City Council ordinance seeks to limit Mayor's discretionary powers, but only this one time

Yesterday, I wrote about the potential for increased federal scrutiny over the manner in which D-CDBG funds are being monitored by the LRA and used in Orleans Parish.

Recently, Mayor Ray Nagin revived plans to purchase the Chevron Building even though City Council had voted against pursuing such an agreement last summer. The Nagin administration has argued that because only funding sources independent of the city budget would be used - the revolver fund or D-CDBG money - Council has no legal oversight authority. Presumably, that logic would extent to every project the Mayor might pursue using non-budget recovery dollars.

I've now learned that City Councilmembers Jackie Clarkson, Arnie Fielkow, Stacy Head, and Shelley Midura have cosponsored an ordinance that would require the Mayor to disclose plans to use money from the capital project fund or D-CDBG funds and to obtain Council approval for those plans.

Read the ordinance here.

The ordinance only applies to "City Hall Project Worksheet 7746," which represents the proposed purchase of the Chevron Building.

It does not tackle the larger questions about the mayor's power to use D-CDBG and revolver fund money in a discretionary fashion and would not preclude the mayor from applying recovery dollars to other projects such as the proposed LSU/VA hospital or the proposed renovation of Municipal Auditorium with little disclosure or oversight.

The measure will be up for a vote at City Council on Thursday, January 21st.

HUD Monitoring Disaster CDBG Funding More Closely?

For more than a few weeks, American Zombie and I have been wondering aloud Mayor Ray Nagin administration's interpretation of laws governing money outside the parameters of the regular city budget, as well as City Council's oversight of that money.

Of particular concern is the "revolver fund" that the Louisiana Recovery Authority established to advance cash to parishes to pay for projects that will eventually get FEMA reimbursement. Nagin wants to use some of that money to buy the Chevron Building and convert it into a new city hall - even though the council has already rejected such a move.

A statement from Nagin spokeswoman Ceeon Quiett makes it clear the administration believes it has discretionary power over funding streams like the revolver fund and that the council has no legal oversight.

"The matter before the City Council was the appropriation of funding from one capitol [sic] account to another ..not an approval of the acquisition. Funding appropriation –Legislative Branch authority per the charter, Purchases –Executive Branch authority per the charter."

To clarify, Quiett is saying that the proposal to buy the Chevron building that was shot down by City Council over the summer involved the city budget. Because the most recent proposal only uses money from state and federal sources, such as the revolver fund, there is no formal oversight process through which the administration must seek City Planning Commission or City Council approval. Whether that is accurate is debatable, but it is the administration's position nonetheless.

Presumably, that position extends to the city's use of the Disaster Community Development Block Grant money, for which the LRA is the local administrator of federal funds from the U.S. Housing and Urban Development Department. The City Council had obligations when it comes to this money in that the LRA required a recovery plan with community buy-in, including Council approval, before the agency would release the HUD funds.

However, when it comes time to allocate real capital to a specific project, the modification of the original plans accepted by the LRA, or the reallocation of surplus money from a specific project, it would appear that the Mayor has vast powers.

Once the Council approves a framework for yearly DCDBG expenditures, only the LRA or HUD would be in position to block funding for a specific project submitted by Nagin on the grounds that it deviates from the original recovery plan, anticipated expenditures were vaguely documented or if HUD regulations are otherwise violated.

Since the Obama administration took office and Shaun Donovan was sworn in as the new secretary, HUD has been more proactive about cracking down on dysfunctional projects. HUD's receivership of the Housing Authority of New Orleans, for instance, has been totally reshuffled amid widespread allegations of graft and waste.

There is also evidence that HUD is taking a fresh look at its role in the hurricane recovery process both in New Orleans and elsewhere.

In November, AP reported that a HUD review had discovered over 11 million in unaccounted disaster money at the New Orleans Redevelopment Authority (NORA) that had fallen victim to poor record keeping or a failure to follow HUD regulations.

That same week AP also reported that HUD had rejected Texas' recovery plan for rebuilding areas badly battered by Hurricane Ike in 2008. The notification letter from HUD, which you can read here, suggests that Texas' plan was denied for failures to comply with federal citizen participation requirements.

Are these recent actions highlighting regulatory compliance issues in New Orleans and Texas indicative of a much more widespread concern on the part of HUD administrators that processes governing the efficient use of recovery money were poorly constructed, inattentively followed or even explicitly violated?

What effect will increased federal scrutiny have on controversial local projects, such as the Municipal Auditorium renovation and the purchase of the Chevron Building, for which the Nagin administration claims the City Council has no stipulated oversight authority?

To what extent does the council concede or dispute the administration's interpretation of their oversight authority over irregular DCDBG and revolver funds? How does that effect their ability to halt the mayor from spending money on major developments should they wish to do so?

While the upcoming elections have clearly taken center stage, the dispute between the outgoing administration and the City Council over the discretionary use of federal and state recovery dollars is the most important subplot for engaged citizens to closely monitor. It is this fundamental interpretation of City Charter and of HUD rules and regulations that looms over the individual development controversies that grab headlines - from Municipal Auditorium to Lower Mid-City and the proposed medical complex.

When news broke that the Chevron Building purchase was revived, City Council members expressed surprise and confusion. Yet since the New Year, there appears to have been no follow-up. It should be very interesting to watch what happens as specific projects begin to initiate expenditures.

Process Matters: The Revolver Fund and the Chevron Deal

I think WDSU was the first to report on it but the Times-Picayune has a story as well.

I also learned earlier today that the city was again pursuing the acquisition of the Chevron Building and the abandonment of City Hall. The section 106 (historic review process) notice is here and supporting material is here.

Both of those articles remind us why this is news. Over the summer, the administration negotiated with Chevron Corporation to potentially purchase the Chevron Building from the oil giant for the price of $8 million, pending the process stipulated by City Charter.

There was a process. The City Planning Commission held a hearing and a vote. The City Council held a hearing and a vote.

City Council voted against the project.

So some members were apparently surprised today to learn that the administration was going to go ahead with the purchase and relocation anyway. Travers Mackel reeled in Shelley Midura:

"This is news to me," she said. "(The information) is not factual. The city determined in July that it would not buy the Chevron Building and would not move any city offices into that building."

Frank Donze also caught up with the Councilmember from District A:

She said she has "serious concerns about what is going on here" and described any effort to acquire the Chevron complex with state and federal money as "an undisguised attempt to avoid the council's involvement, and, unfortunately, part of a disturbing pattern of this administration."

Later, I emailed Councilman Arnie Fielkow for his thoughts:

We only learned of this today and are trying to get many of the same questions answered. I, and many other cms, do not support this! The entire project needs to be better thought out, master planned and left to the next administration and council!

And Councilwoman Stacy Head for hers:

I have no idea how he plans to do this without council approval. I am calling around to find out.

I also emailed Ceeon Quiett at the Mayor's Office of Communications. Here is what she wrote back:

The matter before the City Council was the appropriation of funding from one capitol account to another ..not an approval of the acquisition. Funding appropriation –Legislative Branch authority per the charter, Purchases –Executive Branch authority per the charter. The Mayor and the City Council both believe in the relocation of City Hall and the viability of the Chevron building. To this day, as the media has reported, leaking roofs, lack of hot water, broken elevators remain. As you remember FEMA has recognized the depth of damages to 1300 Perdido St. City Hall. Over $5million has been approved by FEMA for City Hall.

--

I think the administration is arguing that City Council and the City Planning Commission had oversight power over the original proposal to acquire the Chevron Building and mothball 1300 Perdido St. from this past spring and summer because at that time, they were being asked to fund the purchase using the city's capital budget.

Indeed, the city's original deal was to purchase the Chevron building for $8 million by using the $5 million FEMA has pledged for damage to our current City Hall and cobbling together the other $3 million through bond sales and the capital improvement budget.

This time is different, from the Mayor's perspective, because the executive is simply moving forward with the execution of a purchase and is not pursuing funds from the budget, which would reengage the a cycle of public hearings and votes by Council and the City Planning Commission.

The administration's position is that it did not need approval for the project itself, just the funds to move forward with the purchase. Ms. Quiett reminds us that FEMA has already allocated $5 million. That still leaves the same $3 million shortage for the price of purchase alone, ignoring the cost of renovation as a factor. I suppose that means that this time, administration is going to fill in the rest using funds that they have the authority to move around in a discretionary fashion without triggering a cycle of hearings.

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I closely followed Dambala's recent piece about the potential pitfalls involved with discretionary use of Disaster Community Development Block Grant (DCDBG) funds, which come from the federal Department of Housing and Urban Development (HUD) and are administered by the Louisiana Recovery Authority (LRA).*

Today, he has a post about today's new controversy about the Cheveron Building in which he indicates the administration is planning to use what is called "the revolver fund" to avoid initiating the CPC and Council oversight process.

The revolver fund was set up by the LRA to help hurricane-damaged parishes scrounge up the cash to initiate recovery projects. For instance, when FEMA agrees to reimburse the City of New Orleans a certain amount of money for damage to a public building, they don't just cut the check so the city can go and hire a construction firm. Instead, FEMA reimburses the city once the work has begun. This protects taxpayers by ensuring that these recovery dollars are applied to restore the infrastructure that was damaged and not to other purposes but it also hurts the liquidity of parish level and municipal governments by requiring them to front the cash for all of these projects. To fix the problem, the LRA created revolver funds to help parish and municipal governments get cash up front. New Orleans can now tap revolver money to pay for projects and then repay the revolver fund when FEMA reimbursement checks cleared.

Dambala says today that:

The problem with that equation is that any money spent under the Revolver system must meet FEMA requirements for spending. If you recall in my previous post, the FEMA requirements state the the money can't be used for new development....they can only be used for repairs of exising infrastructure.

But FEMA requirements aren't that inflexible. FEMA money can be applied to a new development, if it is classified as an "improved project." That is what the city requested in its letter (see the WDSU story or the attachments linked at the top of this post) to FEMA.

I am trying to understand, from a procedural standpoint, how the administration can use revolver money for discretionary purposes. The idea is that the fund fronts the city cash for a specific, reimbursement approved project and then the city reimburses the revolver once the FEMA money comes through. Seems like a simple, clean transaction. But it's more complicated than that.

For instance, under the School Facilities Master Plan, the Recovery School District is not rebuilding every single school for which it is receiving FEMA reimbursement money. Or, under the plan guiding construction for the New Orleans Public Library, the city is not rebuilding every single branch for which it is receiving money from FEMA for flood damage.

One would assume that the city would apply every dollar from FEMA toward reimbursement for damaged libraries (just as an example) to building new libraries, even if the plan is to build fewer libraries in a more consolidated system. But maybe that's not the case. Conceivably, if the city spends less out of the revolver fund than they take in reimbursement money from FEMA, there would be a stash of surplus cash sitting in the revolver fund.

FEMA is not, I don't think, supposed to reimburse for construction that is not performed. If the city uses $10 million in revolver money, they're only supposed to get a $10 million check from FEMA to repay the revolver even if FEMA had budgeted $20 million for their assessment of damage. But I don't really know how it works in practice. It might be that the City allocates money from the revolver and gets an expedited reimbursement based on the allocation instead of the actual expenditure.

Some reader insight on this would be great.

Dambala says it is understood that the money leftover in the revolver when it is no longer needed to front anticipated reimbursements would go into the city's pot of remaining DCDBG funds and could be reapplied to other purposes. Is that what is understood and is that what is happening now?

I also want to know more about how oversight and administration of the revolver fund works. My sense is that it is something the LRA created for the Mayor's office to help with cashflow, is not something that is considered a part of the city's revenue or spending streams, and is therefore hidden from the regular budget process. Does that mean that a hypothetical surplus in the revolver fund is purely a discretionary tool for the executive branch? If Council doesn't have oversight over that money, does the LRA?

If there's anybody out there who can add some detail, answer some questions, or correct my mistakes, please leave a comment or email me.


*I have additional analysis and questions on this matter as well that I'll have to tease out in another post. I have been very curious about unaccounted discretionary spending, the 2010 budget, and the use of DCDBG funds as it relates to the demolition of Lower Mid-City and the proposed LSU/VA. If you've been itching for more information about what Dambala might be talking about, check out this story and video. It'll get your brain churning a little bit but it might give you more new questions than new answers.

How We Spend Our CDBG Money

Found some!

This time, we're proposing to spend it on the LSU VA Hospital. Nearly $75 million.

We're using Community Development Block Grant money to demolish an existing community.

Brilliant.

Rather than level that neighborhood, which contains scores of historic houses in both good and bad condition, these groups have pushed the VA to build its new medical center on the site of Lindy Boggs -- the vacant and deteriorating hospital a developer from Georgia is willing to sell. Such a move would not displace any residents or business owners.

In the same vein, the Foundation for a Historical Louisiana recently published an assessment by a Philadelphia architect who determined the state could renovate Charity Hospital into a modern medical center in less time and for less money than it would take to construct a new hospital from the ground up. The state disputed some of the findings in the study, and the foundation responded with its own rebuttal last Tuesday.

"The city, state and VA have chosen the most complex, most damaging, most costly and most time-consuming way to go about bringing back the LSU and VA medical centers," said Walter Gallas, the New Orleans field officer for the National Trust for Historic Preservation.

Indeed. Smart priorities, you guys.

You know, the LSU VA Hospital project is also being allocated nearly 60% of our 2007 economic development funds too.

Seems like if there's any way to throw money at this ridiculous Blakely pet project, we figure out how to do it.