, $1.8 million was immediately declared ineligible, and another $11 million was "unsupported." (www.hud.gov/offices/oig/reports/files/ig0991005.pdf)
It turns out that most of the "unsupported" funds were loaned out through the Southeastern Economic Redevelopment Agency (SEDC) between 2000 and 2007. In a recent San Diego City performance audit of SEDC, Smith was generally described as a one-woman show, directly controlling all decisions on publicity, long-range planning, developer negotiations, contract approval, and the hiring of multiple consultants on numerous undisclosed projects, all within Smith's "authority" to make out $50,000 contracts without informing SEDC corporate board members.
If details are necessary to "support" the additional $11 million in questionable expenditures, the only way to get at them is to have Capt. Spock do the Vulcan Mind Meld with Smith, because nobody at SEDC has ever seen any paperwork on this stuff... or it would have come to light earlier as a last-ditch defence to prevent her from being fired last summer.
From the HUD IG report: "The CDBG redevelopment loans were administered so poorly that Southesatern Economic Development Corporation staff managing four redevelopment projects areas were not aware that most of the loans issued by the City were actually funded through the CDBG program."
Previously, it was revealed that SEDC would routinely request monthly funding from the City to make its payroll, including off-budget bonuses to staff members including Carolyn Smith. So far, there has been no breakdown by the City of how much "unsupported" spending was done with City-provided CDBG funds, or whether any such use was permitted by HUD regulations.
On this issue of SEDC reimbursement requests to the City in general, the HUD IG report states: "The [San Diego City] CDBG Administrator added that one of the problems was that when redevelopment loans were approved and allocated by city council members and the [City of San Diego] Redevelopment Agency, they did not go through the City for eligibility or approval. As a result, there were no project files in the City's CDBG administration office. In addition, the current City accountant in charge of the reimbursements requested by the Agency did not get involved with the HUD rules and regulations and strictly dealt with the accounting. The City's CDBG administration was disconnected from the redevelopment loan process, allowing the Agency to spend CDBG funds at will, while not following HUD requirements."
Unless I am mistaken, we now know that this funding nightmare is precisely why the mayor cannot end this City's dependency on CCDC and SEDC... or somebody might have to actually determine if any of the 35 reviewed projects were or are eligible for HUD-regulated block grant funds for community development. According to the HUD IG report, irregularities were noted or at least suspected going all the way back to the 1970s.
The City's official response to the HUD IG report is that all funds were spent on projects furthering HUD national objectives such as direct assistance for low-income housing. The SEDC website contradicts this, citing various commercial projects including Marketcreek Plaza, Imperial Marketplace, Sizzler's, Starbucks, and Domino's Pizza (www.sedcinc.com/reports/Central_Imperial_Mid_Term_Review.pdf) and reported to HUD that SEDC's Central Imperial redevelopment area "is only 32 percent residential, which is not primarily residential." Additional funds were spent on celebrations and festivities at the commercial sites, as described in the HUD IG report.
Not too long ago, the FBI seized computers at SEDC...
My bet is that none of the "unsupported" $11 million will ever be properly documented according to HUD regulations, as the only existing documentation is floating around inside Smith's cranium. If this is true, then it looks like the Carolyn Smith bonuses were a lot more expensive than first realized.
More like this:
- Today's News: San Diego City Council to Forgive $$$,$$$$,$$$ in Redevelopment Loans & Interest after 2009? — June 22, 2010
- So What Happened to the $139 Million in Undocumented HUD Loans? — March 15, 2010
- Redevelopment Agency Block Grant Scandal: No Quick Resolution Here — Jan. 12, 2009
- Recent SEDC Audit to City Raises More Questions than Answers — Sept. 18, 2008
- County Grand Jury recommends consolidation of CCDC, SEDC into single redevelopment agency — Sept. 10, 2008