Fort Worth offers to settle United Riverside housing case

Posted Friday, Feb. 08, 2013  comments  Print Reprints

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FORT WORTH -- The city is offering to take the remaining real estate owned by a Fort Worth affordable housing nonprofit run as recently as last year by City Councilwoman Kelly Allen Gray to settle a 4-year-old $220,000 dispute over eligibility of two home buyers.

The nonprofit, United Riverside Rebuilding Corp., would have to shut down and surrender mineral rights.

The city would receive eight lots in southeast Fort Worth it estimates are worth substantially less than the $220,000. United Riverside would give a ninth lot to a neighborhood now using it for a community garden.

United Riverside is willing to give up the properties, but it wants to stay open and keep mineral rights.

"We have no problem giving them the property," Phyllis Allen, a board member and sister of Gray, said for the board.

"But how the city can decide we need to cease to exist is beyond me," she said. "We're independent."

Moreover, she said, "nobody is conveying property with mineral rights today."

The city staff made the offer, authorized in executive session by the City Council, in a letter sent over the holidays to Roland Walton, United Riverside chairman. Gray stepped down as executive director during her successful run for the council last year; she now represents southeast Fort Worth's District 8.

Gray said in an interviewthat she was unaware of the terms of the offer and was not involved in the talks.

Allen and Gray say the dispute has unfairly blemished United Riverside's record of building affordable homes in Riverside.

The nonprofit got its start with a grant in 2000. It has built 25 houses and remodeled two others, investing $1.2 million and selling at below-market value to allow buyers to move in with equity, said Gray, who was executive director from inception.

"Every single dime that was entrusted to the United Riverside Rebuilding Corp. was spent the way it was said it was going to be spent," she said.

"We built homes, we remodeled houses, we provided social services, we brought families back into the community," she said.

"We built the best houses [under the affordable housing program] in the city," Allen said. "The houses are there."

The dispute hinges on two homes United Riverside built and sold. In May 2006, United Riverside, with Gray as director, accepted $287,000 in federal Housing and Urban Development money administered by the city's housing department.

Under the grant, the money was to be used as seed to construct six infill homes. United Riverside would build two, sell them and use the proceeds to repeat the process.

United Riverside built two homes and sold them. But the buyer of one turned it into a rental, violating federal affordable housing rules, and the city has said the second buyer's income was too high. In 2008, after United Riverside sold the homes, the city, as is routine under the HUD process, sought documentation that the home buyers met requirements.

United Riverside maintained that it sent the documentation early on but that the originals were later destroyed by a flood in its offices. The city has said it never received the documents.

The city repaid $220,719.29 last year to the government. Of that, the city and HUD determined that $190,843 went to building the two homes, $12,544 was for a lot not built upon within the allowed time, and the remainder was for expenses United Riverside couldn't document, said Jay Chapa, city housing and economic development director.

Chapa became director in fall 2008, after the city merged the housing and economic and community development departments. He was director of the latter department.

The Tarrant Appraisal District lists the eight lots to be given the city as worth a total $62,400 at market last year, and the city is using those figures as its estimate of value, Chapa said.

Under the city's offer, United Riverside would pay outstanding property taxes and closing and title policy costs in transferring the lots -- on LaSalle, East Fourth and East Robert streets, and Ennis Avenue -- to the city.

United Riverside would give the lot at 2612 Chenault St. to the neighborhood using it for a garden; TAD lists it as worth $3,850.

The lots must pass what the city views as a routine environment assessment.

The city will likely put the lots up for sale, Chapa said.

Allen said United Riverside the lots may be worth more than the TAD values.

It wasn't clear whether the nonprofit has the assets to cover taxes and costs. United Riverside hasn't estimated the costs, Allen said. The lots "are our biggest asset," she said.

In United Riverside's 2011 federal 990-EZ tax filing, it listed its real estate as worth $108,860, and its only assets at year-end.

Its offices are in a city-owned community center. United Riverside has a natural gas lease on one lot, Allen said.

United Riverside's 2011 filing lists no employee compensation. Its 2010 filing says Gray received a $36,661 salary and was its only paid employee.

"My sister is probably one of the most honest people I know," Allen said. "That's what drives me crazy."

Development groups

The case was one of several similar disputes the city has had with community housing development organizations, authorized by the government in the early 1990s to build affordable housing in underprivileged neighborhoods.

Through April last year, the city has repaid the government about $700,000 on grants made from 1994 to 2006, Chapa said. During that period, the city made grants to nine organizations under the program and repaid money to the government in cases related to seven, he said.

The total money the city distributed to the organizations involved: likely more than $5 million, Chapa said.

The city typically received lots in settlement. When it sells them, it will receive money against what it repaid the government, so the city's net repayment will end up being less than the $700,000, he said.

'Over their heads'

The city never alleged malfeasance, he said.

Rather, the organizations were typically nonprofits formed by neighborhood leaders or development groups, and often got in "over their heads," Chapa said. "They had good intentions."

Some groups spent too much on property before building, or built into bad cycles and couldn't sell, he said.

The federal program also has complicated rules that the nonprofits could run afoul of in "very technical" circumstances, such as not having enough staff, he said. The government has changed the rules over the years to try to ensure proper use of the money, and those changes have made the rules more difficult, Chapa said.

Fort Worth's issues with administering the program involved "a combination of trying to be too aggressive in providing dollars to the neighborhoods and not enough technical support by the city," Chapa said.

Since the problems, the city has tightened its processes, Chapa said.

Would-be home buyers must now go through the city's down-payment assistance program, under which the city ensures they're qualified, he said.

Depending on their size and capability, the city may now have a nonprofit "start small and build capacity" before working up, Chapa said.

Scott Nishimura,


Twitter: @JScottNishimura

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