HUD wants San Benito to pay back $738,000

SAN BENITO — A federal agency is requesting the city pay back $738,000 if officials can’t show the money was spent in low-income areas about 15 years ago.

Meanwhile, City Manager Manuel De La Rosa says officials will conduct an “income survey” to try to justify the expenditures.

In a Dec. 16 letter to De La Rosa, Elva Garcia, director of HUD’s office of Community Planning and Development program in San Antonio, stated the agency’s on-site monitoring system found the city spent $738,060 worth of Community Development Block Grant money to fund street repairs in sections of town that did not quality as low-income areas.

Last July, a HUD monitor found the city spent CDBG money after a 2004 bond issue to help fund street repairs along South Bowie, South Travis, Chapman, South Fannin and Arlington, an area which included 39.13 percent of low- to moderate-income residents — below the agency’s 51-percent eligibility benchmark — based on 2006-2010 U.S. Census data, according to the document obtained through the Texas Public Information Act.

“The city did not conduct surveys but instead inappropriately proceeded with the street projects when the data at the time showed a 39.13 percent low-mod population well outside of the 51-percent regulatory requirements,” Garcia wrote.

A HUD review, based on 2011-2015 Census data, showed the area’s percentage of low- to moderate-income residents had increased to 50.31 percent, still below 51-percent standard, she wrote.

As a result, HUD is allowing the city to conduct a survey to determine whether the area’s percentage of low- to moderate-income residents has increased to 51 percent in that area — a finding that would make the city’s expenditures eligible.

Garza gave city officials 30 days to decide whether they would conduct the survey.

“The city is interested in conducting an income survey and is also interested in having discussions with HUD representatives to determine what other options are available,” De La Rosa stated Monday.

Victor Treviño, who served as city manager as officials planned the street project’s financing, could not be reached for comment.

Labor-intensive survey

In her letter, Garza describes a “very labor-intensive” surveying process.

“We remind the city that the process involved in conducting income surveys in compliance with the Community Planning and Development notice can be very labor-intensive and does not always result in the surveyed service area meeting the 51-percent low-mod population requirement,” Garza wrote in the letter.

“Should the city elect to conduct these surveys and should the survey results determine that the service areas remain non-compliant with the 51-percent requirement, the city will be requested to pay those ineligible costs associated with those specific street projects,” Garza wrote. “Upon completion of the survey, HUD will make a final determination regarding ineligibility and repayment.”

How we got here

In 2004, the city borrowed $5.2 million through the sale of certificates of obligation to fund a street repair project while earmarking CDBG money to pay back about 30 percent of expenditures, according to Valley Morning Star articles published in 2004.

As part of the project, the city used $96,489 to fund repairs along South Bowie, from Turner to Wentz; $132,144 along South Travis from Ballenger to Turner; $23,805 along Chapman, from Fannin to Sam Houston; $264,288 along Chapman from Sombra to Fannin; $110,666 along South Fannin from Ballenger to Interstate 69; and $110,666 along Arlington, from Ballenger to I-69, according to HUD’s data.

Earlier this month, city commissioners met in closed session with City Attorney Mark Sossi to review HUD’s findings.

After the 25-minute meeting, De La Rosa said officials were planning their response.

At HUD offices, spokesman Scott Hudman has described the agency’s on-site monitoring system as “routine.”

“On-site monitoring visits, off-site reviews and audits ensure that program funds are being used properly,” HUD states on its website. “These reviews also determine whether a grantee’s implementation activities comply with … program goals and regulations.”

HUD administers CDBG money aimed at improving living standards in low-income areas.

fdelvalle@valleystar.com