The City of Wilmington issued new grant funds to the Wilmington Housing Partnership to allow work to resume on four affordable townhouses on Vandever Ave. The basis for the move is a repayment plan for a debt the administration considers uncollectable.
Mayor Mike Purzycki calls a forbearance and repayment agreement signed Oct. 3 between the Wilmington Housing Partnership (WHP) and the City for a $3.4 million dollar loan a “formality,” despite the fact that the agreement was used last month to allow additional grant money to be released to the organization. “The $3.4 million I [previously] characterized as uncollectible is still uncollectable,” said Purzycki Thursday.
The City of Wilmington took control of the public-private Wilmington Housing Partnership this year after a City audit in January revealed misuse of financial assistance from the City, hundreds of thousands of dollars in accounting records errors and a “weakened financial condition.”
Wilmington recently paid back a $3.4 million loan issued by JPMorgan Chase to the City for WHP in 2016. WHP was required to make payments to the City on the loan under a promissory note, but failed to do so several months last year. The City Treasurer alerted other city officials to WHP’s delinquency on the loan in January.
City Real Estate and Housing Director Robert Weir took over as president of WHP when the previous director resigned in January. The next month, Weir sought forward funding of $650,000 from the City's Fiscal Year 2018 capital budget for WHP, according to the City Auditor’s office. This request was used as the basis for an amendment to a FY2018 grant to WHP from $192,000 to $842,000, signed by Chief of Staff Tanya Washington.
Last month the Auditor’s office determined that the grant amendment was unauthorized and noncompliant according to City Code and policies. An Oct. 7 review signed by Auditor Terence Williams concluded payments on the grant this year should not have been approved— in part because WHP owed the city money. The review also found Weir “did not have the authority to enter into contractual agreements on behalf of WHP” based on the organization’s bylaws at the time.
Part of the grant funds were held up this summer by City Treasurer Velda Jones-Potter, who suspected irregularities.
But the Auditor's review released this fall concluded the noncompliant activities did not amount to fraud, waste or abuse. “These didn’t fall under these criteria, so I didn’t feel as though it was necessary to prevent the payment,” said Williams.
The Auditor’s review stipulated that grant funds held by the Treasurer's office could be released if the organization paid debts to the city—or set up a payment plan.
WHP President Weir signed a repayment agreement with City Finance Director Brett Taylor days before the Auditor’s report was released. The agreement includes an 18-month forbearance period that delays the start of payments to the city. On Oct. 8, Williams directed Jones-Potter to release payments to WHP.
Jones-Potter calls the Mayor’s view of the repayment plan as a formality “shameful.”
“That was the basis of the Auditor’s decision to OK the release of payments to the Wilmington Housing Partnership,” she said. “The Auditor opined that that cured the legal impediment, which was that there was a debt owed to the City.”
A statement from the Mayor’s office sent out by Deputy Chief of Staff for Policy and Communications John Rago Thursday says that since the Auditor’s report was issued last month, the City has adopted the Auditor’s recommendations to bolster procedural safeguards.
“Where the City Auditor identified areas of technical noncompliance, the City or WHP, at the direction of the City, immediately acted to come into compliance and, in some cases as noted by the City Auditor, corrected defects even before receiving the City Auditor’s report,” the statement reads.
At a committee meeting Thursday, City Council members continued to question how the Partnership spent the unpaid $3.4 million loan — and request a forensic audit into the organization’s transactions.
The City Auditor has repeatedly expressed his belief that a forensic audit is currently not an appropriate step to take, citing the potential cost to taxpayers.
