Community Development: Information on the Efforts by the City of
Philadelphia, Pennsylvania, to Relocate and Compensate Residents of the
Logan Triangle Area (Correspondence, 06/09/2000, GAO/RCED-00-165R).

Pursuant to a congressional request, GAO reviewed the city of
Philadelphia's efforts to relocate and compensate Logan Triangle Area
residents whose homes are sinking into a landfill, focusing on the: (1)
status of relocations of property owners and tenants; and (2) management
challenges the Logan Assistance Corporation faces in completing the
remaining relocations.

GAO noted that: (1) as of December 31, 1999, the Corporation had
relocated and compensated 499 Logan Triangle property owners and
tenants; (2) the remaining 215 eligible property owners who have not
been relocated or compensated by the Corporation consist of: (a) 186
owners who moved on their own without receiving compensation; and (b) 29
owners with occupied properties; (3) according to a March 2000
Relocation Plan authorized by the Corporation, it will cost an estimated
$15.2 million to complete the relocation and compensation effort over
the next 3 years; (4) in addition to the 714 owners and tenants eligible
to receive relocation benefits, there are an additional 193 ineligible
properties (for which relocation benefits cannot be paid under the
Uniform Relocation Assistance and Real Property Acquisition Policies
Act) remaining in the Logan Triangle, as of December 31, 1999; (5) of
these 193 ineligible properties, 175 were unoccupied and mostly vacant
lots because of demolition, and 18 were occupied by either homeowners or
tenants; (6) the Corporation faces several management challenges in
completing the remaining 215 eligible relocations and compensations; (7)
according to the Department of Housing and Urban Development, the city
is obligated under the Uniform Relocation Act to compensate some, if not
all, of the 186 former eligible Logan Triangle property owners who moved
on their own without receiving compensation; (8) in order to do so, the
city must locate these property owners, which may be difficult,
particularly if these owners moved out of town or out of state; (9) if
the city decides to retain the Corporation to perform this task, the
Corporation may need to hire additional staff with investigative skills
to locate these owners or contract out for this type of service; (10)
also, assisting and convincing the remaining 29 eligible property owners
to sell their properties has been a problem for the Corporation because
most of these owners have poor credit histories, multiple property
liens, and lower incomes because of a disability or retirement; (11) as
of March 22, 2000, about $2.4 million was available to the Corporation
to pay for housing acquisitions, relocations, and administrative costs;
and (12) the Corporation faces management challenges in completing the
remaining relocations because: (a) there is no agreed time frame to
locate and compensate the 186 eligible property owners who previously
vacated their properties; and (b) their office space is in poor
condition, which makes it difficult to retain qualified staff.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-00-165R
     TITLE:  Community Development: Information on the Efforts by the
	     City of Philadelphia, Pennsylvania, to Relocate and
	     Compensate Residents of the Logan Triangle Area
      DATE:  06/09/2000
   SUBJECT:  Community development programs
	     Real property
	     Declining neighborhoods
	     Relocation allowances
	     Real estate purchases
	     Housing
	     Tenants
	     Building codes
IDENTIFIER:  Philadelphia (PA)
	     Community Development Block Grant
	     HUD Special Purpose Grants Program

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GAO/RCED-00-165R

GAO/ RCED- 00- 165R Logan Sinking Homes

B- 285045 June 9, 2000 The Honorable Wayne Allard Chairman The Honorable
Rick Santorum Vice Chairman Subcommittee on Housing and Transportation
Committee on Banking, Housing and Urban Affairs United States Senate

The Honorable Arlen Specter Chairman Subcommittee on Labor, Health and Human
Services and Education Committee on Appropriations United States Senate

Subject: Community Development: Information on the Efforts by the City of
Philadelphia, Pennsylvania, to Relocate and Compensate Residents of the
Logan Triangle Area

In 1987, the city of Philadelphia, Pennsylvania, delineated the boundaries
of a 17- block area containing over 900 townhouses, known as the Logan
Triangle Area, and established a relocation plan to assist the property
owners and tenants residing in this area. The relocation of Logan Triangle
residents was necessary because their homes, which were built on an ash and
cinder landfill between 1910 and 1930, were sinking. Relocation under the
city's plan was voluntary and consisted of an offer to purchase Logan homes
and/ or relocate tenants if they desired to move. It also established a
cutoff date for receiving relocation benefits. Anyone who either moved into
or acquired a home in the Logan Triangle after August 29, 1986, was deemed
“ineligible” to receive benefits under the federal Uniform
Relocation Assistance and Real Property Acquisition Policies Act of 1970, 1
as amended (Uniform Relocation Act), which requires payments for the fair
market value of homes, rental assistance for tenants, and reimbursements for
other costs, such as moving expenses. Because the Uniform Relocation Act
does not provide funding for these relocation activities, the city is using
the Department of Housing and Urban Development's (HUD) Community
Development Block Grant

1 The Uniform Relocation Act provides for relocation assistance, and when
applicable, just compensation, subject to state law, for the acquisition of
property, to individuals who have been displaced, as a result of programs or
projects undertaken by a federal agency or with federal financial
assistance. The displacement can occur as a result of the acquisition,
demolition, or rehabilitation of real property.

United States General Accounting Office Washington, DC 20548 Resources,
Community, and

Economic Development Division

B- 285045 2 GAO/ RCED- 00- 165R Logan Sinking Homes

program (referred to as the block grant program) to provide the benefits
mandated by the act. This program provides federal funds to help grantees-
cities and urban counties- finance projects and services for local residents
and the operating expenses for administering the projects and services.

Benefits to residents were funneled through the Logan Assistance Corporation
(Corporation), a nonprofit organization founded by the city of Philadelphia
in 1987. Since then, the Corporation, which holds a contract with the city's
Office of Housing and Community Development, has received about $34.3
million from the city of Philadelphia, the state of Pennsylvania, and HUD to
relocate Logan residents. HUD was the source of most of these funds ($ 28.9
million, or 84 percent). This is because the city has chosen to allocate a
portion of its annual block grant program entitlement funds provided by HUD
to the Logan acquisition and relocation activities- $23.1 million. HUD has
also provided an additional $5.8 million through its Special Purpose Grants.
The city pointed out that while HUD is the source of most of the funds used
to relocate and compensate Logan residents, the city considers block grant
program funds to be an entitlement to the city and the decision to allocate
these funds to Logan residents represents its contribution to the Logan
effort. In addition, the city has provided $3.7 million to demolish
unoccupied properties.

Concerned about the progress the Corporation has made in relocating Logan
residents, you asked us to address the following two questions:

ï¿½ What is the status of relocations of property owners and tenants in the
Logan Triangle Area?

ï¿½ What are the management challenges the Corporation faces in completing the
remaining relocations?

This letter summarizes the information presented to your staff at our
briefing on April 7, 2000. Enclosure I contain the materials we presented at
that time, along with some additional information requested by your staff as
a result of the briefing and updated information on the funding levels
provided by the city.

Status of Relocations

We found that as of December 31, 1999, the Corporation had relocated and/ or
compensated 499 Logan Triangle property owners and tenants, or about 70
percent of the 714 owners and tenants eligible to be relocated and
compensated. The remaining 215 eligible property owners who have not been
relocated or compensated by the Corporation consist of

ï¿½ 186 property owners who moved on their own without receiving compensation
and may be difficult to locate, and

ï¿½ 29 owners, with occupied properties (16 homeowners and 13 ineligible
tenants/ squatters).

B- 285045 3 GAO/ RCED- 00- 165R Logan Sinking Homes

According to a March 2000 Relocation Plan authorized by the Corporation, it
will cost an estimated $15.2 million to complete the relocation and
compensation effort over the next 3 years-$ 13.1 million to fund the benefit
payments to the remaining 215 eligible property owners and $2.1 million to
cover the Corporation's associated operating expenses.

In addition to the 714 owners and tenants eligible to receive relocation
benefits, there are an additional 193 ineligible properties (for which
relocation benefits cannot be paid under the Uniform Relocation Act)
remaining in the Logan Triangle, as of December 31, 1999. Of these 193
ineligible properties, 2

ï¿½ 175 were unoccupied and mostly vacant lots because of demolition, 3 and

ï¿½ 18 were occupied by either homeowners or tenants.

Management Challenges Faced by the Corporation

The Corporation faces several management challenges in completing the
remaining 215 eligible relocations and/ or compensations. According to HUD,
the city is obligated under the Uniform Relocation Act to compensate some,
if not all, of the 186 former eligible Logan Triangle property owners who
moved on their own without receiving compensation. In order to do so, the
city must locate these property owners, which may be difficult, particularly
if these owners moved out of town or out of state. If the city decides to
retain the Corporation to perform this task, the Corporation may need to
hire additional staff with investigative skills to locate these owners or
contract out for this type of service. Also, assisting and convincing the
remaining 29 eligible property owners to sell their properties has been a
problem for the Corporation because most of these owners have poor credit
histories, multiple property liens, and/ or lower incomes because of a
disability or retirement. These financial problems prevent many of the
homeowners from obtaining financing to purchase replacement housing. As of
March 22, 2000, about $2.4 million 4 was available to the Corporation to pay
for housing acquisitions, relocations, and administrative costs.

In February 2000, HUD interviewed responsible officials of the city's Office
of Housing and Community Development and prepared a status report, which
included the following findings related to the management challenges faced
by the Corporation in completing the remaining relocations:

ï¿½ There is currently no agreed on time frame to locate and compensate the
186 eligible property owners who previously vacated their properties.

2 The Corporation was unable to provide us with the number of ineligible
tenants currently residing in the Logan Triangle because it is not
responsible for identifying or assisting these tenants. 3 As of January
2000, the city of Philadelphia had demolished 862 houses in the Logan
Triangle.

4 The $2.4 million is included in the estimated $15.2 million to relocate or
compensate the remaining eligible owners.

B- 285045 4 GAO/ RCED- 00- 165R Logan Sinking Homes

ï¿½ The Corporation's office space is in poor condition. According to the
Corporation's executive director, this makes it difficult to retain
qualified staff.

In addition to the challenges associated with the remaining residents
eligible for relocation benefits, both Corporation and city officials told
us that they would like to find a way of relocating the 18 ineligible
homeowners and tenants who still remain in the Logan Triangle. As one
possibility for addressing the challenge of providing financial assistance
to these remaining ineligible residents, we found that the city, at its
option, may use HUD block grant program funds to provide relocation
assistance to persons who are not subject to the Uniform Relocation Act. HUD
notified the city of the availability of this option in a letter dated March
22, 2000. It also noted that HUD block grant program funds could be used by
the city to provide additional relocation assistance to eligible resident
property owners whose financial situation limits their relocation options to
acquire comparable housing. Subsequently, the city asked HUD for clarifying
information on the option. On May 10, 2000, HUD responded to the city's
letter for clarification, but according to the city's Director of Housing
and Community Development, some inconsistencies remain for which the city
will seek further clarification.

Agency Comments

We provided a draft copy of this report to HUD and to the city of
Philadelphia's Office of Housing and Community Development for their review
and comment.

Both HUD and the city of Philadelphia generally agreed with the facts
presented in the draft report. HUD's comments are in enclosure II. The city
of Philadelphia's comments and our response are in enclosure III.

In addition, the city commented that it does not concur with the budget or
the relocation schedule of the Corporation that it will take $15.2 million
and 3 years to complete the relocations and compensations of the remaining
eligible Logan property owners. We agree that the cost of completing these
compensations and the time in which they will be completed cannot be
determined with certainty. However, we have included the Corporation's
estimate because it provides an approximation of the funds and time that may
be needed to complete the compensation of eligible property owners.

Scope and Methodology

In conducting our review, we visited the city of Philadelphia in February
2000 and interviewed HUD Philadelphia field office officials; city officials
from its Office of Housing and Community Development and Redevelopment
Authority and the Councilwoman representing the Logan Triangle Area; the
Corporation's board chairman and staff; and Logan residents and clergymen.
We also interviewed HUD officials in Washington, D. C. In addition, we
reviewed HUD and Office of Housing and Community Development monitoring
reports on the Corporation; documents and plans provided by the Corporation
and the Office of Housing and Community Development related to funding
sources, expenditures, and the number of relocations completed and that

B- 285045 5 GAO/ RCED- 00- 165R Logan Sinking Homes

remain to be completed; the Corporation's contract with Office of Housing
and Community Development; and the last two financial audits of the
Corporation prepared by an independent public accountant for fiscal years
1998 and 1999.

We performed our review from January through April 2000 in accordance with
generally accepted government auditing standards.

---- As arranged with your offices, unless you publicly announce its
contents earlier, we plan no further distribution of this report until 3
days from the date of this letter. At that time, we will send copies of this
report to the Honorable Andrew Cuomo, the Secretary of Housing and Urban
Development; Philadelphia's Office of Housing and Community Development; the
Corporation; and Councilwoman Marian Tasco. We will make copies available to
others on request.

Please call me at (202) 512- 7632 if you or your staff have any questions
about this report. Key contributors to this report were James Vitarello,
Patrick Doerning, and Robert Procaccini.

Stanley J. Czerwinski Associate Director, Housing and Community

Development Issues Enclosures - 3

Enclosure III 6 GAO/ RCED- 00- 165R Logan Sinking Homes

Homes Sinking in Logan Triangle Area of Philadelphia, Pennsylvania

Briefing for Senators: Rick Santorum, Arlen Specter, and Wayne Allard April
7, 2000

Enclosure III 7 GAO/ RCED- 00- 165R Logan Sinking Homes

Briefing Overview Requesters' Concerns Objectives Background Objective 1:
Status of Relocations of Logan

Property Owners and Tenants Objective 2: Remaining Management Challenges

Enclosure III 8 GAO/ RCED- 00- 165R Logan Sinking Homes

Requesters' Concerns Logan Triangle - 17 square blocks in Philadelphia where

nearly all homes were sinking. In 1987, the city of Philadelphia committed
to offer to

purchase homes and relocate residents. Logan Assistance Corporation (LAC)
formed in 1987 by the

city to manage relocations. After 13 years and the receipt of $34. 3 million
(mostly from

HUD), LAC has yet to complete all relocations and compensations.

Enclosure III 9 GAO/ RCED- 00- 165R Logan Sinking Homes

Objectives What is the status of relocations of property

owners and tenants in Logan Triangle? What are the management challenges LAC

faces in completing the remaining relocations?

Enclosure III 10 GAO/ RCED- 00- 165R Logan Sinking Homes

Background: Logan Triangle Problem

Over 900 townhouses and a few commercial properties.

Homes built on unstable landfill of ash and cinder. To be eligible for
acquisition and relocation benefits

under the federal Uniform Relocation Act: A property owner must have owned a
Logan

home at least 180 days before August 29, 1986. A tenant must have moved into
a Logan home

before August 29, 1986.

Enclosure III 11 GAO/ RCED- 00- 165R Logan Sinking Homes

Background: Funding $38 million provided for Logan activities from 1987

through June 30, 2000 $34. 3 million to LAC for acquisition and relocation

activities $20. 7 million in city's Section 108 loan funds $5.8 million in
HUD Special Purpose Grants $5.3 million in state funds $2.4 million in
city's discretionary CDBG

entitlement $60, 000 from city's general fund $3. 7 million from city funds
for demolitions

$35. 6 million, or 94%, expended through March 22, 2000

Enclosure III 12 GAO/ RCED- 00- 165R Logan Sinking Homes

Background: Relocation Assistance

LAC provided the following relocation benefits to homeowners and tenants
based on the Uniform Relocation Act:

Homeowners - fair market value of home, as if not sinking, additional
benefits if comparable replacement home costs are more than the Logan home,
and other costs, such as moving;

Tenants - 42 months of rental assistance payments and moving expenses; and

Absentee property owners, primarily limited to fair market value of the
home, have not yet received benefits.

Enclosure III 13 GAO/ RCED- 00- 165R Logan Sinking Homes

Background: LAC Board of Directors and Staffing Levels per LAC Contract

Staff Positions  Executive Director Deputy
Director Finance Director Secretary Relocation Supervisor Relocation
Specialist Relocation Specialist Relocation Specialist Real Estate Manager
R/ E Special Trainee Housing Maintenance

Status ------------ Filled

Filled Filled Filled Filled Filled Filled Filled (part- time) Vacant Vacant
Vacant

Board of Directors: 12 Members (4 vacancies)

Enclosure III 14 GAO/ RCED- 00- 165R Logan Sinking Homes

Objective 1: Status of Relocations and Compensation of Logan Property Owners
and Tenants, as of December 31, 1999

Enclosure III 15 GAO/ RCED- 00- 165R Logan Sinking Homes

Relocations by Calendar Year

Enclosure III 16 GAO/ RCED- 00- 165R Logan Sinking Homes

Objective 1: Status of Relocations

Of the 499 Logan owners (434) and tenants (65) who were paid relocation
benefits, 184 were relocated in the last 3 years (more than any comparable
time).

Of the 215 owners not yet provided benefits: 186 no longer live in the Logan
Triangle and

may be difficult to locate.

Enclosure III 17 GAO/ RCED- 00- 165R Logan Sinking Homes

Objective 1: Status of Relocations

29 owners with occupied properties in the Logan Triangle (16 homeowners and
13 absentee owners) either

Have property liens or financial problems, and/ or Are unwilling to leave
their Logan homes.

As of March 22, 2000, LAC estimates it will cost $15.2 million (including
operating expenses) and take 3 years to complete the Logan relocations and
compensations.

18 of the 193 homes owned by ineligible property owners were occupied by
homeowners or tenants.

Enclosure III 18 GAO/ RCED- 00- 165R Logan Sinking Homes

Objective 2: Remaining Management Challenges

Identify and compensate up to 186 eligible property owners who no longer
live in the Logan Triangle.

City believes LAC could identify and compensate these property owners,
provided it acquires additional investigative skills to locate them.

City has not decided on whether to use LAC to do this work.

City will need to devote funding in future years to compensate up to 186 of
these owners.

Enclosure III 19 GAO/ RCED- 00- 165R Logan Sinking Homes

Objective 2: Remaining Management Challenges

Acquire 29 eligible occupied properties and relocate current eligible
households.

For owners with financial problems, LAC is trying to reduce the amount of
property liens and find them affordable replacement homes.

Since acquisitions under the city's operations plan are voluntary, some
owners may continue to be unwilling to relocate.

About $2.4 million of the $34. 3 million was available to pay for and manage
these relocations as of March 22, 2000.

Enclosure III 20 GAO/ RCED- 00- 165R Logan Sinking Homes

Comments From the Department of Housing and Urban Development

Enclosure III 21 GAO/ RCED- 00- 165R Logan Sinking Homes

Comments From the City of Philadelphia

Enclosure III 22 GAO/ RCED- 00- 165R Logan Sinking Homes

Enclosure III 23 GAO/ RCED- 00- 165R Logan Sinking Homes

Enclosure III 24 GAO/ RCED- 00- 165R Logan Sinking Homes GAO Comments

The following are GAO's comments on the city of Philadelphia's letter dated
May 19, 2000.

1. We have included these 13 properties with the 16 homeowner properties
rather than add them to the 186 eligible property owners who do not now live
in Logan in order to maintain the distinction between occupied and
unoccupied properties.

Since the city acknowledges that the real number of resident owners, as
opposed to the absentee owners, cannot be precisely determined at this time,
we have decided not to change the “186 property owners who moved on
their own without receiving compensation.” Moreover, both resident and
absentee property owners may be eligible to receive relocation benefits.

2. We have modified our report to reflect the suggested changes. 3. The city
commented that it does not concur with the budget or the relocation schedule
of the Corporation, and that it will take $15.2 million and 3 years to
complete the relocations and compensations of the remaining eligible Logan
property owners. We agree that the cost of completing these compensations
and the time in which they will be completed cannot be determined with
certainty. However, we have included the Corporation's estimate because it
provides an approximation of the funds and time that may be needed to
complete the compensation of eligible property owners.

4. The city commented that it disagreed with this statement regarding the
competitive nature of the Corporation's salaries and the condition of the
Corporation's office space. Subsequently, the Deputy Director of the Office
of Housing and Community Development told us that the city agreed that the
Corporation's office space is in poor condition. As a result, we deleted the
statement in the draft report that staff salaries were not competitive.

5. We have modified our report to reflect the suggested changes. (385857)

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