UPDATED: Unusual Public Hearing Tonight Centers on Lower-Income Housing Funds’ Usage

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City of East Lansing

Avondale Square, a project subsidized by about $5 million in tax dollars, shown in an undated photo provided by the City of East Lansing.

[This article has been updated at the end.]

Many branches of East Lansing’s government will remain quiet this week, the last week of December, as is true every year. But there is one event on the City’s public meeting schedule this week: a “staff led” public hearing tonight, held virtually and starting at 6 p.m., about the City’s use of Community Development Block Grant (CDBG) funds from the U.S. Department of Housing and Urban Development (HUD).

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.”

The City’s use of CDBG funds has been controversial over the last several years, which might help to explain the choice to hold a public hearing disassociated with any regular body’s meeting, sandwiched between Christmas and New Year’s.

Until two years ago, the City deployed a much more intensive citizen-input system for CDBG funding, with a specially-appointed advisory committee that frequently agonized over how to recommend Council divide a limited pot of money. Dana Watson, appointed to Council this year while expressing a strong interest in low-income housing needs, served on that CDBG advisory committee.

But Council decided in 2018 to do away with that committee and that process in the interest of simply pushing as much of the CDBG funding as possible towards paying off the City’s substantial debt to HUD for the Avondale Square development. There didn’t seem to be a lot of point in public input about perceived needs for CDBG funding if Council was just going to use most of the funds to pay the Avondale Square debt.

As ELi has showed in a detailed analysis, the Avondale Square project involved construction of 26 privately-owned houses, 16 of them open-market and 10 restricted to moderate-income households, at a total cost to taxpayers of about $5 million. Playing out differently than originally intended, the project ultimately used a subsidy of about $200,000 in taxpayer dollars per house, including the 16 open-market (income-unrestricted) houses for which the owners have paid full freight.

Because the Avondale Square houses are privately owned, the City had to put up something else as security for the loan. The security for the federal loan is the City-owned Grove Street parking ramp. A few years ago, then-Mayor Pro Tem Ruth Beier joked that, given the state of that parking ramp, the federal government should just be given it and the City could be relieved of the debt. Then-Mayor Mark Meadows rejoined, “It could become part of the National Park Service.”

Joking aside, Council recognized in 2018 that the sooner the debt on that project could be repaid to HUD, the more tax funds will ultimately be saved.

Given the Avondale Square debt problem, in May of 2019, City Council decided to defund social service agencies that had been funded under East Lansing’s use of CDBG funds. Another reason to end that agency-focused granting program was its high administrative cost relative to the dollars that were granted. Following a contentious debate at Council, a $7,000 allocation was made that year to Haven House from the City’s General Fund (funded chiefly by property taxes).

This Monday night’s hearing is meant to specifically review the City’s use of CDBG funds from July 1, 2019, through June 30, 2020. The Performance Evaluation Report provided by City staff shows:

  • $82,630 going to the City’s administration;
  • $297,924 going to pay back debt on the Avondale Square project;
  • $100,000 being used for “public infrastructure,” particularly sidewalks downtown, with the claim that “7,000 East Lansing residents [gained] improved access to public sidewalks”;
  • $5,000 provided as “direct financial assistance to homebuyers”;
  • $5,000 provided for “homeowner housing rehabilitated.”

The report shows one family benefitting from the Down Payment Assistance program and one other family benefitting from the Homeowner Rehabilitation program. Of these, one family is noted as being white (non-Hispanic) and one Asian.

Neither family assisted was homeless or had special needs, and the report indicates that no homeless and/or special-needs households were provided affordable housing units under this past year’s use of funds.

According to the City’s narrative, “The two households that received housing assistance provid[ed] financial materials indicating that they were moderate-income.”

The City did provide $20,000 from the General Fund (again, drawn chiefly from property taxes) to partner with Advent House Ministries “to provide advocacy and awareness of the services that they provide to persons living on the streets.” It’s unclear what exactly those funds were spent on, but it appears likely it was spent on informational flyers in the City’s parking garages and City staff (possibly police officers) who are tasked with working with the homeless in East Lansing.

The City also gave $10,000 in General Fund dollars (not CDBG funds) at the start of the pandemic to fund the work of Advent House, Holy Cross Services, Haven House, Child and Family Charities, and the City Rescue Mission of Lansing. (That’s $10,000 total spread among those five agencies.)

The City’s use of CDBG funds has been controversial for more than Avondale Square. In 2018, following a fraud suit from a whistleblower, the City was found by HUD to have inappropriately used CDBG funds to rebuild a sidewalk and retaining wall on the Abbot Road side of the City Attorneys’ private property.

That case was settled at a cost of $20,000 to taxpayers (not counting legal expenses), although, in violation of the Open Meetings Act, the Council failed to be public about it until ELi caught wind of the case from an anonymous tip.

After formally admitting fault in the matter, the City was required to return the funds, although HUD then provided funds to the City in the same amount, as a sort of do-over. This year’s report suggests those funds were used for sidewalks elsewhere.

The result of the infamous “retaining wall case” was that the City’s taxpayers footed the entire $150,000 cost of the sidewalk and retaining wall at the center of the case. In his defense of what happened, City Manager George Lahanas told HUD that people of low-to-moderate income were likely to use the sidewalk alongside the City Attorneys’ property. The same reasoning now seems to be at play in the use of CDBG funds for sidewalks downtown.

City staff are required to provide HUD with public comment on the matter of the 2019 report after Monday’s hearing. Public comment can be sent via email to Amy Schlusler-Schmitt or can be made live at the meeting. Oral comments at the hearing may be time-limited by City staff. Find the meeting agenda, including the report and phone number to call in, here.

UPDATE AS REPORTED BY ANDREW GRAHAM:

A total of five citizens called to offer comments during the roughly 40-minute long meeting which was run by Amy Schlusler-Schmitt, the City of East Lansing’s Community Development & Engagement Manager. If written comments were also submitted, the City did not share those for the public to see. Schlusler-Schmitt made a brief presentation and answered questions.

One caller asked about the City apparently being on track to fall well short of several stated five-year program goals and also asked about the absence of any assessment of overall need for assistance in various areas. That caller, along with two other callers, made a point to ask about racial and ethnic data, which was sparse in the included materials in terms of indicating who has benefitted from the use of funds. One caller, Chris Root (who does government reporting for ELi) asked about the possibility of aligning the use of CDBG funds with the City’s recent resolution declaring racism a public health crisis.

Root also asked about the use of funds for work on City sidewalks, as did ELi Publisher/reporter Alice Dreger. Both indicated that it appears the City is using CDBG funds — which has an intended purpose of helping low- and moderate-income people — to backfill the City’s General Fund to repair public infrastructure. Schlusler-Schmitt said more money could go to giving housing assistance to individual families but not many apply for down payment and repair funds.

Schlusler-Schmitt suggested that those who attended provide comments to Council during the upcoming budget discussions. 

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