[House Report 104-437]
[From the U.S. Government Publishing Office]
[COMMITTEE PRINT]
deg.Union Calendar No. 212
104th Congress, 1st Session - - - - - - - - - - House
Report 104-437
THE FEDERAL TAKEOVER OF THE CHICAGO HOUSING AUTHORITY--HUD NEEDS TO
DETERMINE LONG-TERM IMPLICATIONS
__________
FIFTH REPORT
by the
COMMITTEE ON GOVERNMENT
REFORM AND OVERSIGHT
together with
ADDITIONAL VIEWS
December 21, 1995.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT
WILLIAM F. CLINGER, Jr.,
Pennsylvania, Chairman
BENJAMIN A. GILMAN, New York
DAN BURTON, Indiana
J. DENNIS HASTERT, Illinois
CONSTANCE A. MORELLA, Maryland
CHRISTOPHER SHAYS, Connecticut
STEVEN SCHIFF, New Mexico
ILEANA ROS-LEHTINEN, Florida
WILLIAM H. ZELIFF, Jr., New
Hampshire
JOHN M. McHUGH, New York
STEPHEN HORN, California
JOHN L. MICA, Florida
PETER BLUTE, Massachusetts
THOMAS M. DAVIS, Virginia
DAVID M. McINTOSH, Indiana
JON D. FOX, Pennsylvania
RANDY TATE, Washington
DICK CHRYSLER, Michigan
GIL GUTKNECHT, Minnesota
MARK E. SOUDER, Indiana
WILLIAM J. MARTINI, New Jersey
JOE SCARBOROUGH, Florida
JOHN B. SHADEGG, Arizona
MICHAEL PATRICK FLANAGAN, Illinois
CHARLES F. BASS, New Hampshire
STEVEN C. LaTOURETTE, Ohio
MARSHALL ``MARK'' SANFORD, South
Carolina
CARDISS COLLINS, Illinois ROBERT L. EHRLICH, Jr., Maryland
HENRY A. WAXMAN, California
TOM LANTOS, California
ROBERT E. WISE, Jr., West Virginia
MAJOR R. OWENS, New York
EDOLPHUS TOWNS, New York
JOHN M. SPRATT, Jr., South Carolina
LOUISE McINTOSH SLAUGHTER, New York
PAUL E. KANJORSKI, Pennsylvania
GARY A. CONDIT, California
COLLIN C. PETERSON, Minnesota
KAREN L. THURMAN, Florida
CAROLYN B. MALONEY, New York
THOMAS M. BARRETT, Wisconsin
GENE TAYLOR, Mississippi
BARBARA-ROSE COLLINS, Michigan
ELEANOR HOLMES NORTON, District of Columbia
JAMES P. MORAN, Virginia
GENE GREEN, Texas
CARRIE P. MEEK, Florida
CHAKA FATTAH, Pennsylvania
BILL BREWSTER, Oklahoma
TIM HOLDEN, Pennsylvania
------
BERNARD SANDERS, Vermont (Independent)
James L. Clarke, Staff Director
Kevin Sabo, General Counsel
Judith McCoy, Chief Clerk
Bud Myers, Minority Staff Director
_________________________________________________________________
Subcommittee on Human Resources and Intergovernmental Relations
CHRISTOPHER SHAYS, Connecticut,
Chairman
MARK E. SOUDER, Indiana
STEVEN SCHIFF, New Mexico
CONSTANCE A. MORELLA, Maryland
THOMAS M. DAVIS, Virginia
DICK CHRYSLER, Michigan
WILLIAM J. MARTINI, New Jersey
JOE SCARBOROUGH, Florida
MARSHALL ``MARK'' SANFORD, South
EDOLPHUS TOWNS, New York Carolina
TOM LANTOS, California
BERNARD SANDERS, Vermont (Ind.)
THOMAS M. BARRETT, Wisconsin
GENE GREEN, Texas
CHAKA FATTAH, Pennsylvania
HENRY A. WAXMAN, California
Ex Officio
WILLIAM F. CLINGER, Jr.,
CARDISS COLLINS, Illinois Pennsylvania
Lawrence Halloran, Staff Director
Demi Greatorex, Professional Staff
Member
Thomas Costa, Clerk
Cheryl Phelps, Minority
Professional Staff
(ii)
LETTER OF TRANSMITTAL
----------
House of Representatives,
Washington, DC, December 21, 1995.
Hon. Newt Gingrich,
Speaker of the House of Representatives,
Washington, DC.
Dear Mr. Speaker: By direction of the Committee on
Government Reform and Oversight, I submit herewith the
committee's fifth report to the 104th Congress.
William F. Clinger, Jr.,
Chairman.
(iii)
C O N T E N T S
----------
Page
I. Summary..........................................................1
II. Background.......................................................3
III. Findings.........................................................7
IV. Recommendations.................................................11
VIEWS
Additional views of Hon. Cardiss Collins, Hon. Edolphus Towns,
Hon. Henry A. Waxman, Hon. Louise McIntosh Slaughter, Hon.
Barbara-Rose Collins, Hon. James P. Moran, Hon. Carrie P. Meek,
Hon. Chaka Fattah.............................................. 15
Additional views of Hon. Christopher Shays....................... 18
(v)
Union Calendar No. 212
104th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 104-437
_______________________________________________________________________
THE FEDERAL TAKEOVER OF THE CHICAGO HOUSING AUTHORITY--HUD NEEDS TO
DETERMINE LONG-TERM IMPLICATIONS
_______
December 21, 1995.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______________________________________________________________________
Mr. Clinger, from the Committee on Government Reform and Oversight,
submitted the following
FIFTH REPORT
On December 14, 1995, the Committee on Government Reform
and Oversight approved and adopted a report entitled ``The
Federal Takeover of the Chicago Housing Authority--HUD Needs To
Determine Long-Term Implications.'' The chairman was directed
to transmit a copy to the Speaker of the House.
I. SUMMARY
The Federal takeover of the Chicago Housing Authority (CHA)
by the Department of Housing and Urban Development (HUD) on May
30, 1995, was an unprecedented model for intervention at a
troubled public housing agency.\1\ Although HUD has authority
to intervene in troubled housing agency operations at any time,
HUD maintains the takeover was precipitated by the resignation
of the CHA Board of Commissioners, and was supported by Chicago
Mayor Richard Daley. HUD has intervened in the operation of
troubled housing agencies in the past. However, HUD has never
assumed responsibility for the day-to-day operations of a
housing agency the size of CHA.\2\
\1\ 42 U.S.C. 1437d(j); 24 CFR 901.215: ``(b) Upon determining that
a substantial default exists under 901.200, the Department may initiate
any interventions deemed necessary to maintain decent, safe and
sanitary dwellings for residents. Such interventions may include: (1)
Providing technical assistance for existing PHA management staff; (2)
Selecting or participating in the selection of an alternate entity to
provide technical assistance or other services up to and including
contract management of all or for any part of the public housing
developments administered by a PHA; or (3) Assuming possession and
operational responsibility for all or for any part of the public
housing administered by the PHA.''
\2\ The Federal Takeover of the Chicago Housing Authority:
Oversight Hearing Before the Subcomm. on Human Resources of the House
Comm. on Government Reform and Oversight, HRIR Hearing of 9/5/95.
(Testimony of Henry Cisneros, Secretary, HUD.) (Original transcript pp.
28-31, in subcommittee files.)
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HUD's ability to carry out the CHA takeover effectively has
immediate impact on the people of Chicago and broad
implications for the 86 other housing agencies presently listed
as ``troubled'' by HUD. If the takeover sets CHA on a course
for recovery, HUD's assumption of control of CHA operations may
be validated as an acceptable model of intervention at troubled
housing agencies. Nonetheless, HUD has not articulated a long
term plan to reform CHA and to extricate itself from CHA
management.
Presently, clear statutory and regulatory standards for HUD
intervention at troubled housing agencies do not exist.
Consequently, it is unclear as to whether HUD may be called
upon to take over management of other public housing agencies
in the future--a task which may prove beyond HUD's resources
and management capacity.\3\
\3\ HRIR Hearing of 9/5/95. (Prepared written statement of Judy
England-Joseph, Director of Housing and Community Development Issues,
General Accounting Office, pp. 2-3, in subcommittee files.)
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Findings:
1. HUD's takeover of CHA was a necessary response to the
resignation of the CHA Board of Commissioners.
2. HUD implemented a 120 day-plan to stabilize CHA
finances, management, security and physical inventory.
3. Three months following the takeover, HUD lacked a long
term strategy for reforming CHA, and extricating itself from
CHA management.
4. HUD's presence at CHA will be required beyond January 1,
1996.
5. HUD lacks clear statutory or regulatory standards to
trigger intervention at troubled housing agencies.
6. HUD does not have the staff resources necessary to run
several troubled housing agencies at once.
7. The Resident Management Corporation at 1230 North
Burling, Cabrini Green, Chicago has improved living conditions
and economic opportunities for public housing residents.
Recommendations:
1. HUD should promptly secure strong, long term leadership
at CHA.
2. HUD, and new CHA management, should develop a long term
strategy for the recovery of CHA.
3. HUD should maintain a clear distinction between its
actions as a Federal agency and its actions as CHA manager.
4. HUD's takeover of CHA should be evaluated as a pilot
program to determine the effectiveness of direct HUD
intervention at other troubled housing agencies.
5. Clear statutory or regulatory standards should be
established for HUD intervention at troubled housing agencies.
6. HUD should do more to support viable Resident Management
Corporations, particularly those operating in troubled public
housing developments.
II. BACKGROUND
On May 30, 1995, the Department of Housing and Urban
Development (HUD) assumed control over the day to day
operations of the ``troubled'' Chicago Housing Authority
(CHA).\4\ Executed in the wake of the resignation of CHA's
Board of Commissioners \5\ on May 26, 1995, the takeover was an
unprecedented HUD action.\6\ A declared breach of contract
between CHA and HUD signed by HUD Secretary Henry Cisneros on
June 2, 1995, made the takeover legally effective. Both the
Mayor of the City of Chicago, Richard Daley, and HUD view their
relationship with respect to CHA as a partnership.\7\
\4\ As used in this report, the following definitions apply:
Troubled public housing: Public housing authorities unable to meet
minimal performance standard, as reflected in their Public Housing
Management Assessment Program (PHMAP) score, are categorized as
troubled by HUD. Housing authorities identified as troubled enter into
a Memorandum of Agreement with HUD which sets forth targets,
strategies, incentives and sanctions for improving management
performance. If HUD finds a PHA unable to improve its performance, the
Department may solicit proposals from private managers or other PHA's
for the management of the troubled PHA's public housing programs. The
Department may also petition the appropriate state or federal court to
appoint a receiver for the troubled PHA, or assume operation of the PHA
itself. While HUD has pursued receivers and private management in the
past for large troubled agencies, it is rare that HUD declares a breach
in the Annual Contributions Contract (ACC) and assumes direct control
of a housing agency. CHA is the largest housing authority to have ever
been taken over by the Department. CHA remained on HUD's troubled list
for sixteen years prior to the 1995 takeover. As of January 1995, HUD
had identified 90 PHA's in the nation as troubled. These 90 PHA's were
responsible for 17% of the public housing stock.
Public Housing Management Assessment Program (PHMAP): The PHMAP
assesses PHAs on indicators such as vacancy rates, use of modernization
funds and housing conditions on an annual basis. There are 11
indicators. PHAs receiving a score below 60 on their PHMAP are
classified as ``troubled''.
Receivership: Court appointed receivers, such as David Gilmore,
receiver of the D.C. Housing Authority, assume control of a housing
agency by order of a court. Receivers then carry out the management and
recovery of housing agencies under the direction of the judge. As a
receiver's actions are a function of court order, they often enjoy the
political immunity and regulatory latitude necessary to carry out
dramatic reform at troubled housing agencies.
\5\ Resolution 95-CHA-209, Chicago Housing Authority, 1995. The
resolution became effective May 30, 1995 at 5:00 p.m. (CST). (In
subcommittee files.)
\6\ HRIR Hearing of 9/5/95. (Prepared written statement of Jeffrey
Lines, President, TAG Associates, p. 4, in subcommittee files.) HUD
rarely assumes control of the operations of a public housing agency and
has never assumed the operation of an agency comparable to the size and
scale of CHA.
\7\ Chicago Public Housing, 1995: Hearing on the federal takeover
of the Chicago Housing Authority Before the Subcomm. on Housing and
Community Opportunity of the House Comm. on Banking and Financial
Services, 104th Cong., 1st Sess. p. 77. (1995) (``Banking Hearing of 6/
7/95'') (Statement of Henry Cisneros, Secretary, HUD).
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CHA is the Nation's third largest public housing authority
(PHA), surpassed in size only by those of Puerto Rico and New
York City. CHA, created in 1937 by a resolution of the City of
Chicago pursuant to the Housing Authorities Act of the State of
Illinois,\8\ administers over 55,000 public and assisted
housing units serving over 150,000 residents. Funding for CHA
programs and administration is provided by the Department of
Housing and Urban Development in accordance with the Annual
Contributions Contract (ACC).\9\ CHA has been on HUD's list of
``troubled'' housing agencies since 1979, when the list was
first created, due to the housing authority's inability to
achieve a passing score on the Public Housing Management
Assessment Program (PHMAP).\10\ CHA is plagued by a poorly
conceived and distressed housing stock, an acutely poor
resident population and a historically mismanaged
administrative bureaucracy.\11\
\8\ 310 ILS 10/1. et. seq.
\9\ The Annual Contributions Contract (ACC) sets out the terms and
conditions under which HUD provides funding to public housing agencies
to develop and operate public housing. Funding provided to a housing
agency is based on HUD's Performance Funding System (PFS).
\10\ HUD-funded public housing agencies are subject to an annual
Public Housing Management Assessment Program (PHMAP) which assesses
public housing agencies on indicators such as vacancy rates, use of
modernization funds, and housing conditions. Housing agencies which
fail to maintain a PHMAP above 60 are placed on the ``troubled'' list
and must enter into a Memorandum of Agreement with HUD which sets forth
strategies, targets, incentives and sanctions for improving management
performance.
\11\ HRIR Hearing of 9/5/95. (Prepared written statement of Henry
Cisneros, Secretary, HUD, pp. 1-2, in subcommittee files.)
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A report issued by former United States Attorney Anton
Valukas in June 1994, exposed $15.3 million in misappropriated
CHA pension assets, $4.3 million in misappropriated health
insurance payments, $200,000 in improper insurance commissions
and millions of dollars lost through fraudulent actions by
outside vendors and CHA personnel.\12\ It was estimated that
the financial losses discovered during the Valukas
investigation totaled more than $26 million.\13\
\12\ Anton Valukas, former U.S. Attorney, and the law firm of
Jenner & Block were retained by the Chicago Housing Authority (CHA) to
make two reports which were subsequently turned over to the United
States Attorney's Office. The CHA Board of Commissioners asked the law
firm for a report on various allegations of wrongdoing in the operation
of the CHA's Retirement Plan, Pre-Tax Savings Plan and other insurance
matters. The CHA Oversight Committee also secured Jenner & Block as a
special counsel for an investigation of fraud and irregularities by
outside vendors providing goods and services to CHA. This second
investigation was broadened to include inquiries into wrongdoing by
certain CHA Police Department Personnel.
\13\ According to an overview of the investigation of the Chicago
Housing Authority by the CHA Oversight Committee and Jenner & Block
provided to the subcommittee by HUD. (In subcommittee files.)
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Additionally, evidence of fraud and mismanagement has been
unearthed in the past by the HUD Inspector General and CHA
Inspector General in other departments at CHA.\14\ The Section
8 program \15\ operated by CHA was particularly troubled and
became the focus of efforts by HUD detailees sent to CHA six
months prior to the takeover. These weaknesses in CHA's
bureaucracy are largely attributable to the housing authority's
highly centralized administration.\16\
\14\ Office of the Inspector General, Department of Housing and
Urban Development, Chicago Housing Authority Maintenance Operations,
94-CH-201-1013, (1994). The CHA Inspector General issued a separate
report pointing to a lack of oversight enforcement in CHA's management
of Section 8 programs.
\15\ In addition to funding public housing, HUD provides rental
subsidies to owners of private units renting to qualified low-income
residents pursuant to Section 8 of the United States Housing Act of
1937, as amended. Through Section 8, HUD pays housing unit owners,
either for-profit or non-profit, the difference between the fair market
rent for the dwelling and a percentage of the tenant's income. Public
Housing Agencies may assume responsibility for administering some
portions of Section 8, particularly the certificates and vouchers
programs, and are compensated by HUD for incurred operating and
administrative costs.
\16\ TAG Associates, Review of the Organization, Management
Operations and Public Housing Portfolio of the Chicago Housing
Authority (1994). (In subcommittee files.)
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Another difficulty afflicting CHA is its dilapidated
housing stock. The CHA landscape is marred by concentrations of
deteriorated high-rise buildings, dubbed by one Washington Post
reporter as ``high-rises to hell,'' \17\ which represent
serious challenges to the housing authority's recovery. The
vertical structures are clustered together on large plots of
vacant land isolated from economic activity. Gang and criminal
activity flourish in the high-rise configurations and residents
live in perpetual fear of violence. At the time of the Federal
takeover, deferred maintenance of CHA properties had rendered
58% of the units unsuitable for human habitation by Federal
standards, although CHA's occupancy rate was 85%.\18\
\17\ Banking Hearing on 6/7/95. p. 207. (Statement of Susan
Gaffney, Inspector General, HUD)
\18\ HUD Memo Hits ``Mismanaged CHA'', ChicagoTribune, June 7,
1995. (In subcommittee files)
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The socio-economic status of the resident population of CHA
also creates particular challenges for the housing authority.
Eleven of the 15 poorest neighborhoods in the Nation are
located in CHA communities.\19\ The average income of a CHA
resident is only $4,665, while the national average for public
housing tenants is over $6,000.\20\ This contributes to low
rent revenues and severe social problems. Ninety-five percent
of CHA residents are African American, a phenomenon
attributable to the segregated housing policies pursued by the
Chicago Housing Authority in the 1950s and 1960s.\21\ Nearly
50% of the CHA population is under the age of 15.\22\
\19\ HRIR Hearing of 9/5/95. (Prepared written statement of Henry
Cisneros, Secretary, HUD, p. 2, in subcommittee files.)
\20\ According to information provided by HUD staff at CHA. (In
subcommittee files.)
\21\ In 1969, a federal court ruled that CHA and HUD were
responsible for creating racially segregated public housing in the City
of Chicago. Gautreaux v. CHA (296 F. Supp. 907 (1969))
\22\ See Supra note 19.
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On June 1, 1995, Congresswoman Cardiss Collins, Ranking
Member of the Government Reform and Oversight Committee,
submitted a request to Committee Chairman William F. Clinger
that hearings be conducted in Chicago on the role of HUD in the
operation of the Chicago Housing Authority. Subsequent to this
letter, the Subcommittee on Human Resources and
Intergovernmental Relations (the Subcommittee) began an
investigation into the Federal takeover at CHA.
On July 11, 1995, the Subcommittee submitted an inquiry and
document request to HUD requesting certain information
concerning CHA's demolition and redevelopment initiatives,
HUD's efforts to reform CHA administration and CHA budget
reconciliation for FY95. HUD responded to this request on
August 1, 1995. Former CHA Executive Vince Lane, Mayor Richard
Daley, CHA residents, former CHA staff, local housing and
community development experts and others were also interviewed
by Subcommittee staff in preparation for the hearing.
Assistant Secretary Joseph Shuldiner and additional HUD
staff met with Subcommittee and Member staff on August 21,
1995, to discuss HUD actions at CHA since the takeover. On
August 25, 1995, majority and minority staff conducted on-site
investigations and interviews in the City of Chicago. On August
28, 1995, the Subcommittee requested additional information and
documents from HUD's Office of General Counsel with respect to
legal issues involved in the CHA takeover. The Office of
General Counsel met with Subcommittee staff the next day to
provide a response to the requests and answer staff questions.
On September 5, 1995, the Subcommittee held a hearing in
Chicago to investigate the Federal takeover of the Chicago
Housing Authority. The hearing focused on HUD's progress at CHA
since the May 30 takeover, the department's short and long term
strategies for reforming CHA and HUD's plans for installing new
leadership and management at the housing authority.
The Honorable Henry Cisneros, Secretary of the Department
of Housing and Urban Development, testified on behalf of HUD.
Joining him were Joseph Shuldiner, Assistant Secretary for
Public and Indian Housing \23\ and Kevin Marchman, Deputy
Assistant Secretary for Distressed and Troubled Housing.\24\
\23\ On October 16, 1995, Joseph Shuldiner left HUD to become the
Executive Director of CHA.
\24\ At the time of the hearing Kevin Marchman was Deputy Assistant
Secretary of the Office of Distressed and Troubled Housing and served
as the Interim Executive Director at CHA. Upon the departure of Joseph
Shuldiner from HUD, Marchman was nominated for the vacated Assistant
Secretary of Public and Indian Housing post and is currently acting in
that capacity.
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The subcommittee also heard testimony from panels of
tenants, public housing management experts and city and private
sector representatives. The tenant panel consisted of Artensia
Randolph, President of the Central Advisory Committee, Hattie
Calvin, President of the Cabrini Green Leadership Advisory
Council, and Cora Moore, 1230 North Burling, Cabrini Green,
Resident Management Corporation. Jeffrey Lines, Kansas City
Receiver and President, TAG Associates, and Judy England-
Joseph, Director, Housing and Community Development Issues,
U.S. General Accounting Office testified with respect to CHA
management. Testifying on city and private sector partnerships
were: Rosanna Marquez, Director of Programs, City of Chicago,
Chief George Murray, Chief of the CHA Police Department and
William Wallace, Managing Director, Housing Technology
Corporation.
During the hearing, the subcommittee requested that HUD
submit a list of non-budgetary statutory reforms that would
assist in the recovery of CHA and other troubled housing
agencies. On September 25, 1995, HUD provided the Subcommittee
with the requested list.\25\ The Subcommittee in turn referred
the list to the House Banking and Financial Services
Subcommittee on Housing and Community Opportunities.
\25\ The four non-budgetary reform proposals submitted by HUD to
the Subcommittee included: (1) Continuation of the repeal of the one-
for-one rule and provision allowing the use of modernization funds for
replacement housing included in the 1995 rescissions bill; (2)
additional powers for HUD and/or court ordered receivers in the
takeover of troubled housing agencies; (3) enactment of HUD proposals
that would require takeover or receivership action at troubled housing
agencies that fail to achieve satisfactory improvement after a year;
and (4) additional statutory authority to discontinue the employment of
excessively expensive, overly dense concentrations of very low-income
families where tenant-based assistance could provide a better living
environment at a lower cost. (In subcommittee files.)
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Additional information was requested by the Subcommittee on
September 11, 1995, including information regarding HUD-funded
consultants involved in the CHA recovery. HUD's response to the
request included a statement indicating that the department did
not directly hire any consultants for CHA. Rather, consultants
for CHA's recovery were secured by the National Association of
Housing and Redevlopment Officials (NAHRO) in accordance with
an agreement in place between HUD and NAHRO. The agreement
directs NAHRO to assemble recovery teams for individual
troubled housing agency sites, including Chicago. The
management of these consultants was brought into question when
conflicting accounts of the length of a contract awarded to one
housing consultant, Rick White, were provided to the
Subcommittee staff.\26\ The Subcommittee again wrote HUD on
October 4, 1995, inquiring about Mr. White's consulting
contract. A response was provided October 31, 1995 stating the
contract in question had been temporarily extended by NAHRO,
thereby creating some confusion as to the contract's exact
terms. Following that contract's expiration, CHA contracted
with Mr. White directly.
\26\ The oral account provided by Mr. White during a meeting with
CHA, HUD and subcommittee staff on August 25, 1995 with respect to the
length of White's consulting contract with NAHRO conflicted with the
written response provided to the subcommittee on September 29, 1995.
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On October 10, 1995, the Subcommittee received a letter
from an individual writing on behalf of the 1230 North Burling
Resident Management Corporation (RMC) claiming that CHA was not
adequately compensating the RMC at 1230 North Burling, Cabrini
Green at CHA. The Subcommittee also inquired by letter of
October 20, 1995, as to the status of the funding allocations
and management contract between CHA and 1230 North Burling RMC.
HUD responded to the Subcommittee on November 7, 1995, and is
reportedly pursuing corrective action with respect to the
funding of the RMC.\27\
\27\ HUD's Management of Public Housing Resident Programs:
Oversight Hearing Before the Subcomm. on Human Resources of the House
Government Reform and Oversight Comm. (Resident Hearing of 11/9/95.)
(Prepared written statement of Kevin Marchman, Acting Assistant
Secretary of Public and Indian Housing, HUD, p. 6, in subcommittee
files.)
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III. FINDINGS
1. HUD's takeover of CHA was a necessary response to the resignation of
the CHA Board of Commissioners.
During the September 5 hearing, Chairman Shays concluded
that HUD's takeover of CHA operations was necessary given the
magnitude and severity of the problems faced by the housing
authority and its residents. Members also noted the significant
investment of Federal funds the mismanagement of CHA had placed
in jeopardy. However, earlier intervention on the part of HUD
may have spared CHA years of deferred maintenance,
administrative waste and the deterioration of social conditions
within the public housing developments.\28\
\28\ CHA was first placed on HUD's list of troubled housing
agencies when the list was created in 1979 where it has remained since
that time. In July 1987, HUD's Deputy Assistant Secretary of Public and
Indian Housing made a recommendation that CHA be placed under private
management. The recommendation was not adopted. Public Housing: Chicago
Public Housing Authority Takes Steps to Address Long Standing Problems.
(GAO/RCED-89-100, June 8, 1995.)
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GAO concurred that the takeover was necessary stating:
Because of the circumstances HUD faced in May 1995 HUD's
decision to take control of CHA with its own staff, on balance,
appears to have been the best option available. The immediate
need for leadership prevented HUD from taking the time to
exercise other options, such as contracting with private
management. Nevertheless, private management and receivership
are still viable options for developing long term solutions to
CHA's problems.\29\
\29\ HRIR Hearing of 9/5/95, (Prepared written statement of Judy
England-Joseph, Director of Housing and Community Development Issues,
General Accounting Office, p. 4, in subcommittee files.)
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Still, HUD clearly has had a long-standing option to
declare CHA in default of its ACC and place the housing
authority under HUD management, private management, the
management of an alternative housing agency or a court
appointed receiver. CHA has been on HUD's list of troubled
housing agencies since 1979.
2. HUD implemented a 120 day-plan to stabilize CHA finances,
management, security and physical inventory.
HUD submitted to the Subcommittee a 120 day stabilization
plan for CHA that outlined six specific objectives and goals
and provided timeliness and performance measures.\30\ The six
objectives and goals are as follows:
\30\ HRIR Hearing of 9/5/95. (Prepared written statement of Henry
Cisneros, Secretary, HUD, p. 4, in subcommittee files.) (A copy of the
120 day plan is in the subcommittee files.)
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Security and Safety: Increase the level of safety in
and around Chicago's public housing developments and
develop community policing plans.
Resident Services: Increase resident participation in
the decisions affecting their lives.
Housing Operations: Improve the effectiveness of
CHA's maintenance program and improving the appearance
of CHA buildings and open spaces.
Administration and Financial Management: Replace the
existing CHA administrative structure and create a new
structure which will provide field support for field
management, manage CHA assets and resources, and
restore confidence and integrity at CHA.
Building Community Involvement: Increase the
community's involvement with CHA's programs.
Redevelopment: Demolish certain high-rise buildings
and replacing them with less dense dwellings that
create better living conditions and opportunities for
low-income families.
3. Three months following the takeover, HUD lacked a long term strategy
for reforming CHA and extricating itself from CHA management.
Protracted problems stemming from CHA's administrative
structure, physical housing stock and social environment must
be resolved to implement an effective recovery at CHA. Short
term solutions, such as HUD's 120 day plan, will not likely
result in the long term correction of these problems. A long
term recovery strategy for CHA is necessary. HUD was unable to
provide the Subcommittee with a long term strategy at the time
of the hearing. HUD also lacked a plan for extracting itself
from the daily operations of CHA.
Long term plans for the recovery of CHA should address,
among other things, the following matters:
CHA's Housing Stock: CHA's housing stock is
distressed due to deferred maintenance and poorly
conceived architecture. This contributes to the
widespread blight of CHA developments and must be
addressed through rehabilitation, redevelopment and
proper building management. Demolition of certain CHA
structures may be necessary to CHA's long term
recovery.\31\
\31\ See Supra note 16.
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Social Conditions at CHA: CHA developments are
occupied by densely populated, poverty-impacted
communities. High concentrations of broken families,
unemployment, gang activity and substance abuse create
social instability in CHA developments.\32\ These
problems were compounded by CHA's abandonment of
fundamental public housing regulations, such as tenant
eviction and screening, prior to the HUD takeover.\33\
\32\ Ibid.
\33\ Abandonment of tenant eviction and screening regulations were
described to Subcommittee staff during interviews conducted prior to
the hearing.
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CHA's Bureaucracy: The centralized bureaucracy in
place at CHA at the time of the takeover was
ineffective and vulnerable to fraud, waste and abuse.
CHA's institutional deficiencies are exemplified by the
following examples: $600 million in unexpended funds
were trapped in the CHA pipelines at the time of the
HUD takeover,\34\ the Valukas report unearthed an
estimated $26 million in losses due to fraud at CHA;
\35\ and the HUD Inspector General Audit on Maintenance
Operations found serious deficiencies in CHA's
execution of maintenance repairs and other public
housing management operations, including tenant
screening and eviction policies.\36\
\34\ HRIR Hearing of 9/5/95. Original transcript p. 62, in
subcommittee files. (Testimony of Joseph Shuldiner, Assistant Secretary
of Public and Indian Housing, HUD) Mr. Shuldiner confirmed that $600
million in unexpended funds were available to CHA for redevelopment.
Shuldiner stated that half of the $600 million were funds allocated to
CHA in the past for general development purposes, while the other half
were allocated specifically for the redevelopment of the Cabrini Green
and Henry Horner developments.
\35\ See Supra at note 13.
\36\ Banking Hearing of 6/7/95. p. 207. (Statement of Susan
Gaffney, Inspector General, HUD.)
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Resident/CHA Relations: Problems exist with respect
to resident/CHA relations. Oral accounts provided by
several CHA resident leaders during, and prior to, the
hearing suggest resident alienation from the CHA
administration, patronage between former CHA
administrators and certain residents, resident distrust
of CHA Police, and resident distrust of CHA commitments
with respect to redevelopment plans.
4. HUD's presence at CHA will be required beyond January 1, 1996.
Secretary Cisneros testified at the hearing that HUD would
remove itself from daily operations of CHA by January 1, 1996.
Given the protracted nature of the problems faced by CHA and
the absence of a long term plan for CHA's recovery, the
Subcommittee finds that HUD's presence will be required beyond
the Secretary's projected pull-out date.
5. HUD lacks clear statutory or regulatory standards to trigger
intervention at troubled housing agencies.
HUD is primarily a regulatory and monitoring agency that
assumes direct control over housing agencies in only rare and
select cases.\37\ PHMAP scores assess public housing agencies
on performance indicators such as vacancy rates, use of
modernization funds and housing conditions. Public housing
agencies that fail to receive a passing score on their PHMAP
are listed as ``troubled'' by HUD and enter into a memorandum
of agreement that sets forth strategies, incentives and
sanctions for improving management performance. If a housing
agency substantially defaults upon its agreement, or with
respect to other covenants or conditions to which it is
subject, HUD may solicit proposals from other public housing
agencies and other public housing management agencies for the
management of the defaulted public housing agency, or petition
the appropriate State or Federal court to appoint a receiver to
manage the defaulted housing agency.\38\
\37\ HRIR Hearing 9/5/95. (Prepared written statement of Jeffrey
Lines, President, TAG Associates, p. 5, in subcommittee files.)
\38\ 24 CFR 901 et. seq.
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Presently, no statute or regulation requires HUD to
intervene if a housing agency fails to raise its PHMAP score or
fulfill its memorandum of agreement over time. Section 6(j) of
the United States Housing Act of 1937 states only that,
``[n]otwithstanding any other provision of law or of any
contract for contributions,'' the Secretary of HUD may engage a
variety of models for intervention at housing agencies found in
default of their agreement with HUD to operate public housing
programs.\39\ Without more objective criteria to trigger HUD's
intervention, HUD's decision to act at select housing agencies
can appear arbitrary or motivated by political
considerations.\40\ Although, HUD asserted it intervened at CHA
in response to the Board of Commissioner's abdication, HUD
participated in the decision to place the department in charge
of CHA.
\39\ 42 U.S.C. 1437d(j).
\40\ HUD's intervention at CHA in part facilitated the finalization
of plans to demolish the blighted Henry Horner developments. The
developments are located across the street from the site of the 1996
Democratic National Convention. Consequently, allegations have been
made in the media that the HUD takeover may have been politically
motivated. (In subcommittee files.)
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6. HUD does not have the staff resources necessary to run several
troubled housing agencies at once.
In their written statement, GAO testified that Assistant
Secretary Joseph Shuldiner stated that HUD may not have the
capacity to run troubled housing agencies in the future.\41\
Additionally, other troubled housing agencies, in desperate
need of HUD assistance and oversight, must be tended to by
HUD's finite pool of public housing specialists. The extended
presence of HUD staff at CHA could have implications for the
quality of oversight provided to the 87 other troubled housing
agencies in the Nation. This drain on staff resources would be
compounded by additional HUD takeovers pursued by HUD prior to
their departure from CHA operations.
\41\ HRIR Hearing of 9/5/95. (Prepared written statement of Judy
England-Joseph, Director, Housing and Community Development Issues,
General Accounting Office. p. 4, in subcommittee files.)
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Should HUD or Congress determine that the intervention
model pursued at CHA is a viable alternative for reforming
troubled housing agencies, the potential for its use at other
housing agencies would be limited by the finite pool of
qualified staff at HUD.
7. The Resident Management Corporation as 1230 North Burling, Cabrini
Green, Chicago has improved living conditions and economic
opportunities for public housing residents.
Assumption of management responsibilities at 1230 North
Burling, Cabrini Green, resulted in improved living conditions
and the creation of economic opportunity for the residents
living there.\42\ Cora Moore, Manager of the 1230 North Burling
Resident Management Corporation, testified that her
corporation's presence in the building has resulted in a 60%
decrease in crime and a 50% decrease in vandalism at the
building site. Furthermore, the resident management corporation
now operates its own on-site laundry room, the profits from
which will be used for future projects for the 1230 North
Burling community.
\42\ Prior to the hearing, members of the subcommittee were given a
tour of the development at 1230 North Burling in Cabrini Green. The
Resident Management Corporation operating at 1230 North Burling has
produced visible improvements in the quality of housing provided and
created job opportunities for some residents.
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1230 North Burling's management activities facilitated the
hiring of eleven of its residents as employees of the resident
management corporation and an additional 35 residents are
projected to be hired to renovate all of the apartments in the
building. 1230 North Burling also runs an after school tutoring
program in conjunction with a non-profit organization which
donated a new playground to the resident management
corporation.\43\
\43\ HRIR Hearing of 9/5/95. (Prepared written statement of Cora
Moore, Manager, 1230 North Burling, p. 3, in subcommittee files.)
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IV. RECOMMENDATIONS
1. HUD should promptly secure strong, long term leadership at CHA.
CHA is in need of strong, long term leadership.\44\ The new
management secured for CHA must have the required expertise to
develop and implement a long term strategy for the recovery of
CHA and to act autonomously of HUD's participation in daily
operations. Timeliness in securing this new management
structure is necessary to prevent any potential lapses in
implementation of recovery initiatives and improvements made by
HUD during its interim control of CHA operations. Also, delay
in securing long term leadership could create a potential for
the excessive expenditure of funds on short term HUD efforts
that may prove inconsistent with long range goals yet to be
defined by CHA management. Such expenditures could pose a
threat to CHA and the limited resources available to it.
\44\ HRIR Hearing of 9/5/95. (Prepared written statement of Judy
England-Joseph, Director, Housing and Community Development Issues,
General Accounting Office, p. 6, in subcommittee files.)
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Additionally, the new management structure should correct
deficiencies in the former CHA administrative structure, which
was weak and inefficient.\45\
\45\ HRIR Hearing of 9/5/95. (Prepared written statement of Judy
England-Joseph, Director of Housing and Community Development Issues,
General Accounting Office, p. 5, in subcommittee files.) (Prepared
written statement of Jeffrey Lines, President, TAG Associates, p. 2, in
subcommittee files.)
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2. HUD, and new CHA management, should develop a long term strategy for
the recovery of CHA.
HUD must ensure that a long term strategy is defined to
address the long standing difficulties confronting CHA. The
strategy should address comprehensive rehabilitation of the
housing stock, the quality of resident services and relations,
progress toward community enhancement and development, and the
quality of the relationship between the housing agency and the
broader community.\46\ Implementation of this long term
strategy should also account for HUD's withdrawal from daily
CHA operations.
\46\ HRIR Hearing of 9/5/95. (Prepared written statement of Judy
England-Joseph, Director of Housing and Community Development Issues,
General Accounting Office, p. 7, in subcommittee files.)
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However, short term actions by HUD could limit CHA's long
term inventory options. After assuming control of CHA, HUD, at
the direction of Assistant Secretary Joseph Shuldiner, issued a
Request for Qualifications (RFQ) asking private sector housing
managers to craft their own proposals for running some or all
portions of the CHA stock. Action on responses to the RFQ had
not been taken at the time of the hearing.
Unfortunately, plans defined by the private sector, rather
than the housing authority, may not be in the best interest of
CHA and could leave CHA with a difficult mix of properties to
manage. Management companies may not prove willing to assume
responsibility for the properties at a reasonable cost,
particularly the more troubled housing developments.
A long term strategy will also foster improved resident/CHA
relations. Residents have a deep seated distrust of the housing
authority and local developers.\47\ Unless HUD/CHA can present
the residents with redevelopment and reorganization plans that
fit in a logical long term strategy for improving CHA and
resident life, residents are likely to resist initiatives that
threaten the status quo.
\47\ Resident distrust of CHA and local developers was expressed to
Subcommittee staff by during interviews with CHA residents prior to the
hearing.
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Further, efforts to reform CHA should be integrated with
initiatives to end the geographic and economic isolation of CHA
residents. Strategies involving community and economic
development efforts in, and surrounding, CHA housing
developments need to be developed. As Chicago was chosen as one
of the Nation's six Empowerment Zones (EZ) \48\, the city
should make efforts to include CHA communities in EZ urban
revitalization efforts.\49\
\48\ The Empowerment Zone and Enterprise Community program promotes
the comprehensive revitalization of distressed communities by funding
broad, community based strategic plans. Chicago was named as one of six
empowerment zones in December 1994.
\49\ HRIR Hearing of 9/5/95. (Prepared written statement of Judy
England-Joseph, Director, Housing and Community Development Issues,
General Accounting Office, p. 9, in subcommittee files.) GAO stated
that the involvement of CHA in activities such as the Empowerment Zone,
``would be beneficial''. However, benefits resulting from neighborhood
revitalization efforts may take years to manifest themselves at CHA.
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3. HUD should maintain a clear distinction between its actions as a
Federal agency and its actions as CHA manager.
Clear demarcations must be maintained between actions taken
by HUD and actions taken by HUD in the name of CHA for the
duration of the takeover. The resolution passed by the CHA
Board of Commissioners specifically named Joseph Shuldiner,
Assistant Secretary of Public and Indian Housing as the new
proprietor of CHA. While this resolution was not legally
binding,\50\ the takeover presents questions of Federal
Government liability for the actions of HUD employees in the
operations of CHA. These questions are particularly of concern
with respect to HUD employees who assumed temporary CHA titles.
\50\ It was the Secretary's June 2, 1995 breach of contract letter
that provided the legal grounds for the HUD takeover. The letter stated
HUD had decided to ``act in the name of and on behalf of the CHA,''
rather than stating the agency would act as the CHA.
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In an effort to maintain the demarcation between HUD and
CHA and avoid possible conflicts of interest, Assistant
Secretary Joseph Shuldiner and Deputy Assistant Secretary Kevin
Marchman, acting as the CHA Executive Committee Chairman and
Interim CHA Executive Director respectively, executed
memorandums on June 6, 1995, recusing themselves from HUD
matters regarding competitive assistance administered by HUD.
4. HUD's takeover of CHA should be evaluated as a pilot program to
determine the effectiveness of direct HUD intervention at other
troubled housing agencies.
HUD should create measures by which the recovery of CHA can
be assessed. According to GAO, HUD has taken steps towards
establishing accurate baseline data for maintenance, finances,
inventories and other areas to measure the success of the
future CHA and private managers contracted by the housing
authority. Additional indicators must be developed, although
Congress should recognize that such measures can only be
evaluated for trends over time. As certain HUD regulations are
reinstated at CHA, such as tenant screening and eviction, some
traditional public housing management performance indicators,
such as vacancy rates, may actually worsen before
improving.\51\
\51\ HRIR Hearing of 9/5/95. (Prepared written statement of Judy
England-Joseph, Director of Housing and Community Development Issues,
General Accounting Office, p. 7, in subcommittee files.)
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5. Clear statutory or regulatory standards should be established for
HUD intervention at troubled housing agencies.
Congress should establish a statutory threshold for HUD
intervention at troubled public housing agencies. Although HUD
created an Office of Troubled and Public Housing in 1994 to
address the problems posed by troubled public housing agencies,
HUD's oversight and regulation of public housing agencies
continues to be insufficient. Troubled public housing agencies
represent a waste of Federal funds and can have tragic
consequences for the tenants residing there.\52\
\52\ Public Housing: Vacant Units, Wasted Federal Dollars,
Oversight Hearing Before the Subcomm. on Employment, Housing and
Aviation of the House Government Operations Comm., 103rd Cong., 2nd
Sess., (1994). The subcommittee testimony revealed extensive waste and
abuse of federal funds and deteriorated living conditions at public
housing agencies.
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The absence of thresholds triggering intervention raises
questions concerning what factors influence decisions to
intervene at troubled housing agencies. The absence of
objective thresholds for intervention also begs the question as
to why an ailing housing authority would be permitted to
continue operation without some form of intervention into its
operations by HUD. Without uniform requirements governing the
agency's intervention at troubled housing agencies, the process
may be open to politicization.
In the case of CHA, HUD intervened in the daily operations
of the housing authority upon the resignation of the entire CHA
Board of Commissioners. Although conversations had been on-
going with respect to the possibility of a takeover between
representatives of HUD, CHA and the City of Chicago prior to
passage of that resolution, Secretary Cisneros did not sign a
letter declaring a breach of contract between HUD and the
housing authority until June 2, 1995, three days after HUD had
been appointed by the former Board of Commissioners as the new
proprietor of CHA. HUD's inability to declare an official
breach of contract on the same day of the takeover suggests
some challenges on the part of the department in responding to
an unpredictable intervention process.
Given that HUD's intervention at troubled housing agencies
is not governed by statute or regulation, it is difficult to
establish measures to rate HUD's performance in a housing
agency takeover. Also, the lack of clear guidance governing the
implementation of HUD takeovers also fails to provide the
department with a clear exit strategy from PHA operations.
HUD is presently considering regulations which would
necessitate intervention by HUD if a housing agency failed to
improve performance over a specified period of time.\53\
\53\ See Supra at note 25.
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6. HUD should protect viable Resident Management Corporations from
poorly managed public housing agencies.
Resident Management Corporations (RMC) can provide viable
private management at public housing developments. RMC's
additionally create opportunities for resident empowerment and
economic uplift. Accordingly, HUD should encourage public
housing agencies to contract with functional RMCs where
possible. RMCs should particularly be encouraged within
developments that have been failed by troubled housing agency
administrations.
However, HUD needs to provide effective oversight of RMC
contracts with public housing agencies to ensure the integrity
of the contract and working relationship in place. In a written
statement submitted for a subsequent hearing held by the
Subcommittee on HUD's management of resident programs, one
resident management consultant stated, ``Resident councils fail
to achieve Resident Management of their crime infested
developments all across the country because bad PHA's limit,
intimidate and control the funds available to resident
organizations for training, technical assistance, economic
development and empowerment.'' \54\
\54\ Resident Hearing of 11/9/95. (Prepared written statement of
Bertha Gilkey, President, Cochran Tenant Management Corporation, p. 6,
in subcommittee files.)
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The Resident Management Corporation at 1230 North Burling,
Cabrini Green, provides an example of how even well managed CHA
properties can fall victim to dysfunctional PHA administration.
Prior to the HUD takeover, the RMC at 1230 North Burling had
been providing management services in accordance with a
contract signed by CHA. The quality of housing management
provided by the RMC was commendable. However, CHA failed to
accurately calculate the Allowable Expense Level (AEL) for the
1230 North Burling building, and subsequently failed to provide
funding to the RMC in accordance with proper HUD procedure.
While this situation has been remedied since the hearing,
Resident Management Corporations identified in the future for
management contracts should be protected from this type of
neglect and abuse.
ADDITIONAL VIEWS OF HON. CARDISS COLLINS, HON. EDOLPHUS TOWNS, HON.
HENRY A. WAXMAN, HON. LOUISE McINTOSH SLAUGHTER, HON. BARBARA-ROSE
COLLINS, HON. JAMES P. MORAN, HON. CARRIE P. MEEK, HON. CHAKA FATTAH
This Investigative Report (the Report) results from an
ongoing Human Resources and Intergovernmental Relations
Subcommittee investigation of the U.S. Department of Housing
and Urban Development's (HUD) takeover of the properties and
operations of the Chicago Housing Authority (CHA). The
investigation was initiated at the request of Ranking Minority
Committee Member Cardiss Collins, and we commend Chairman
William Clinger and Subcommittee Chairman Christopher Shays for
their efforts in this matter.
CHA is the third largest public housing authority in the
nation, and has within its housing stock a disproportionate
number of the nation's worst public housing--huge
concentrations of aging, deteriorated, poorly designed and
poorly maintained buildings inhabited by very low-income, often
female-headed families and plagued by gang crime and violence.
At the time of the takeover, the HUD Inspector General, U.S.
General Accounting Office (GAO), and independent analysts had
documented systemic problems at CHA across major operational
areas including housing management, maintenance, financial
management, and security.
We support the Federal takeover of CHA as the only logical
action to confront the systemic problems in Chicago's public
housing and to address the urgent needs of the residents. This
investigation seeks to determine the efficacy of HUD's strategy
for reforming CHA, and the agency's capability to carry out
proposed reforms in light of the enormity and intractability of
CHA's problems.
We generally support the Report. However, the briefing
provided to Subcommittee staff by HUD and CHA officials on
December 5, 1995 has yielded new information, not reflected in
the Report, that indicates that some of the Subcommittee's
recommendations have already been undertaken by HUD. Our
additional views include this information, as well as
additional facts that can be found in the record, and provide a
more complete picture of the status of the intervention effort,
the rationale for the takeover, and the capability of HUD to
intervene in other troubled housing authorities.
We concur with the Report's finding that ``three months
following the takeover, HUD lacked a long-term strategy for
reforming CHA * * *'', and the recommendation that ``HUD, and
new CHA management should develop a long term strategy for the
recovery of CHA''. In fact, in his testimony before the
Subcommittee, HUD Secretary Cisneros acknowledged the need for
a long-term plan. Subsequently, in the December 5 briefing HUD
indicated that its five-year strategy for reforming CHA would
be significantly in place by February 15, 1996, and that the
``vision statement'' governing the reform effort would be
released by HUD before December 31, 1995. We recommend that the
Subcommittee closely monitor the development and implementation
of the CHA recovery strategy to determine its efficacy and
potential for success.
Also during the December 5 briefing, HUD demonstrated that
all senior positions at CHA have been filled by new and
qualified personnel in the employ of CHA, facilitating the
agency's differentiation between its Federal operations and its
activities as CHA manager. It is our opinion that HUD is, in
fact, already being responsive to the Subcommittee's
recommendations that ``HUD should promptly secure strong, long
term leadership at CHA'', and that ``HUD should maintain a
clear distinction between its actions as a Federal agency and
its actions as CHA manager''.
We concur with the Report's finding that ``HUD's takeover
of CHA was a necessary response to the resignation of the CHA
Board of Commissioners''. However, the Report does not
sufficiently underscore that the Federal takeover action was
also consistent with HUD's Reinvention Blueprint, the
Administration's strategy for restructuring HUD that was
released in December 1994. Among its provisions, the Blueprint
establishes a one year benchmark during which troubled public
housing authorities (PHAs) must either demonstrate improvement
or HUD will be required to find that the PHA has breached its
contract with the Federal government. If a breach is declared,
HUD can administer the PHA--as the agency is now doing in
Chicago.
We also concur, as does the agency, that ``HUD lacks clear
statutory or regulatory standards to trigger intervention at
troubled housing agencies''. Although current authorizing
language provides that the HUD Secretary may intervene in
troubled PHA's (Section 6(j) of the U.S. Housing Act of 1937,
as amended), HUD has indicated to the Subcommittee that the
statutory changes necessary to carry out the Blueprint proposal
are integral to the agency's ability to intervene in troubled
authorities. We support HUD's efforts to achieve this important
statutory reform.
We support the Report's recommendation that ``HUD's
takeover of CHA should be evaluated as a pilot program to
determine the effectiveness of direct HUD intervention at other
troubled housing agencies'', with the caveat that the Congress
take into consideration in its evaluation the impact of the FY
1995 rescissions and FY 1996 HUD appropriations on the
availability of funds for the CHA recovery effort. Any failure
to acknowledge the impact of these fiscal constraints imposed
on HUD or CHA would result in an unfair and distorted
evaluation of the effectiveness of the intervention effort.
For example, the FY 1995 rescissions bill reduced funding
levels previously available to CHA in 1995 for modernization
from $179 million to $143 million. This unanticipated shortfall
has necessitated CHA's postponement of building modernization
activities requiring these funds to 1996.
Second, the FY 1996 House Appropriations bill significantly
curtails funding of CHA operations. Taken in conjunction with
the 1995 reductions, CHA stands to lose over $58 million in
modernization funds, reducing the 1995 appropriated level to
$121 million in 1996. In addition, a total of $23.5 million in
operating subsidies will be cut, reducing CHA funding from $170
million to $146 million. The bill also eliminates the
Development and Hope VI programs. Housing sites that would have
been eligible for redevelopment funding under these programs
can no longer access these funds.
Finally, like the Majority, we are concerned about HUD's
ability to deliver a sustained commitment of key officials with
housing management experience in the intervention of other
chronically troubled housing authorities. However, the Report's
finding that ``HUD does not have the staff resources to run
several troubled housing agencies at once'' was refuted by HUD
in the December 5 briefing. It is important to note that the
Report raises questions about HUD's ability to intervene in
other PHAs using the CHA model. HUD can employ other
intervention models that do not require the same commitment of
HUD staff and resources as were provided to CHA, that are
responsive to the unique needs and conditions of the individual
PHA. Given that HUD may be taking intervention action against
other troubled housing authorities in the coming weeks, it is
incumbent upon the Subcommittee to monitor the implementation
of these models to determine whether HUD can effectively carry
them out.
Cardiss Collins.
Edolphus Towns.
Henry A. Waxman.
Louise McIntosh Slaughter.
Barbara-Rose Collins.
James P. Moran.
Carrie P. Meek.
Chaka Fattah.
ADDITIONAL VIEWS OF HON. CHRISTOPHER SHAYS
On December 5, 1995, representatives from the Department of
Housing and Urban Development (HUD) and the Chicago Housing
Authority (CHA) briefed Members and staff on progress made in
the implementation of the initial 120-day plan for CHA and in
the formulation of a long-term vision and strategy to reform
that profoundly troubled housing agency. Much of the
information provided at the briefing was not available when
this report was finalized. Therefore, I join my colleagues,
Rep. Cardiss Collins (D-IL) and Rep. Edolphus Towns (D-NY), in
acknowledging that HUD has already made notable progress
implementing some of our recommendations.
In particular, with the hiring of an Executive Director and
all the Assistant Directors, the top tier of a new CHA
management team is in place. That addresses our first
recommendation and should provide the leadership needed to
improve operations and living conditions at CHA properties.
HUD informed us that Secretary Cisneros will issue a vision
statement to guide long range planning at CHA. We were also
told that a long range plan should be finished by February 15,
1996 and a Memorandum of Understanding (MOU) between HUD and
CHA formalizing needed reforms will be signed by March 15,
1995. Completion of those steps should implement our second and
third recommendations.
At the briefing, HUD disputed the conclusion that the
Department lacks the staff resources and expertise to engage in
several takeovers simultaneously. While I applaud HUD for
taking more pro-active and aggressive steps to stabilize
troubled public housing, I believe the Department's assessment
of its capacity is well intentioned but premature. The hearing
record supports our finding and any conclusion to the contrary
can only be made in the context of HUD's long-term plans at CHA
and our continuing oversight of this process.
Christopher Shays.
-