Holyoke awaits audit decision
Sunday, April 25, 2010
By MIKE PLAISANCE
mplaisance@repub.com
HOLYOKE - The city is still waiting to hear whether it must repay federal grants used to build seven duplexes, but one councilor says the city should attempt to get the money from the developer if a repayment is ordered.
"It's a big problem," Ward 2 Councilor Diosdado Lopez said recently.
Lopez has filed an order to place the responsibility for $288,000, which the federal government says was overpayment on construction of seven duplexes, on the nonprofit Olde Holyoke Development.
Olde Holyoke Development received 26 of the 39 loans processed here under one of the programs audited by the Housing and Urban Development department. Olde Holyoke officials said the city and Olde Holyoke Development abided by all federal guidelines and regulations.
The audit issued on Nov. 23 found that there was "ineligible, unreasonable or unnecessary" use of $3.87 million in federal funds in relation to construction and demolition. The audit covered July 2006 to June 2009.
City officials say the Community Development Office has abided by federal rules and that some of the disagreements are due to the city and the federal agency using different calculation formulas.
Lopez' order to have Olde Holyoke Development be responsible if a repayment is ordered is being studied in the Redevelopment Committee.
William H. Murphy, administrator of the city Community Development Office, told councilors a few weeks ago that it would be about a month before the city learns whether it must repay any money.
Spokeswoman Rhonda M. Siciliano said the federal agency is continuing the review of the Holyoke audit and doesn't have a time frame for when that will be done.
The audit said building the duplexes should have cost about $1.75 million, based on the calculations of "a specialist with expertise in estimating construction costs," but the city paid more than $2 million.
The audit said the federal appraiser in determining what the seven duplexes should have cost used the "universal standards" of data from the Marshall & Swift company, of Los Angeles, Calif. The company's Web site says it provides the most current and accurate building cost data available.
Murphy, Deputy Administrator Linda B. McQuade and Richard P. Courchesne, Olde Holyoke Development president, said construction costs for the duplexes were based on the real costs of home construction in this area. The costs also included Energy Star upgrades, which consist of guidelines for energy efficiency set by the U.S. Environmental Protection Agency, they said.
The auditor said the appraiser's determinations included the maximum allowable calculations for energy efficiencies.
In response to Lopez' order about repayment being the obligation of Olde Holyoke Development, Courchesne said everything was done properly. Every home his organization built has a mortgage and a promissory note, he said.
"In the 30 years we've been working with the city, they've never paid anything back to HUD and my opinion is they won't have to this time, either," Courchesne said.
Between 1975 and 2009, Olde Holyoke Development built 158 homes, mostly duplexes, that have a total assessed value of nearly $21 million, he said.
McQuade declined to comment specifically on Lopez' order. But she said the city and Olde Holyoke Development abided by all regulations, despite the audit's findings, and she was eager for a resolution to the 16-month-long review.
"I'd like it to be over with. They walked into the office in December 2008, so, yes, I'll be happy when it's over with," McQuade said.
Chairman Kevin A. Jourdain said the Redevelopment Committee will deal with the issue again once federal officials determine the finalized audit.
Lopez' proposal to have Olde Holyoke Development pay the bill if money must be returned could be an option, Jourdain said, but that will depend on what the federal government ultimately decides was done wrong.
"If it's something Olde Holyoke did, then that's a reasonable request," but not if the fault lies with the city, Jourdain said.
Councilor at Large Aaron M. Vega said he was concerned about the questions the audit raises about how federal money is used.
"And you don't know, is it just the tip of the iceberg, is there more out there?" Vega said.
The dispute between city and federal officials over how funding was used leaves councilors confused, Ward 1 Councilor Donald R. Welch said.
"It's an interpretation of words, and I'm not an auditor, so it's hard to say," Welch said.
Another dispute between the federal auditor and the city again lies with the seven duplexes Olde Holyoke Development built using city-issued Community Development Block Grants. The auditor said the city exceeded by nearly $1 million the allowed subsidies to Olde Holyoke Development.
But McQuade said the auditor failed to account for the approximately $700,000 that the eventual owners of the properties paid to buy them.
The remaining $332,105 was devoted to demolition costs, a use which a 1979 amendment to regulations allowed despite the auditor's assertion that use of the money to raze buildings was prohibited, McQuade said.
The Community Development Office is adamant they did things right and monitored Olde Holyoke Development, she said.
"The $330,000 was for demolition," McQuade.
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