Bombshells in Council Meeting Raise More and Bigger Questions about Housing and Community Development

Weeks ago, Mayor Sylvester Turner said he would provide a complete explanation for allegations of interference in a $15 million contract that would have benefitted his former business partner. Many people thought that would happen today at a joint meeting between the Budget & Fiscal Affairs and Housing & Community Development Committees. But it didn’t.

The Mayor didn’t appear. His representative didn’t speak. And Tom McCasland, the fired director of Housing & Community Development wasn’t even invited. Instead of explanations, we got more bombshells and even bigger, more troubling questions that pointed to what Mayor Pro Tem Dave Martin called “a train wreck” that was years in the making.

The Longest Three Hours Ever

Keith Bynam, the department’s Interim Director, and Temika Jones, Assistant Director and Chief Financial Officer (also a former auditor) sat in the hot seats for three hours. They gave a presentation about the department’s finances.

The meeting almost ended before it started. Council members received the presentation from Bynam and Jones less than an hour before the start of the meeting. The members had so little time to prepare that several wanted to postpone. Based on their initial review, some also called the presentation a “diversion.” The acrimonious discussion about whether to adjourn the meeting consumed the first 33 minutes and set the tone for the rest of the day. One council member, Mike Knox, walked out.

While the presentation was certainly not what council members expected, it also wasn’t a “diversion.” It more closely resembled open heart surgery on an entire city department in front of live TV…using hand grenades instead of scalpels.

Most of the presentation focused on budget shortfalls in the department, and who knew what about those shortfalls when.

Sadly, Bynam and Jones had planned to talk about a “corrective action plan” for the department, but never got to their recommendations because of persistent interruptions from council members whose jaws were scraping the floor.

At the end of the meeting, the City Attorney said the internal investigation that the Mayor assigned to him had been turfed to outside counsel – former US attorneys. He knows a hot potato when he sees one!

If this presentation was an attempt to support the mayor (who was reportedly at an Astros game), it backfired. Bynam and Jones spent half their time fielding questions from council members about why they didn’t turn whistleblower years ago. They claimed: 1) that they repeatedly raised spending issues with McCasland, 2) that McCasland supposedly discussed them with the Mayor, and 3) that they weren’t really sure if he ever did.

Bombshell Revelations

Among the bombshells:

• The department’s annual administrative budget for ongoing HUD Community Development Block Grant (CDBG) programs (separate from Harvey programs) went over budget during the last fiscal year by 175%. It budgeted $3,987,480 and spent $11,084,775.
• TIRZ (tax increment reinvestment zone) money made up the difference, but by law TIRZ money is supposed to be spent within the zone where the tax increment is collected.
• During the last 5 fiscal years combined, the department overspent its admin budget by 143%. It budgeted $21,088,015 and spent $51,322,491 on admin.
• Admin expenses for the Harvey CDBG fund exceeded the four-year budget of the program by 14% in the first year of the program.
• For the department’s Homeowner Assistance Program (HoAP), the department incurred $70 million in expenses as of the end of the third quarter, but has only had reimbursements approved and/or paid that totaled $12,475,085. They missed that one by almost 6X. As a result, they are now $22 million short in their project delivery funds.
• Only one of nine programs in the Harvey fund is on track to meet its performance benchmarks by the end of the year.
• The former director’s wife owns a company that was doing business with the department to reduce “duplication of benefit” (DOB) gaps for HoAP applicants. But the company actually increased the gap for each applicant, according to the GLO. To cover the difference, the department will have to reduce each homeowner reimbursement request.
• The GLO capped Relocation Assistance at $6,000 per applicant, but the department is spending $8 to 10K.
• Change orders were not accounted for properly.

Virtually all city council members appeared to be surprised by the revelations.

12 Bigger Questions Remain

Compared to his role in one dubious financial transaction, Mayor Turner now has many bigger questions to answer.

1. Did the Mayor provide proper oversight to the Housing and Community Development Department?
2. Why did he continue to back McCasland when management issues arose years ago? HUD and the GLO had warned him. The problems were widely reported in the media.
3. Are the numbers reported today accurate and complete, or are there more surprises waiting?
4. How could admin expenses swell so much? Previous GLO and HUD audits suggested that the department was understaffed. And McCasland claims he held admin expenses below 13%. And typically, first-year admin startup costs for a new program run about 20-30% of the total allocated for the entire program. They don’t consume 4+ years of budget in one year.
5. Does the City’s accounting software need improvement? The City doesn’t even recognize liabilities incurred to HUD and the GLO. It only covers the general fund.
6. Were these numbers being timely reported to the Mayor? Bynam and Jones say they reported them to McCasland every month, and that McCasland supposedly discussed them with the Mayor. But Bynam and Jones claim McCasland kept them out of meetings with the Mayor. So they don’t know what McCasland told the Mayor.
7. Did McCasland make the Mayor aware of the overages?
8. What is McCasland’s side of the story?
9. How is it possible that the City Controller was writing checks and these overages did not show up on a balance sheet?
10. The City’s general fund advances cash to complete projects in anticipation of reimbursements from the GLO once the work is approved. Are there audited financials that show more detail on how these funds were spent AND additional liabilities which may be accruing?
11. McCasland says he sent a memo to the Mayor, the Housing Committee and every City Council Member that disclosed the role his wife played. Where is that memo?
12. Why did the City sue the GLO to keep these programs last year if they were losing so much money?

Rule #1

Rule #1 in business is that when you’re in a hole, stop digging. Evidently, NO ONE at the City got that memo.

Posted by Bob Rehak on 10/7/2021

1500 Days after Hurricane Harvey

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