State questions Terre Haute use of blight relief funds. deactivates program

Those BEP funds cannot be used for blight elimination or housing demolition until the matter “has been resolved to the satisfaction of” state officials who oversee the program, according to a letter obtained by the Tribune-Star through a public records request.

Since early December, discussions have been under way between the city and the state office, which is the Indiana Housing and Community Development Authority. The city department of Redevelopment administers the program.

On Dec. 3, Rayanna A. Binder, program director for the state BEP program, wrote in an email to redevelopment officials, “I need to set up a conference call regarding the BEP funds removed by the comptroller. This call needs to occur TODAY.”

She wrote that she needed written confirmation that the city had returned the funds before the close of business that same day.

Binder further wrote, “Both rounds of Terre Haute’s BEP award have been de-activated and will not be reopened until this matter has been resolved to the satisfaction of IHCDA” and legal counsel.

When contacted by the Tribune-Star, Binder referred any questions about the programs, as well as the public records request, to the state agency’s legal counsel, David Stewart.

The state apparently became concerned after the city controller transferred BEP funds out of a so-called “non-fed” account, or redevelopment account used to pay program expenses. On Dec. 1, former Redevelopment Commission attorney Rhonda Oldham said the city controller had inappropriately transferred money out of a construction bond account as well as Blight Elimination Program funds. Oldham asked that those funds — totaling more than $1 million — be returned.

Oldham wrote that $850,000 was transferred in late November from the Indiana 46 construction bond account, and she cited state code prohibiting pooling of such funds. Redevelopment became aware of the transfer only after checks were written on the bond account to vendors.

Oldham further wrote: “It appears that the controller [Leslie Ellis] has transferred $155,000 from Blight Elimination Program (BEP) funds ... These funds must be returned ... for use in that program.”

Oldham attached a copy of an agreement entered into by the City of Terre Haute in August 2014 in which it acknowledged it would not pool those BEP funds, so they would be available for use in blight elimination.

By Dec. 3, the city restored funds to the two Redevelopment Department accounts, minus checks that had been issued to vendors.

The BEP funds have supplemented normal demolition done by the city and allowed the city to accelerate its demolition program, something mentioned by Mayor Duke Bennett during his City Update last week before the Terre Haute Chamber of Commerce.

Last Thursday, Bennett noted that the city, using those federal funds, is tearing down about 100 homes, up from about 50 annually, in an effort to remove blighted homes and increase the city’s assessed value as new homes are constructed.

On Thursday, Bennett said the funds in question were quickly returned.

The way the program operates is that the city fronts the money and the state provides reimbursement, but the city didn’t have to set it up that way, he said. The city could have set it up so that bills are sent directly to the state program. “Then, we don’t have to set money aside in the first place.”

As far as the current de-activation of the program, he said the state “wants to do some paperwork updating to ensure funds will be there.” The only thing that has happened is that there is “a slow-down in actual demolition. All other work continues. It’s a very long process and some properties take two years before they can be torn down.”

As soon as the BEP funds are released, “a whole bunch can be done [demolished] at the same time, instead of a few, and we’ll be back on schedule,” Bennett said.

The mayor added, “We’re still committed to the program. We’ll front the money. It doesn’t matter where it comes from, they want to make sure we have funds available to do that.”

Attorneys are “updating the agreement” and “working on some wording changes,” Bennett said.

Bennett added that “someone called them [state officials] and reported that [transfer of BEP funds]. They would never have known. They money was returned immediately. This whole thing is completely unnecessary, but we’re dealing with it.”

Cliff Lambert, outgoing executive director of the redevelopment department, said Thursday, “I have not been privy to any conversation between city legal, the city administration and BEP program director.” The redevelopment department secures the money on behalf of the city and administers the program, but the recipient is the city of Terre Haute.

“The city is responsible to BEP to rectify the damage done by inappropriate removal of the funds,” Lambert said.

Any blighted housing demolition occurring at this time is through city Economic Development Income Tax money and is independent of the BEP program, Lambert noted. “I believe strongly in the BEP program, and I think that it can make a significant, positive change for our community; I hope the issue is resolved soon,” Lambert said.

In September, Indiana Lt. Gov. Sue Ellspermann recognized Terre Haute’s accomplishments as among the best in the state under the Blight Elimination Program.

Indiana communities competed for $75 million from the U.S. Department of Treasury’s Hardest Hit Fund — disbursed in two rounds through the Indiana Housing and Community Development Authority — to eliminate blighted, vacant and abandoned homes in an effort to decrease foreclosures. Terre Haute received $1.7 million through the program, which required a 10 percent match from the city.

Separate from the BEP program, the city has been using about $250,000 per year in EDIT funds for demolition of condemned housing, Lambert said.

Last week, Eddie Felling, city attorney, confirmed that he has been in discussion with IHCDA representatives.

The question, Felling says, is that once the city is reimbursed, “is that our money again or is it tied to BEP and IHCDA?”

Reimbursement funds are placed in a BEP account, but the city is allowed to keep it there only for a short time, and then funds must be taken out and put in the nonfederal account. Once the money is moved to the nonfederal account, the question, Felling said, becomes: Does it need to stay there or can it be moved?

“There are two schools of thought. Is it our money since we spent it to begin with, or is it theirs since they gave it to us as reimbursement?” Felling said.

He added, “I think we have it resolved. I’ve been in contact with their counsel; we are on the same page to make sure they don’t have issues with our practices.”

While there are deadlines for the use of BEP funds, Felling anticipates extensions and the city “will be able to use the full amount.”

A final agreement has been under discussion between the city and IHCDA.

Stewart, IHCDA general counsel, stated in an email: “I am not at liberty to admit or deny” that a memorandum of understanding is under discussion. Any MOUs in the draft stage are considered attorney work product and are non-disclosable by law. “However, if such a document does get executed it will become a public record and be available for disclosure,” he wrote in an email.