State to take $91M in Harvey funds
City accuses land office of hindering the recovery with burdensome rules
Houston’s top housing official said the city is weighing its legal options as the Texas General Land Office looks to strip another $91 million in Hurricane Harvey recovery funds from the city’s portfolio, and accused the state of hindering the city’s progress with “prohibitively burdensome” requirements.
In a letter responding to the GLO’s recent moves, Housing Director Keith Bynam accused the agency of being a bad-faith partner in the recovery effort, using “duplicative, inefficient, inaccurate, and expensive processes and requirements.”
“As a result of GLO’s continuous overreaching, to the detriment of the people the city is committed to serve, the city has no choice but to review its available legal options and remedies with regard to this matter under the contract and applicable law,” Bynam wrote.
The land office put the city on notice in a July 1 letter that said the city again had missed key spending benchmarks for the end of June in the yearslong effort to replenish housing stock lost during the storm. Since then, the agency has moved to take $91 million from underperforming programs in the city’s $835 million Harvey portfolio.
That number could grow, if the state agency decides to target the city’s largest program, a $450 million initiative to construct new affordable multifamily developments. The land office has put off its consideration of that program, which is aimed at developing apartments and rental housing, for now.
The GLO will have to submit an amendment to the contract for approval by the U.S. Department of Housing and Urban De
velopment, but the pact allows the agency to adjust programs if spending benchmarks are not met. The feds recommended the land office enforce benchmarks on the city’s progress in an audit earlier this year.
The dispute between the GLO and the city now has stretched on for years, involving $1.3 billion in federal relief money approved by Congress that passed through the GLO to the city. Citing slow progress, the GLO last year removed about $440 million of the city’s funds — about a third of its portfolio. That consisted mostly of the city’s effort to rebuild or rehabilitate damaged single family homes, though it left the city some money in that program to finish what it had in its pipeline.
Now, the GLO has targeted another $91 million from five other programs. The cuts include $40 million from an effort to provide services to the homeless and other vulnerable Houstonians, $15 million from an initiative to help homebuyers with down payments and other costs, another $13 million from the single family program, $12 million from a bid to construct smaller rental properties and $11 million from an economic development plan.
The GLO plans to use the funds for its single family program, and it said the money will remain in Houston.
“They will now get to the residents in a faster and more efficient manner,” agency spokeswoman Brittany Eck said. “The time for delays is over.”
The latest disagreement centers on spending benchmarks the city was supposed to hit by the end of June. Across its portfolio, the city was supposed to have drawn down on $363 million in housing funds by that deadline. Instead, it hit $279 million, missing the mark on seven of its nine programs. The city failed to reach benchmarks in the previous two periods, as well.
City officials, though, say they are closer to the benchmarks than the land office’s letters would suggest. They say the “drawdown” figure in the benchmarks represents the last possible step in the process by which to measure progress, one city officials say is inhibited by the GLO’s slow response to reimbursing funds. The benchmarks were negotiated and agreed upon by both the GLO and the city.
The city has submitted another $20 million that has not been reimbursed, which still would not be enough to meet its benchmarks. City officials, however, say they have a total of $415 million under contract, which would satisfy five of the nine deadlines and put the city closer to reaching the others.
“Notably, the contractual benchmarks are based on the amount of funds reimbursed back to the city, not the city’s expenditures. That reimbursement is beyond the city’s control,” Bynam wrote in his response. “The GLO’s failure to timely approve reimbursement requests and benchmark extensions when the GLO was the direct cause of the city’s failure to meet the applicable benchmarks was not done in good faith and is not indicative of a proper and effective working relationship.”
The land office’s characterization, Bynam said, also fails to account for its eight-month stoppage on several city programs, a crucial period in which the city could not spend money. Bynam said that made the benchmarks all but impossible to meet.
Take the city’s multifamily program, for example. The city missed its $202 million benchmark by about $42 million. It had submitted another $14 million in payments the GLO has not yet approved, and had another $70 million ready to go that could not be submitted during the pause. That would have been enough to meet the benchmark in that program.
The pause also extended to the city’s $25 million small rental program and its $60 million public services initiative. The GLO has said it will take about $12 million and $40 million, respectively, from those efforts.
“The GLO’s multifamily audit effectively removed over eight months from the time period in which the city could work to fulfill its benchmarks,” Bynam said.
The GLO, though, has noted that stoppage stemmed from serious allegations raised by the city’s former housing director, Tom McCasland. He asserted that Mayor Sylvester Turner was trying to use some of the city’s last multifamily money to fund a project involving the mayor’s former law partner, Barry Barnes. Funding that deal would have jeopardized other projects that scored higher in the city’s rubric and offered more affordable units for low-income Houstonians. Turner denied wrongdoing and later dropped the deal, but the allegations led the GLO to audit the city’s multifamily criteria.
The GLO recently let the city seek multifamily proposals from developers who have applied for the funds in the past and did not get them. It is waiting to see how that process plays out before deciding whether to strip funds, said Eck, from the land office.
“The GLO has not slowed the city of Houston from using disaster recovery funds — only prevented them from using them improperly,” Eck said.
Bynam’s letter also referred to the GLO’s snub of Houston and Harris County in distributing some $2 billion in mitigation funding, a separate pot of federal relief created for the first time after Harvey.
The GLO had proposed giving Houston and Harris County none of its initial disbursement, resulting in bipartisan outcry and a federal finding that the GLO was discriminating against communities of color. The land office subsequently said it would give Harris County $750 million.
The city is set to get none of that money so far.