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Buried HUD report cited fiscal woes

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BY LINDELL JOHN KAY
Staff Writer

Sunday, April 21, 2019

A 2016 HUD consultant report swept under the rug by local officials at the time details how the city has been propping up the Rocky Mount-Edgecombe Community Development Corp.

Commissioned by the city, the report is a bleak assessment of the city's Community Housing Development Organization funds known as CHDO. Conducted by the Minnesota Housing Partnership, the report was handed over to then-City Manager Charles Penny and the City Council.

After that, the report never saw the light of day.

The Telegram obtained the report from a whistleblower who also turned it over to State Auditor Beth Wood.

CDC Executive Director Joyce Dickens — recently appointed by Gov. Roy Cooper to the state's Rural Infrastructure Authority — said she wasn't given the report in 2016 and when the Telegram provided it to her last week, it was the first time she saw it.

Penny, 61, is likely headed to Statesboro, Ga., where he's the sole finalist for the city manager spot. Penny plans to take the job, according to the Statesboro Helard.

In 2016, the CDC owned 125 residential rental units, commercial office space and vacant development parcels yet didn't have sufficient operating dollars to support development staff, according to the report penned by Cherré Palenius, the community development manager for the Minnesota Housing Partnership.

The income from the residential rental units and the commercial space is used to off set ongoing operational expenses, including city and county real estate taxes, property insurance, maintenance and repairs, lawn care, snow removal, extermination and utilities.

The vacant parcels being held for development also have expenses that include taxes and grass cutting. The parcels produce no income for the CDC, Dickens said.

For the past several years, the CDC has fully funded its development projects using federal dollars passed through the city with a small amount of local funds, according to the report.

Dickens disagreed with the report, saying the CDC hasn't fully funded its development projects with federal money passed through the city. The CDC has also received funds from several other state and federal sources.

The report counted 3,377 vacant lots and determined 6.3 percent of residential properties in the community were vacant or abandoned, 50 percent of which are concentrated in 9 of the city's 82 communities.

The report found the Twin Counties to be highly segregated with average incomes low than surrounding areas. There were few operating nonprofits with sufficient staff. Many were faith-based organizations operating largely with volunteer staff.

"Plus, there appears to be very few organizations with housing development experience outside of RMECDC," the report states.

The report provided results on an organizational and financial assessment of the CDC. Staff at that time included Dickens, an administrative assistant and several housing counselors. Two consultants provided oversight of commercial development and housing development.

"They are highly reliant on the city of Rocky Mount for support and should anything happen with this funding, they would have to identify other sources of funding to support their activities," the report states. "The executive director is the founder of the organization and is past average retirement age."

CDC staff were working with their board to determine if they would continue to seek CHDO certification. CDC had been the only eligible CHDO to work in Nash and Edgecombe counties — however, the CDC had little staff capacity and needed to make changes in order to continue to be certified as a CHDO under the new HOME rules, according to the report.

The CDC is no longer a CHDO.

"Certified Housing Development Organization designation only applies to sources of funding originally from HUD," Dickens said. "For example, Low-Income Housing Tax Credits and New Market Tax Credits project funding does not require a CHDO Designation."

The report states that although required by its bylaws, the CDC hasn't adhered to term limits.

"The catastrophic impact of the elimination of all prior core operations funding and the push to continue high productivity of community development initiatives has claimed the priority attention of our board and staff in recent years," Dickens said. "However, our board is now in the process of strengthening our internal governance, which includes board development, succession planning, CHDO status, etc."

Dickens said while the CDC didn't see the report until last week, it has been doing the best it can to ensure its future viability.

"The RMECDC’s 31 years of longevity are the strongest predictor of our continuing survival," Dickens said. "Since our incorporation in 1988, the RMECDC has acquired the capacity that the CHDO requires. The RMECDC’s capacity is demonstrated by its track record of award-winning documented performance."

Dickens said the success of community development initiatives in Rocky Mount is directly linked to the successful cooperation of the city and the CDC.

"RMECDC’s work is far from complete in the city of Rocky Mount," Dickens said. "The 2014 city-sponsored housing study, Cross-road to Prosperity, documented the significant unmet affordable housing needs in Rocky Mount, finding the existence of 14 fragile and vulnerable under-resourced neighborhoods."

The report said the city didn't have staff to keep up with the required oversight of the programs.

Tameka Kenan-Norman, the city's chief communications officer, said the city's Community and Business Development Department has hired a compliance officer.

The report made several recommendations to the city, the chief being the city seek to find or develop other CHDOs.

Kenan-Norman said that sometime in 2015 or 2016, the status of the CDC changed from CHDO to Developer. Currently, the Southeastern N.C. Community Development Corp. is the city's only CHDO.

"Community and Business Development is currently working with HUD, receiving technical assistance and counseling to help create other new opportunities," Kenan-Norman said.

The report recommended a checklist for projects two years ago. After the city had to repay $182,000 to HUD due to failure to file paperwork on time, Councilwoman Chris Miller made the same checklist recommendation.

Kenan-Norman said a checklist has since been created.

Dickens said due to scarcity of investment dollars in what are often perceived as high-risk, low-income communities, it is nearly impossible to structure a community economic development project that will generate a significant amount of operational support for a nonprofit developer in a highly distressed community like Rocky Mount.

Since the city is an CDBG Entitlement entity, it’s entitled to federal funding to address housing needs. HOME Funding is designated to provide decent and affordable housing for low- and very low-income Americans, Dickens said.

"The RMECDC is blessed to have implemented several HOME housing initiatives in partnership with the city of Rocky Mount as well as Low Income Housing Tax Credit and New Market Tax Credits developments," she said.

The report concludes by stating the city's housing capacity needs to be increased by improving local organizations and encouraging new organizations to enter the local market.

"We also believe that the city would benefit from receiving additional long-term technical assistance, specifically centered on all of the federal housing programs available that can meet the needs of the community. In order to be successful, the community will need sustained assistance," according to the report.

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