This Mid-City house is now under renovation after the new owner managed to meet more onerous standards for the Road Home site, required by the city's Safety and Permits office.

By Karen Gadbois – staff writer – State and city redevelopment authorities have suspended a program to sell Road Home properties until New Orleans permit officials resolve a problem that has thwarted would-be renovators by requiring costly home elevations.

Dozens of property closings across the city are on hold while the matter is resolved. It’s unclear how many of the 80 recent buyers already have run into the unexpected buzz saw of the city’s bureaucracy.

The cost of a home elevation – generally between $50,000 and $100,000 – easily can put a renovation project out of reach for buyers not expecting the cost. Recent buyers have the added stress of facing a nine-month deadline to get the house finished and occupied, according to a standard provision in Road Home sales. If that’s not met, the property reverts to the local development agency – a situation that both buyer and seller would prefer to avoid.

Three bureaucratic agencies stand between the pre-Katrina property owner and a prospective renovator:

• The Louisiana Land Trust, which runs the Road Home program, bought the property from the homeowners who chose Option 1.

• That state group took the New Orleans properties and put them in the hands of the New Orleans Redevelopment Authority, which handles the sales locally.

• The city’s Department of Safety and Permits then has to give its approval for the new homeowner to start renovations.

Frustrated homeowners say that NORA never disclosed the elevation requirement. But NORA officials said they weren’t aware of that problem – or that the properties were being treated any differently than any other damaged home in the city.

NORA now has about 50 property closings on hold until the issue is solved, spokesman Steve Majors said. He said the agency has been aware of the issue for about six months.

The problem turns on the small but legally divisive words “or” and “and.”

For most houses in the city, a renovator has to elevate the structure to what’s called base-flood elevation unless they can meet one of two provisions: that the house was less than 50 percent damaged in the aftermath of Katrina, or that the value of the renovations was less than half of the house’s pre-storm value.

But for the properties bought from NORA, city permitting officials were requiring that property owners meet both provisions.

City Safety and Permits Director Paul May said he’s drafting a policy memo that will direct his department to treat Road Home properties the same as any other in the city. He said it would be issued “soon” but wasn’t more specific.

The double standard caught seasoned developer Erich Weishaupt by surprise – especially since he’d already redone a house bought from a private seller on the same block without this hassle.

The Mid-City contactor has purchased and renovated more than 10 homes since 2006, but he said the two he recently bought through NORA have been by far the most difficult to bring back on line.

Instead of getting a permit, he said he was told he had to elevate the house and that no grant programs were available for this costly procedure.  Money would have been available to the original homeowner, but these options disappeared upon sale.

A flurry of e-mails between Weishaupt and the manager of the Louisiana Land Trust program, Louis Lumpkins, and other project managers at NORA reveal the agency’s efforts to assist him in getting the much-needed permits.

After a few weeks of wrangling and a call to his City Councilwoman, Shelly Midura, he eventually met both provisions the city was asking for, and he got the building permit he had been so desperately seeking. He is now renovating both properties.

Small developer M.J. Sauer has found herself in a similar predicament

“I don’t see why these properties are treated differently,” she said.

Her property had a damage assessment of just more than 50 percent – 53 percent. If she purchased the property on the open market, she would have had the option of challenging the accuracy of the assessment. No such options exist for Road Home properties.

She said the city told her to raise the home by 4 inches.

Louisiana Land Trust Executive Director Mike Taylor told Fox 8 on Tuesday that “until we get a full understanding of what is happening we are not transferring properties for rehabilitation.”

He said the agency is hoping a resolution can be found, but he is looking for solutions for those owners caught in this gap.

Those solutions may include asking the U.S. Housing and Urban Development Department to get involved and demolish the houses.

Another recent homebuyer is struggling with what to do.  Jeralyn Thomas of eastern New Orleans received a letter from NORA offering her the modest bungalow next door to her home on Sherwood Drive.

She could have asked NORA to demolish the property before buying the lot for $13,000. But she thought she could renovate the house, so she bought the parcel and structure for $24,000 in December.

She hoped to move her daughter’s family into the house, reuniting them in the neighborhood where Thomas has lived for 20 years.

Thomas, a nurse, decided to hire a licensed contractor familiar with permitting procedures to navigate City Hall.

Her contractor, Dent Hunter, has renovated more than 20 homes post-Katrina.

He was taken aback when Safety and Permit officials said the house had to be elevated one foot – at least a $50,000 proposition for this house that was built on a slab, even with the ground.

Dent said a City Hall employee told him that a group of 12 to 17 properties were going to be issued a special exemption and allowed to get a permit. But so far, he’s had no success.

With the nine-month deadline counting down to September, she fears she will not only be unable to renovate, but may risk losing her investment if NORA takes back the property.

The New Orleans Regional AIDS Planning Council, a public body that sets annual priorities for spending millions in federal money, may have improperly gotten involved in recommending a recipient of that money: a member of the council.

Aside from the possible conflict of interest, the new contract also has consequences for the patients themselves.

That’s because the organization, with no history, likely will take patients from existing organizations that have made inroads with the traditionally hard-to-reach and underserved African-American population.

Longtime AIDS activist David Munroe laid out these complaints in a letter to the New Orleans Regional AIDS Planning Council. But another official connected with the grant program said Munroe’s complaint letter was simply “sour grapes” because his own organization recently was denied a share of the money.

Even so, a federal official said Munroe’s conflict-of-interest complaint has merit.

At issue is the annual Ryan White HIV/AIDS money that is sent to 13 agencies in the New Orleans region from the Federal Health Resources and Services Administration.

Federal officials require a regional planning council to set priorities among several broad topics, such as medical and non-medical case management, primary medical care and outreach. However, the council isn’t supposed to be involved in deciding who carries out that work.

That responsibility falls to the city’s Office of Health Policy. That office seeks proposals, rates the responses and chooses the winning contractors.

Once the winners are chosen, the planning council approves budgets for each broad service category, and the health policy office determines how much each contractor can spend in each category.

This year, the policy office chose several contractors to handle case management, including Priority Healthcare in Marrero. The agency, which was incorporated in August last year , is run by Tamara Hagan. She not only is a member of the planning council, but she’s chairwoman of a council committee that oversees service delivery.

“Priority was a new organization but it ended up being funded,” Munroe said. “As someone who came into the picture as a member of the planning council and sitting on the service-delivery committee, the feeling is that they may be in cahoots with the Office of Health Policy.”

Hagan did not return several calls for comment.

Lawless said her staff rates and grades the responses, but only after the proposals are looked over by other interested parties outside her office – including members of the planning council.

“They read them and then we have a preliminary discussion, but they are not involved in selection of agencies,” Lawless said of her ad hoc advisers.

Having planning council members select the winners clearly would violate the federal regulations, a point that even Lawless acknowledges.

But David Bowman, a spokesman for the Health Resources and Service Administration said even having council members read the contracts is out-of bounds.

“They do not have the authority to review contracts,” he said.

Lawless said it’s been a long practice of her office to have all manner of AIDS experts help her review the proposals – including those on the planning council, some of whom also work for or run companies that provide services. She said they all sign a document saying they have no conflict of interest.

Still, Ashley, who took leadership just last month, said he’s not comfortable with council members reading the proposals in the future.

“If I am the chair right now, then I do not want any planning council staff or members involved in the grading, scoring or reviewing of proposals,” Ashley said.

Lawless dismissed the complaints of Munroe, who for years was chairman of the planning council before leaving office because of term limits. He went on to start his own AIDS service agency, In This Together, which the city reduced funding for in 2008.

“Understand that the individual who sent this letter is a disgruntled provider who raises similar concerns every year,” Lawless said. “It’s sour grapes.”

Lawless also said existing contractors not being re-funded is a result of them failing to live up to their contracts; she did not name any such contractors.

“We’re not trying to do anything punitive,” Lawless said, “but we’re building on the strengths of existing agencies.”

Priority Healthcare soon could be getting its first patients, at the expense of two of those existing contractors, said two patients of those providers, Desire-based Great Expectations and N’R Peace, which is on the West Bank. These two providers are the only ones in New Orleans that serve primarily African-American patients, many of them  poor, ex-incarcerated and substance-abuse clients.

Representatives for the two organizations, who still hope to get Ryan White funding from the city, acknowledged that they were asked to plan for the transfer of close to 300 patients, but declined further comments for this story.

The two patients, who each asked not to be identified because of the stigma attached to their health conditions, are not happy that they’re being forced to find new case managers after establishing strong relationships with their current providers. And they’re afraid that they’ll have to go to multiple providers to get all the services they now get in one place.

One client who received her primary medical care and case management at Great Expectations said she was “shocked” when told she had to go to a new agency, and that she was given no warning.

“They said I can choose [my new agency] but really I don’t have a choice,” she said. “It’s their way, not mine. So it’s like I’m being pushed out.”

The other patient moved to New Orleans in November. When her then-fiance became abusive, she left the house they shared but didn’t know where to turn because she had no family or friends here – neither did she have health insurance since she was within the three-month probationary period at a new job. So she called N’R Peace, whose staff got her into a shelter.

The case manager there, “gave me guidance and treated me like a family member,” she said. “I know they are paid to do things like this, but they really went above and beyond to help me. The case manager gave me her cell phone number and said to call her anytime if I had any problems.”

The agencies that will be receiving the new caseload – almost 60 from Great Expectations, and over 200 from N’R Peace– will have to expand capacity for their new intake. One agency, FACES, is a part of Children’s Hospital. Executive Director Barbara Boxer said that new appointments so far have not been overwhelming, but caseload was already expanding.

“But since clients can choose which provider they’ll be going to, it’s difficult to know how many of them will choose us,” she said.

Currently, they are sending staff over to N’R Peace to accommodate transferring clients who have difficulty with transportation.

This new weatherization training center was set up by Louisiana Assocation of Community Action Partnerships, using federal money -- a move that gave the group an edge in getting federal stimulus money.

By Brentin Mock – staff writer – For more than 30 years, a federal program to weatherize homes of low-income families has been a fairly low-budget, low-profile affair in Louisiana. In recent years, the state has hired an association of non-profits to do the work on the side as they run other public-benefit programs with considerably higher budgets.

But the weatherization program here attracted a lot more attention – and a tremendous amount of money – a year ago with the passage of President Barack Obama’s American Recovery and Reinvestment Act.

Instead of the normal $1million to $2 million a year, the stimulus package set aside $50 million for Louisiana. Yes, the feds wanted to see a sharp increase in the number of houses fixed up – from a few hundred to more than 1,600 a year – but just as importantly, they wanted to see new jobs created to carry out that work. And because the work will ultimately save on energy costs, those new positions would have the added benefit of being considered “green jobs,” making good on another Obama pledge.

In the end, low-income families get their attics insulated, windows and doors sealed with weather stripping and caulk, light fixtures fitted with fluorescent bulbs, air conditioners cleaned, exhaust fans installed and windows covered with sun screens. The residents also are to be educated on efficient energy use, such as using the provided fans sometimes in place of air-conditioning.

The way the state tried to fulfill these goals is a study in strong-arm tactics by non-profits, well-intentioned bungling by state bureaucrats and ill-informed intervention by Washington officials. In New Orleans in particular, the effort has left the program exclusively in the hands of a relatively small outfit while shutting out better-equipped organizations that promised to match the money with millions more.

In New Orleans, the program has created almost no new jobs and didn’t come close to hitting its goals in the opening months.

“There’s been a concern that all of this money will be spent on I don’t know what, but I haven’t seen any evidence of it making an impact on people I’ve worked with, ” said Darryl Malek-Wiley of the Sierra Club of New Orleans.

Existing coalition not happy with newcomers

To understand where the money has gone, you need to start with where it came from and follow the tortuous path to the end.

The U.S. Energy Department has been handing grants to states for the weatherization-assistance program for decades. The program is overseen here by the Louisiana Housing Finance Agency, the state organization responsible for helping low-income families with their housing needs.

Rather than doing the work itself as it had done for years, the finance agency hires an outside administrator in 2007, the Louisiana Association of Community Action Partnerships. That group is a coalition of more than 42 “community action agencies,” federally designated non-profits that were established to provide services to low-income families.

But with the unprecedented one-time allocation coming from the stimulus package, the state finance agency decided to do things differently last year and open the work to to more bidders.

“This was supposed to stimulate new business and new job growth, so with that spirit, our mission was to open it up as much as we could.” said Jeff DeGraff, spokesman for the Louisiana Housing Finance Agency.

Members of action-agency associations were told informally about the new open process and didn’t initially object, said Charlette Minor, the finance agency’s weatherization manager. Representatives of the association even attended a public roundtable discussion in March 2009 with other non-profits, where the finance agency [b1] was brainstorming the best use of the new money, she said.

However, the association did express disagreement two months later, at a May hearing. And that’s where the trouble started.

“We really don’t need to start recreating the wheel,” association representative Chris Dunn said, according to a transcript of that hearing. “We need to go with what we have and expand on it.”

Things got uglier and more territorial after the meeting, at least as far as the New Orleans share was concerned, said Kristin Gisleson Palmer, former executive director of Rebuilding Together New Orleans, which was interested in participating in the work.

The statewide association of agencies is represented in New Orleans by Total Community Action, a venerable group that also provides the community with such services as Head Start early childhood education, job counseling, transportation for the elderly and disabled and homeless prevention.

Gisleson Palmer said in an interview that she was confronted by James Wallace, the weatherization manager for Total Community Action, after the May meeting.

“ ‘This is our money and this is how we’re going to use it and we’ll tell you how many units you do, if we decide to work with you,’ ” recalled Gisleson Palmer. “He just came off as if he was the only one entitled to the money.”

Likewise, the leader of another local environmental organization remembered an unpleasant encounter with Wallace.

Will Bradshaw, executive director of Green Coast Enterprises, held a phone conference for those applying for the state stimulus money, hoping to get them to agree to a unified approach. He invited Wallace who “expressed some reservation,” Bradshaw said, but ultimately decided to join the call.

Wallace stayed on the call long enough to tell the group that Total Community Action would not be participating in their collaborative before hanging up. Asked if Wallace exited respectfully, Bradshaw said, “not particularly.”

“I think TCA in particular thought something was being taken from them that was rightfully theirs,” Bradshaw said. “If you look at the history of TCA, they have been doing this for a very long time. So I think there was this sense that they were being threatened by these new organizations that were suddenly trying to get involved with weatherization.”

The president of the coalition, Jane Killen, did not respond to requests for an interview, nor did Total Community Action’s leader, Thelma French. And though Wallace was interviewed about the program in general, his organization did not make him available later, after Gisleson Palmer and Bradshaw described their situations with Wallace.

Spreading the money to get more money

Despite the objections from Wallace in particular, and the statewide association in general, the state sent to Washington a plan for spending the money that included several new non-profits.

For the New Orleans area, the plan included:

• The Salvation Army, working through its recently launched EnviRenew program that does green home renovations for low-income families;
• Catholic Charities, which through its partnership with Providence Community Housing is working toward building and repairing thousands of houses for disadvantaged families since Katrina;
• Rebuilding Together New Orleans, a non-profit known around the city for its work in restoring and preserving the unique residential landscape of the city, also with a focus on poor families;
• And Total Community Action, which had been weatherizing 50 to 60 houses on average annually in the 27 years it has been participating in the weatherization program .

The non-profits saw the stimulus funds as an opportunity to expand home repair work they were already doing. They knew that the stimulus was a one-time grant, but they had plans to stretch the money – and to create more jobs as an associated benefit. For instance, the Salvation Army included a commitment to create a $250,000 revolving fund for contractors, and Rebuilding Together New Orleans pledged millions from its parent organization, Rebuilding Together Inc., to match the stimulus grant.

“The regional nonprofits were selected first because LHFA realized they were the best suited to leverage these funds,” Gisleson Palmer said. “In New Orleans, and those areas affected by the hurricanes, you really have to do holistic rebuilding. So the repairs we could make with these dollars would have been much more intensive and complete.”

“We already have construction staff on hand, which means we don’t have to subcontract out this work, which adds another layer, and more bureaucracy, and more money from what you can spend on weatherization work. We were able to quickly utilize these funds and put the money to work immediately from within an existing construction framework, and LHFA realized that.”

The plan was sent to the U.S. Energy Department, where it was met with an unexpected buzz saw of objections.

The feds want answers and explanations

The addition of new non-profits led federal officials to come back with a flurry of questions: Why do you need new contractors? Why can’t the coalition already in place do the work? What role will the existing association have in overseeing the program?

The letter sent from the Energy Department to the state finance agency in July said that the association already in place “must receive preference.” If the state decides to go with someone else, the letter said, officials need to explain why they decided the program “will be run more efficiently by bringing on entirely new contractors rather than by utilizing the knowledge and experience of its current contractor”

Minor, finance agency’s weatherization program handler, wasn’t prepared for this reply. She said her office was in touch regularly with the Energy Department’s state liaison, Robert DeSoto, who was well aware that Louisiana was pursuing an expansion of its pool of contractors. Contacted by phone, DeSoto said he couldn’t speak without permission of his agency’s public-affairs officer.

Energy public affairs officer Jen Stutsman said, “There was a preference toward existing providers because we believed they had the infrastructure already in place.”

Still, that didn’t exclude new contractors, she said, as long as the state explained the need. In fact, other states have done just that, expanding beyond their traditional base of community action agencies.

The letter from her bosses gave another reason the Energy Department preferred the association. It involved green – the kind you take to the bank.

The previous year’s weatherization plan prepared by the state and approved by Washington provided “a significant funding increase” that let the association build a new training center.  That approval was given with the understanding that the association was getting ready to train more workers who would be needed when the stimulus money was released, it said.

A few months later, the state relented. Rather than supporting its initial strategy of 36 contractors and fleshing out the need for new blood, it submitted a new plan to Washington that included only the association’s network, representing 20 community action agencies. In September, the state signed a contract with the Louisiana Association of Community Action Partnerships, which allocated $4.2 million for Total Community Action to do the work in New Orleans.

The New Orleans-area groups left out were confused and frustrated.

“It never was revealed to us where the decision came down from as to how it had to happen, as opposed to what the state wanted,” said Capt. Ethan Frizzell of the Salvation Army.

Gisleson Palmer, who recently won election to the New Orleans City Council, said the decision to re-direct funds to the community action groups was purely political, saying the statewide association applied pressure. The community action agencies “went behind closed doors and lobbied the Department of Energy, or at least that’s how it was told to me,” Gisleson Palmer said. “They came down and yanked it from us …. Meanwhile, we were not given the opportunity to lobby, or speak to DOE or anything like that.”

Stutsman, the Energy Department spokeswoman, said that’s just not so. However, she said the association was included in a meeting with state and Energy Department officials where the new plan was crafted.

In federal reporting required by the stimulus award, the statewide coalition has reported that it created 107 jobs with the federal money and retained another 121.

What they’ve done with the money they have used?

“Most activities have continued to support the ramp up of workforce and infrastructure,” reads the report, available on recovery.gov. The area where coalition officials describe the jobs created reads more like a plan for the future: “The ARRA funds will allow subgrantees to expand the weatherization workforce … the expansion will also foster more partnerships and increase the number of vendors and suppliers.”

Some of the jobs created have been in the very offices of the statewide association itself. In the front of its new training center are dozens of cubicles and offices for its expanding staff. Killen has said publicly that her central staff grew from a few in 2006 to 22 now. New trucks and vans are parked outside, prominently displaying the decal of the Louisiana Association of Community Action Partnerships.

“They now had money to create a business to hire competent people,” said James Gilmore, who as vice president of the finance agency in 2007 signed an agreement with the statewide association to be the state’s weatherization program administrators. “They hired an attorney. They were able to hire a CPA. At the time, they were just a loose network. When they got the administrative funds, they became an organization with a staff. They became a business.”

New Orleans outfit triples its workload

While there may have been a framework for the statewide coalition to distribute money to its partners, there was not one in place at Total Community Action – or at least not one that was able to help it comply with new regulations that came with stimulus money. And its record shows a history of poor paperwork and a lack of openness in contracting.

As Gisleson Palmer alluded, the agency has no staff for performing weatherization duties; it has historically subcontracted the work.

The new money came with the provision that each community action agency choose the subcontractors through a bid process, and it required that they pay a prevailing wage. The agency wasn’t familiar with either of those policies.

When told that, Stutsman said, “I can’t comment specifically on New Orleans, but we believed that the local providers working on this in previous years would have the necessary infrastructure in place and that’s the extent of what I know of it.”

Total Community Action began running its weatherization program in the early 1980s. From then until last year, it was only responsible for no more than about 60 houses a year. The stimulus contract is for 549 houses through 2012. As with other recipients of stimulus money, it has 18 months to show it can handle the load, otherwise the contract terms will change.

Wallace, the local agency’s weatherization manager, said it took some time just to get himself and two staffers familiar with how to issue and receive bids and what the implications were of other new regulations. That delayed the start of weatherization work for at least a month, he said. Wallace bemoaned the extra paperwork, pointing out “there’s no more money in it for TCA.”

Its contracts have never been bid, instead handed out to a few of its own preferred providers – “People who have been doing weatherization work for TCA for the last 10 or 12 years,” Wallace said. “They’re just small guys and females. They may be just two- or three-person entities.”

Last June, in a management review report from the statewide association, Total Community Action received a “satisfactory” for its service delivery, management practices, technical activities and administrative operations, but were graded as “below average” for its maintenance of client files. A subsequent overall management review of its work for the last few months of 2009 was upgraded to “superior.”

“I wouldn’t say it was one of the best in the world,” said Gilmore, the former finance agency vice president. “But based off the numbers of people in New Orleans needing assistance, they did the best they could.”

Wallace shrugged off any concerns about the capabilities of his organization.

“All that is important is that TCA has continued to do this work for a number of years, regardless of if it was the guy on the corner who sat on the steps who did the work, or somebody else,” he said. “TCA has never had a problem, as I know about it, with a misuse of funds.

“[Our contractors] have to sign a paper that says they have not been disbarred, and have not had any problems with any previous federal contractors, and they are not somebody who’s been indicted. But if TCA is using the money as it should, and getting reports in, and getting audits then everything works out fine. That’s why we still do this.”

A technology vendor to the city of New Orleans shut down a key computer system Monday because the city hasn’t paid “hundreds of thousands of dollars” in past-due bills, the contractor said Wednesday.

Based on a tip from a developer unable to move a project forward, The Lens uncovered the problem in a joint investigation with Fox 8 News.

The computer system for the city’s Safety and Permits Department has been inaccessible since Monday evening, frustrating contractors and homeowners looking for basic city services. Likewise, the system has made it tougher on the city employees. The software provides an automated system for building inspectors to work from the field.

Two city employees in the permits department said Wednesday morning that they weren’t issuing permits at all.

A spokeswoman for Mayor Ray Nagin said the issue was being resolved, but she didn’t know whether that involved actually paying the vendor, Accela Inc. of San Ramon, Calif.

As of Wednesday afternoon, access still had not been restored.

Until the computer system is up, city employees were told to issue permits manually and then enter them into the system later, spokeswoman Ceeon Quiett said. Asked about people who already had been turned away empty handed, Quiett said, “I don’t know what happened earlier.”

She also said she didn’t know how much the city owes Accela.

The problem affects not only the City Hall computers, but also the kiosks set up at Winn-Dixie grocery stores by the city, which put them there to make permitting more accessible. Those terminals were dead Tuesday and Wednesday.

Accela spokesman Paul Davis told Fox 8 said the company works with hundreds of government agencies across the country, and they’ve never had to shut down anyone.

“Following many months of a lack of communication, we deactivated, and that’s unprecedented for us,” Davis told Fox 8 news.

He declined to say precisely how much was owed, but he said, “It goes into the hundreds of thousands of dollars.”

Interviewed outside the mayor’s office Wednesday morning, city technology chief Harrison Boyd said he was just getting back into town and getting familiar with the problem. He said no one told him about it Tuesday.

But residents are telling others about the hassles that are bedeviling their efforts to get permits for electrical and mechanical work, as well as overall building permits.

City Council member Stacy Head told Fox 8 that her office has fielded several complaints.

Although Quiett began a brief discussion of the problem by pointing out that the City Council cut $7 million from the operating budget over the objections of the Nagin administration, Head said that’s not part of this problem.

She said the council approved money for payments to vendors such as Accela, but it is up to Nagin and his administration to keep track of bills and make sure they’re paid on time.

In January, The Lens reported on taxpayer money collected by DKM Acquisitions and Properties for economic development.

At the time, nothing visible had been done to renovate the gutted and unkempt Lake Terrace Shopping Center at Robert E. Lee Boulevard and Paris Avenue. City officials said that the $162,500 given to the company had been used for “soft costs,” saying that work was being held up by their counterparts in the permit department.

Now, more city bureaucrats are in on the act – those in the code enforcement division.

The owner, Kenneth Charity declined to speak to The Lens or Fox 8 for the January story. But this week’s publication of code enforcement hearings in The Times-Picayune shows that Charity will be given the chance to speak  to a hearing officer on March 16. The publication isn’t specific about what code problems were cited.

Charity won an grant of $250,000 from the city’s now-suspended Economic Development Fund for 2007. He can request the balance of his award if he shows progress.

The most recent report issued by the city on Feb. 11  lists the challenges facing the retail center as “negotiating permit requirements with the department of Safety and Permit.”

If the site remains as it was in January, he may have more negotiating to do to avoid costly court fees and fines from code enforcement.

CLICK TO EXPAND staff graphic

By Ariella Cohen, staff writer — In the months after Hurricane Katrina, traumatized New Orleanians turned out in droves to discuss the fate of their neighborhoods. They gave hours of their time with the understanding that their input would guide the rebuilding of their city – and help secure the federal disaster grants needed to start reconstruction.  When the resulting plan was approved by the state, many were excited to see their ideas on what they were told was the blueprint for the new New Orleans.

Two and a half years have passed since the plan was approved in June of 2007 and the state opened the spigot on $411 million in federal Disaster Community Development Block Grants. Yet in that time many of the publicly blessed programs have stagnated and, in some cases, received little more than token funding.

Though budget documents released last week by the city show that 75 percent of the $411 million — $308 million — has been set aside for specific projects, nearly half have not received necessary state approval. Without that, the programs and the money set aside for them exist as little more than ideas, vulnerable to cuts by Mayor Ray Nagin’s administration without any public input, an investigation by The Lens and Fox 8 News has found.

Critics, particularly some on the City Council, say legislative input is required by law, and that check-and-balance system is being ignored.

“The administration is moving millions of dollars from one project to another without the council having oversight,” said City Council member Stacy Head. She worries that projects are moving forward “in a way that is inconsistent with the will of the people.”

Head recently saw $2 million stripped from a $4.5 million project on South Claiborne Avenue near Toledano Street in her district. The money, appropriated in a budget for Land Acquisition presented to the City Council in July, was slated to go towards the purchase and redevelopment of blighted lots in the area, one of the 17 target neighborhoods included in the state-approved recovery plan for New Orleans. By the time the next version of the Land Acquisition budget appeared before the council in November, the appropriation had shrunk to $2.5 million. Head said she was never informed that the money had been cut – and she never noticed it in the reams of budget documents distributed by the city’s finance department.

Meanwhile, a similar project in eastern New Orleans near Lake Forest Plaza doubled, ballooning to $8.9 million from $4.5 million in August set aside for the city to buy up abandoned lots for redevelopment. Lake Forest Plaza is being developed by Cesar Burgos, a friend of Nagin who was appointed by the mayor to the chairmanship of the Regional Transit Authority board in 2006.

In an interview Wednesday with The Lens, Burgos said he had not heard that more money was appropriated for land acquisition near the plaza.  “It’s a good thing,” he said. ”We need more citizens in the east. Now we are 50 percent at what we were before Katrina.”

Burgos said he is “very close to an agreement with Wal-Mart” on locating a retail store at the Lake Forest Plaza site.

Nagin says political alliances have nothing to do with the decision to move money. Some cuts were necessary because the city was facing a $68 million shortfall and spending had to shrink in all areas in order to close the gap. Shifts in funding, he said, were done in the name of expediency.

“Most of the projects have been in the works for three or four years, what we are doing now is funding the projects that are ready to go,” he said. “They are moving to the front of the line.”

Head disagrees.

“The projects I’ve been focused on …are moving forward. We’re ready to go and we can’t have those funds diverted to other areas,” she said.

Unfortunately for the council member and her Central City constituents, the City Charter does not require the mayor to seek approval from the council before making changes to the city’s operating budget.

staff graphic

It’s worth understanding the unique bureaucratic process for spending this money and how it’s different than normal.

Generally, bricks-and-mortar projects are included in the city’s capital budget, a separate spending plan from the city’s general fund budget.

The charter, indeed, requires council approval for capital budget spending. But for the general fund, the council simply approves spending in very broad categories, not line-by-line.

The Nagin administration has chosen to put the disaster-recovery money in the operating budget, essentially giving the council less control over specific projects. Under the current arrangement, the administration is free to move monies between projects as long as the projects are under the same broad budget category.

A  category can be as specific as Land Acquisition or as vague as Economic Development or Healthy Communities — a category that includes money for a bioremediation program as well as an initiative that would give grants to grocers who sell fresh produce in low-income neighborhoods.

What’s up for debate, however, is the oversight requirements written into the final approval granted by the state. It says the council’s Recovery Committee and the full council must approve “specific project expenditures.”

The Nagin administration contends that this requirement was met when the council approved the initial plan, full of specific projects.  Mayoral spokeswoman Ceeon Queitt said the city fulfills this requirement in the annual budgeting process and through the approvals necessary for all capital expenditures.

“We cannot use any money until the city council appropriates it for a certain department,” Quiett said.

Head and others claim this provision means the council should be consulted on all final project spending, not just the overall department budgets.

The state-approved recovery plan does not specifically address what approval is necessary if the initial plan is changed.

The state says the shifts in spending are allowed as long as the money moves to programs within the overall recovery plan.

“We want local governments to do what is best for their communities,” said Louisiana Recovery Authority spokeswoman Christina Stephens. “If they want to put money towards a project and it meets (federal) requirements, it’s OK with us. Our goal is to approve the projects as quickly as possible.”

“The public and the council had its discussion when the plan was approved,” she said.

Created after hurricanes Katrina and Rita, the recovery authority is the state proxy for the U.S. Housing and Urban Development Department. It acts as a conduit for the federal money, receiving the cash for local governments and ensuring that the money is spent in accordance with HUD rules. HUD did not respond for requests for comment.

District A City Council member Shelley Midura says that her experience of the Recovery  Committee, of which she is a member, does not include approving specific project appropriations.

“I am not aware that specific requests on specific projects are being run by the committee,” she said.  “I know they aren’t being put before the entire council on a specific project-by-project basis.

“We have limited disaster relief funds, and the spending is not being done in a democratic fashion. It has morphed into a process that is in the hands of such a few number of people you can say the public is being left out,” Midura added.

Case in point: After Katrina, city recovery officials created a program that would provide loans and grants to small businesses and developers to rehabilitate damaged property and make it more energy efficient. As of August, $14 million was specifically earmarked for privately-held cultural and commercial assets that were identified in the City’s initial recovery plans. By fall, $9 million had vanished from the program’s budget, leaving a major post-Katrina commercial renovation grant program with $5 million. Despite that $9 million cut, overall spending in that budget category shrank by less than $2 million because of a fresh  $4 million allocation for the redevelopment of the riverfront and a $2 million redirection of funds to the Gentilly Woods Shopping Center, which was previously given $4 million.  The money all was contained in the Economic Development budget category.

The shifting of money means losses for school projects as well. In August, the city planned to give $9.8 million in disaster money to the Recovery School District to build two new schools, one in the Central Business District focused on international business and another in Algiers’ Federal City focused on maritime themes. By November, the mayor had cut funding for both schools and added $4.5 million for the Louisiana Children’s Museum.

“It’s always disappointing when you plan on securing money and those monies get pulled…but we move on,” said Recovery School District Superintendent Paul Vallas.

Vallas said if the city provided the money, both schools would have been built by now. District operating money will now have to be tapped to finish those schools. And any time a project is delayed, Vallas said, the price increases.

For his part, Nagin says money is being shifted because certain projects are shovel-ready.

“I don’t know of any money that’s been moved from any one area,” he said. “We try and make sure that any money’s been allocated to a (council) district stays in that district…so it’s very rare that that would happen.”

The mayor believes there is enough cash to go around. He says that the state has another $2 billion to $3 billion earmarked for the city’s recovery and that as time goes on, the money will reach projects that aren’t now far enough along to be financed.

“Whatever is moving to the back of the line at this moment will probably get funded later,” he said.

The mayor did not offer any further detail on how this would be accomplished. One recently bumped program is the Neighborhood Loan Loss Reserve Fund. The program, created by recovery officials and approved by the state under the 2007 citywide plan, was intended to help people secure loans for rebuilding.

The program is mentioned in a city press release marking a 2007 mayoral address to the council. The release is titled “City reaches tipping point in third year of recovery.”  Nagin mentions the $10 million for the program as one of four critical successes for Recovery and Livable Communities.

A July budget shows $4 million set aside for the program. By November, the program had been decimated to $500,000. And because the money has not been officially dedicated, or “encumbered,” there is no guarantee the money will not be shifted to another program before it is spent.

Watch this story on Fox 8 News:

A taxpayer-financed program to stimulate economic development in New Orleans continues to back dubious business ventures, throwing into question the city’s stewardship of some $2.5 million in annual grants, an investigation by The Lens and Fox 8 News has found.

Since December 2008, more than $200,000 has been funneled to the owners of a sorely needed Gentilly shopping center and a Carrollton restaurant. But more than a year after the grant recipients were chosen, the abandoned shopping center stands open to the elements and the restaurant has gone belly up.

The business address used to apply for the shopping-center grant never existed, and the restaurant owner got his last check from the city after his place was shuttered.

Required status updates from both grant recipients were submitted, but gave no indication of problems. In fact, one thin report from the shopping center developer shook loose another round of money from what’s called the Economic Development Fund Grant Program.

The moribund strip mall and the failed restaurant are prime examples of how an ailing and long-criticized program still falls short of its original intent – to bring about real, quantifiable business activity. The $2.5 million in grants are drawn directly from taxes paid by city property owners.

“I think it has worked very poorly, quite candidly,” said New Orleans City Council President Arnie Fielkow, who also leads the council’s economic-development committee. The program is “definitely falling short. That’s not to say that some of the awardees over the years have not used the money wisely.”

The program, begun in 1991 with voter approval, drew a bit of infamous attention in 2006 when the New Orleans City Council approved a $350,000 handout to an eastern New Orleans couple to make and market a personal portable toilet. To date, there’s still been no accounting for that money. And no toilet company, either.

The original ballot initiative called for the money to be used for “economic development.” That’s not terribly specific, and the city has struggled with how best to use the money.

Initially, only non-profits were eligible for the grants. Then businesses became eligible. And in recent years, the city has tapped the fund for a variety of its own governmental uses.

For instance, the City Council this month took $1.1 million from the fund to balance the city budget. It also used $2.3 million this year and last to pay for enhanced cleaning of the French Quarter streets and sidewalks.

But for nearly two decades, the money was primarily used to help non-profits and small businesses, and it operated with little public scrutiny or attention. Or for that matter, with little public awareness.

“There have been problems even in how the (selection) committee and the mayor have communicated this program to the public,” Fielkow said.

The tax generates about $2.5 million a year, and the city advertises for applicants. An advisory committee appointed by the mayor reviews the applications and makes recommendations to the mayor. In turn, he passes his selection to the City Council, which has the final authority to make or refuse each grant. A city official is then charged with distributing, monitoring and administering the money.

A reform-minded City Council changed the rules before the 2007 grants were given out in late 2008. After the toilet debacle, the council required a cost-benefit analysis of each project on the front end, and more detailed reporting about the grants as the projects progressed.

Slowed by poor attendance at the advisory committee meetings, the grant-making process was running 10 months behind schedule when things boiled over at a December 2008 council meeting.

Frustrated applicants railed at the council members. At one point, a small-business entrepreneur named Michael Dummett was escorted from chambers after a fiery outburst demanding his grant.

In all, the council gave 22 grants worth $2.2 million.

Dummett got a $40,000 grant to help finance Big Shirley’s, a soul-food restaurant on South Carrollton Avenue, named for his mother.

His first installment of $30,000 was sent on Feb. 2, 2009, about a month after he opened. An undated report of his progress said that he had fully renovated and equipped the eatery, that he had created eight jobs and that he was bringing in $45,000 a month. No other progress reports were included in the city’s file, which was obtained through a public-records request.

He got another city check in May for $6,000. The last check, for $4,000 was issued Aug. 5 – after Dummett had served his last meal, just seven months after opening. By Aug. 1, the windows were papered over, leaving only a for-lease banner visible.

In an interview, Dummett said he was still in business, in a manner of speaking. True, he’d closed down on Carrollton, but he had opened a kitchen inside of a bar in Faubourg Marigny. That venture, too, has since ended.

“My intention was not to take something that wasn’t mine,” he said about the last city check.

He said he used the city grant money to repay people who kept him afloat while he waited for the grant.

In short, he said the lengthy grant delay doomed his restaurant. If he received the money early on, he reasoned, he would have been better positioned to ride out the recession.

Thomas Nash, who oversees the grant program for the city’s Office of Community Development, admitted that he should have been more diligent in this case.

“The city was not aware whatsoever that the business was out of operation,” Nash said in an interview. “Had it been, I would have immediately stopped the check.”

With his $40,000 grant, Dummett was a relative small fry. At the other end of the scale is Kenneth Charity, head of DKM Acquisitions, who won an award for $250,000, the highest amount handed out.

He’s the would-be shopping center developer who has done little visible work for the $162,500 that the city has shelled out to revive the strip mall at the corner of Paris Avenue and Robert E. Lee Boulevard. Stains still show the high-water mark from Katrina flooding, the inside smells of human waste and skateboarders have set up ramps and left spray-painted tags.

The floodwaters from Katrina left their tell-tale marks.

In a neighborhood hungry for a retail revival, the gutted, wall-less building is a source of frustration – only more so since residents’ tax dollars have gone to the developer. The community had put a high priority on rehabbing the property during the Unified New Orleans Plan process.

Charity would not speak on the record for this story. Nash defended him, however, saying that Charity has spent the city award, plus much more, on “soft costs” associated with the project. Those include architect fees and permits from the city.

Nash said the project is hung up because the city hasn’t moved quickly enough to issue the necessary permits. However, the progress report in Charity’s file makes no note of that.

In fact, it lists “plans/permits” under “significant developments.”

Charity, doing business as DMK Acquisitions, purchased the Lake Terrace Center in April 2007 for $1.3 million.

That September, he applied for a grant from the economic development pot. His application lists 64 Newcomb Blvd. as his office. In fact, the address is that of Newcomb College, and the suite number Charity used on his application doesn’t exist. Calls to Tulane University revealed that Charity has never been an employee of the school.

According to his application, Charity needed the money to “renovate, reface, structuralize and put back into commerce” the shopping mall. Details were lacking in the original application as to what the funds would be used for.

Like most recipients, his grant was well below his request of $1 million, coming in at $250,000. That’s a relatively small amount for a project that Charity’s application said would total $3 million.

His grant was also a pittance compared to the other acquisitions that DKM made about the same time. Charity’s company paid more than $4 million for other properties that included a condo in Jax Brewery, the old Vasquez Seafood market and a duplex in the Carrollton neighborhood.

The Vasquez site is unguttted and open to the elements. Neighbors near the Carrollton address say they’ve seen no activity for months.

Council President Fielkow said he doesn’t think the economic development money should be used for a project that the applicant is able to finance.

Business have been long gone from the battered Lake Terrace Center.

“This is really not designed to help a wealthy millionaire have added dollars to open a particular development,” Fielkow said.  Acknowledging that his view isn’t universally shared among council members, he added that he would prefer making awards only in cases where the award makes the critical difference in moving a project forward.

Charity didn’t just benefit from a city grant. To help identify the types of business that the neighborhood wanted and would support, the Greater New Orleans Foundation awarded $60,000 to the Regional Planning Commission to finance such a study for Gentilly.

The group turned over the study to Charity, giving him the equivalent of a treasure map that pointed him to the kinds of opportunities that would likely thrive and draw business.

In June of 2009 Charity received his first payment of $100,000 to begin work on the project. Charity was issued another check in September for $62,500. That was based on his report that “currently set objectives are targeted to meet projected funding periods… project will meet time period, possibly will complete before our projected scheduled period.”

Fielkow was incredulous when told of the chain of events.

“There should never have been a second check issued by the administration unless there was verification that the first monies were being used in the ways in which they were granted,” he said.

Nash said he makes site visits, but the city makes no attempt to verify the progress cited in the reports sent in by recipients of grant money.

Charity’s initial application said the project would be finished six months after getting his city grant.

That would have been before Christmas.

Reporter Jennifer Hale of Fox 8 News contributed to this report. Watch her report on Fox 8:

PDF: Lake Terrace Center progress reports, checks

PDF: Big Shirley’s progress reports, checks

The Lens will be an investigative news source and daily blog. Data-driven news stories, thoroughly researched and engagingly presented, will be complemented by daily blogs that cut to the quick. We will look behind the smoke and mirrors of big-city governance and also shine a light on key issues in communities too often ignored by elected officials. Because many area households lack consistent Internet access, The Lens will republish online content in the Neighborhood Partnership Network’s newsletter, The Trumpet and broadcast stories on partnering mainstream media networks.

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