Despite racing to fund several large community projects in 2017, the future of Auburn's federal block grant allocation could be in jeopardy because the city failed to spend enough money to meet regulations set forth by the Department of Housing and Urban Development.
In 2017, HUD determined that Auburn did not spend enough of its Community Development Block Grant funds after the department notified the city that it reevaluated its spending policies less than a month before the end of the city's 2016-2017 CDBG program year. The city worked to spend the required amount for the 2017-2018 program year, Director of Planning and Economic Development Jennifer Haines said, but still came up short.
Auburn has been a HUD CDBG entitlement community since 1974. The city has always had a "great reputation" as an entitlement community, Haines said. The city typically receives a little over $800,000 in grants from the program, which are used to fund services and programs for low-to-moderate-income city residents.
On March 9, 2017, the city received a letter from HUD, which The Citizen obtained through a Freedom of Information request, announcing a change in how the department will determine timeliness. According to program guidelines, an entitlement community is considered timely if 60 days before the end of the program year — which for Auburn is March 31 — it has less than 1.5 times its current year's entitlement grant in the treasury.
The March 9 letter informed the city that "...going forward, timeliness should be evaluated based on both line of credit AND program income balances (including those in revolving loan funds) ... this is a change from the practice of counting only the funds in the line of credit."
All CDBG grantees are required to establish a line of credit with the U.S. Treasury, which is where communities draw their funds from. Program income is any money the city makes from economic development activity or revolving loan projects, such as a lease agreement or a small business loan. As payments are made on a lease or loan agreement, the city makes money, which is considered income.
According to HUD spokesperson Brian Sullivan, the department decided to begin taking program income into consideration when determining timeliness, as stated in section 570.902 of the CDBG guidelines, because some communities were "banking" their program income and not putting the money back into the community.
"In this budget climate, it was hard to justify seeking more funds when some of our grantees had large balances," Sullivan said. "You've got to be able to demonstrate that the funds you're using are making an impact."
Then, on March 16, HUD sent the city another letter. Based on the new timeliness test, the city had significantly more than its 2016-2017 grant amount remaining in the treasury. The letter states that the city had a balance of 5.37 times that amount and needed to spend down over $3 million.
Haines said she was confused when she received that letter, because the city had already been evaluated for timeliness for its 2016-2017 program and was deemed timely. A letter sent to the city from HUD on Nov. 28, 2016, stated the city needed to spend an additional $326,068 before Feb. 1 to be considered timely. The city was able to do so, spending down $326,500 before the deadline. That spend-down occurred before HUD reevaluated its regulations and decided to include a community's program income in the timeliness test.
"The thing that is difficult for me to understand is that the March 2017 letter talks about the policy going forward," Haines said. "We believed at the time we had met the test because we had done drawn downs of more than we needed to."
The city now had to spend a lot more money than originally planned for in the 2017-2018 CDBG annual action plan, Haines said. The Auburn City Council had already approved the action plan for submission to HUD on Feb. 16, 2017, prior to the city's notice of the regulation change. So city planning staff came up with an amendment plan to "get more money out the door," Haines said. The amendment included funding for projects like the Schine Theater restoration, the Owasco River Greenway Trail and the Casey Park playground.
"There were multiple projects for a lot of money included in that amendment," Haines said. "In that list, the majority are construction projects, and in order to get money out the door with construction projects, there's a lot to do ahead of time. The winter made it hard. We have done a lot and have tried. In order to get that money out the door, we have to go through the proper procurement procedures. We were trying to get as much out the door properly."
The city council approved the the amendments on June 1 and submitted the plan to HUD. However, Haines said the city was not able to move forward with the projects because it did not receive its 2017-2018 grant agreement from HUD until September 2017, which set back the construction timeline on many of the projects. As a result, the city was not able to spend down all of the $3,786,607.57 it needed to before the timeliness test on Feb. 1, 2018. According to Haines, the city was able to spend $2,430,072 from the beginning of March 2017 to the end of February 2018.
According to the CDBG program guidelines, if a community is deemed untimely by HUD for two years in a row, HUD can decide to reduce funding for the next program year or recapture funds already granted to the community.
Haines said the city has not yet received official notification from HUD about its timeliness status. The last official correspondence between HUD and the city came in November 2017 when HUD sent a letter warning that the city was in danger of not meeting the timeliness test for the second year in a row.
If the department deems the city untimely again, Haines said the city will have a meeting with HUD officials in Washington, D.C., sometime in the spring to explain the efforts the city took to try to meet the timeliness deadline, as well as circumstances that inhibited it from doing so. Then, HUD will review any factors that were beyond the city's reasonable control that affected its ability to meet the timeliness requirements.
"The City of Auburn is one of a number of Community Development Block Grant recipients nationally adjusting to new HUD guidelines on the timely expenditure of federal funds," HUD said in a statement to The Citizen. "HUD has been working with City leadership on the development and implementation of a plan to bring the City of Auburn into compliance. These measures will ultimately more effectively allocate federal dollars and increase economic development opportunities for Auburn's residents."
However, until that meeting happens, Haines said she is "uncertain" of how HUD will rule or if the future of projects is in jeopardy. She said she would be "really surprised" if HUD does not give the city an exemption because HUD approved the city's amendment plan and saw that it was taking the necessary steps to meet the timeliness requirement. Many of the projects outlined in the amendment plan could be in jeopardy of losing future CDBG funding, Haines said.
In the meantime, Haines is awaiting approval by the city council to submit the city's 2018-2019 action plan to HUD. City planning staff presented the plan to the city council Feb. 8 and council will vote to approve the plan Thursday. She said city staff will continue to be "diligent about moving projects forward" and getting projects ready for council approval as soon as they receive the grant agreement from HUD for this year's program.
"We have more projects on our plate because of having to get more money out the door than we originally have," Haines said. "I'm impressed with our staff and what we've done and I hope people understand that we worked hard to get that money out the door. It just takes time. We're trying to do our best to officially get the money out the door while meeting all city and HUD regulations."
Haines said the city has not reached out to any of its federal representatives as "we are trying to be respectful of HUD's processes and work through the agency first."
"This funding has done a lot of great work in our community and HUD has been a fantastic partner all these years," Haines said. "We look forward to continuing to work with them for many years to come."
Staff writer Natalie Brophy can be reached at (315)282-2239 or firstname.lastname@example.org. Follow her on Twitter @brophy_natalie.