HUD: City to repay $267,000 used for 'ineligible activities'

Monday, July 23, 2007
By KEN THORBOURNE
JOURNAL STAFF WRITER

A federal audit has concluded Jersey City needs to repay the U.S. Department of Housing and Urban Development $267,000 - plus $113,645 in interest - for using money from a federal affordable housing program for "ineligible activities."

Issued last month, the HUD audit blasts the city for failing to report that two city projects that received money from the "HOME Investment Partnerships Program" were never completed and should have been reported as "involuntarily terminated."

The lion's share of the money concerns a rehab project the Urban League of Hudson County had undertaken at the junction of Grand Street and Communipaw Avenue.

After construction began in 1995, the structure grew so wobbly, the city's construction official ordered it taken down in April 1998, city officials said. At that point, the project had already consumed $254,231 of the $582,898 in HOME funding the city had set aside for it, according to the audit.

Because the project was never finished, HUD is demanding this money be repaid from non-federal funds, along with $113,645 in interest accumulated from the date it was torn down.

But city and Urban League officials insist the project is still alive and was never "involuntarily terminated." After the building was demolished, it became a "new construction" project for veterans, which was reported to HUD, they said.

City officials said they will reluctantly repay HUD the $254,231 since the money will be returned to the city for other affordable housing projects. But, they intend to challenge the interest charge, which Housing Economic Development & Commerce Director Robert Antonicello called "egregious" and "unfair."

In April, the city committed $960,000 from its Affordable Housing Trust Fund to the $6 million project - the Ercel F. Webb Fish N' Loaves Project - and the Urban League has applications pending with various state agencies for low-interest financing.

The audit also takes the city to task for spending $354,581 out of another $650,000 of HOME funds the city allocated for the project as a "new construction" initiative since financing for the project is still up in the air.

HUD is asking the city to provide "documentation to justify" this expenditure. Going forward, Antonicello said the city will no longer use HOME funds for projects that haven't secured all its financing.

Elnora Watson, president of the Urban League of Hudson County, remains confident the 30-unit veteran housing will be built, but acknowledged difficulties. "We've had all kind of site issues," Watson said. "At one point we had raw sewage being channeled though the site. We're going to get it built."

The audit also directs the city to repay $13, 316 used for rehabbing a two-family house on Monticello Avenue. "The project was terminated in February 2004, but the city continued to draw down $13,316 through December 2004," the audit states.

City officials didn't dispute the finding and said this money would be repaid.

A written response to the HUD audit is due from the city today, a HUD official said.