POSTED ON APRIL 8, 2009:
Hot Property, All of a Sudden
The handling of the downtown residential fund calls for close examination of the TDA
It's time for a shake-up at the Tulsa Development Authority. The City Council seems poised to do just that. The current state of affairs is not promoting transparency and accountability in government and is not accomplishing the purposes for which the TDA was created a half-century ago.
Properly focused, the TDA could play an important role in encouraging creative new approaches to low- and moderate-income housing development downtown and in nearby neighborhoods. Successful implementation of a new comprehensive plan, currently under development through the PLANiTULSA process, could be hampered unless the TDA's actions are aligned with the goals adopted by Tulsa's citizens.
In February, the TDA approved a $4 million, 10-year, no interest loan to American Residential Group (ARG) for the development of the 63-unit Tribune II project on the now-vacant southeast corner of Main and Archer. Unlike most TDA development deals, no request for proposals (RFP) was issued. Other developers with an interest in downtown residential projects were not given a chance to compete for the right to borrow the money.
The $4 million came from a downtown residential development fund established with money from the 1996 Third Penny sales tax.
In 1996, the City of Tulsa contracted with TDA to manage the $4 million fund. TDA loaned it all, at no interest, to ARG for the construction of the Renaissance Uptown Apartments ($3.3 million) and the conversion of the Tribune Building to apartments ($700,000). In 2001, the two developments began leasing units.
As critical as I've been of big-ticket public expenditures downtown, I've applauded the city's efforts to jumpstart residential development. When residents moved away from central Tulsa after World War II--thanks in part to urban renewal and expressway construction--retailers and offices followed.
Creating a vital urban core depends on repopulating downtown and the surrounding neighborhoods. Offering low-interest loans and tax incentives seemed like a reasonable way to get the process going, especially if the repaid loan money could be recycled for further projects.
It's reasonable to wonder whether lending it back to ARG is the best way to reinvest the taxpayers' $4 million, particularly if the aim is to attract twentysomethings as downtown residents.
At the very least, TDA should have held a full and open competition, and the City Council, the elected representatives of Tulsa's taxpayers and the original source of that money, should have been consulted about the policy aims that should guide its disposal.
Instead of paying for more high-end new construction, the recycled $4 million could have been split among several projects involving conversion to housing of such Art Deco landmarks as the ONG Building at 7th and Boston and the Tulsa Club at 5th and Cincinnati, serving the interest of historic preservation as well as downtown repopulation. Spreading the funds among multiple developers and projects would reduce the risk of total failure.
The handling of the downtown residential fund is just the latest in a long list of reasons for councilors to examine whether the TDA, as a public trust, is serving the public interest.
In January 2008, the City Auditor's report on grants administration noted that the City was not overseeing the way TDA was spending the lion's share of the Community Development Block Grant (CDBG) funds Tulsa gets each year from the U. S. Department of Housing and Urban Development (HUD). According to HUD's Web site, the purpose of these CDBG Entitlement Community grants is "to develop viable communities by providing decent housing, a suitable living environment, and opportunities to expand economic opportunities, principally for low- and moderate-income persons."
In response, Mayor Kathy Taylor issued a March 31, 2008, executive order to create a Department of Grants Administration to establish independent oversight of TDA's use of CDBG money.
In August 2008, HUD's Office of Inspector General issued a report finding that TDA could not support, under HUD regulations, the way it spent $1.4 million in CDBG money during federal fiscal years 2006 and 2007. Another $115,215 was found to be spent on ineligible activities.
The HUD report also said that during the years TDA "accumulated [with federal funds] almost $9 million in property for which it did not have a specific end use that would benefit the City's low- to moderate-income community." Selling the properties would free up the funds to better serve the intended beneficiaries.
During fiscal years 2006 and 2007, the City of Tulsa received more than $8 million in CDBG funds. About 40 percent of that money, $3.28 million, was passed to TDA.
HUD identified part of the problem as a lack of oversight by the City, due to an intermingling of the authority's staff and the city staff assigned to monitor grants. "A City employee served in the dual capacity of Urban Development Division deputy director, responsible for monitoring, and the Authority's executive director.... Effectively, the Authority's executive director supervised the City employees responsible for monitoring the Authority."
The HUD report continued, "The lack of monitoring and independent review of expenditures allowed the Authority to operate in a manner that did not primarily benefit the City's low- to moderate-income community."
Although Taylor's creation of the Grants Administration Department provides for independent review going forward, the City still had to pay back the $1.5 million in CDBG spending that HUD identified as unsupported or ineligible. TDA reimbursed the City in full.
In August 2008, the TDA approved early termination of their "exclusive negotiating period" with Novus Homes LLC for a parcel west of Elgin between Archer and Brady, where Novus Homes hoped to build a mixed-use loft, retail and hotel building. The site is just west of the location of the new downtown minor-league baseball stadium.
Novus Homes felt that TDA members and staff went from warm and friendly to cold and hostile as soon as the ballpark site was picked and the stadium donors began to seek control of the land around the ballpark. The TDA's decision to end its deal with Novus gave the impression of pushing aside a small business because it was in the way of a group of influential insiders. It's an impression that's likely to keep energetic young entrepreneurs from working with TDA in the future.
In my opinion, three of the five TDA board members had the appearance of a conflict of interest because of their employment by companies involved in the ballpark donor group. Two participated in the debate but then recused themselves from the vote.
The third, George Shahadi, director of real estate for the Williams Companies, was the subject of an ethics complaint for his failure to recuse, because of his employer's participation in the group of ballpark donors said to be seeking control of the surrounding property. In the midst of the ensuing controversy, Shahadi was reappointed by Taylor but withdrew his name from consideration.
Novus Homes has sued TDA for breach of contract, and on March 23, District Judge Michael Gassett granted the developer's motion to compel TDA to respond to their discovery request within 15 days.
TDA is the product of a now-discredited approach to urban planning. Perhaps it no longer serves a valid public purpose.
TDA was established in July 1959 as the Tulsa Urban Renewal Authority (TURA) and went to work acquiring and demolishing "blighted" properties. Some of the properties truly were beyond hope; some were just old, and city leaders lacked the imagination to encourage their preservation and adaptive reuse.
In downtown, TURA bought and cleared the oldest part of the city's commercial district and the northern part of the Riverview neighborhood, west of Denver Ave. Much of the West Tulsa neighborhood was also acquired and cleared by TURA.
North of the IDL, TURA cleared all but a tiny remnant of the Greenwood District. What Tulsa's African-American community rebuilt with blood, toil, tears and sweat after the 1921 Race Riot, TURA knocked down under the benign name of the federal "Model Cities" program.
As the term "urban renewal" accumulated negative associations, the authority was renamed TDA in 1985. TDA has also been used to acquire land in the Kendall-Whittier neighborhood sought by the privately-owned University of Tulsa for its campus expansion.
State law, (Title 11, Article 38) establishes an urban renewal authority in every municipality in the state, although the authority can't exercise its powers until the city council finds that blight exists within its boundaries and grants to an authority the power to deal with it.
Several city councilors are working on a list of questions for TDA to answer later this month. Councilor Rick Westcott said there's a general feeling that TDA has lost its focus. While TDA, as a trust, is supposed to have a degree of independence, Westcott said there needs to be some mechanism in place to ensure that the authority is accountable and responsive to the citizens of Tulsa.
Although TDA is a creation of the state, the Council holds several levers at its disposal. It could reject mayoral reappointment of any of the three TDA members who voted for the new loan to ARG. It could exclude TDA from this year's CDBG funds. And it could issue a finding that blight no longer exists in Tulsa, giving TDA no scope for the exercise of its powers.
If Tulsa is to have an urban redevelopment authority, it must be above reproach in the way it conducts business. Future federal grants are at stake. More importantly, the perception of favoritism could drive away the very creative entrepreneurs we need to see the revival of downtown for which we all hope.
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