Miami Beach Must Repay $1 Million to the Federal Government in Housing Debacle

Miami Beach's complete ineptitude when it comes to building affordable housing would be funny if it weren't screwing over taxpayers and the poor. Earlier this year, the city admitted its affordable-housing practices had failed to create homes that the city's workforce can use, thereby forcing many of the food-service workers and housekeepers to make hours-long bus commutes on and off the barrier island every day.

To make matters worse, City Manager Jimmy Morales announced yesterday that the federal government says the city misspent more than $1 million from the U.S. Department of Housing and Urban Development (HUD) and that it's now demanding the money be repaid. Morales wrote in a letter to the city commission that, after HUD's Office of the Inspector General (OIG) conducted an audit, the agency found Miami Beach "did not ensure that it charged supported and eligible expenditures to the programs and lacked due diligence when supporting and approving expenditures." Translation: The city billed HUD for services it shouldn't have and submitted incorrect paperwork to the federal government to be reimbursed for major housing projects.

The funds were administered by the Miami Beach Community Development Corporation (CDC) — an agency that was beset by poor recordkeeping, sloppy employees, and potentially corrupt administrators for years before Morales became city manager. Morales says he has worked to clean it up for the past four years, but missteps will still likely cost taxpayers millions. The CDC misspent federal "HOME Investment Partnership Program" and "Community Development Block-Grant" funds, according to the OIG report.

"As a result of this extensive review, OIG discovered considerable shortcomings in the city's HOME and CDBG programs as previously administered," Morales wrote. "It should be emphasized that the program failures identified in the reports occurred during the previous administration." Morales became city manager in April 2013, after Jorge Gonzalez was pushed out amid multiple public corruption probes. (Gonzalez himself was never implicated.)

HUD uses HOME and block-grant programs to fund affordable-housing developments across the nation. The money is typically allocated to city- and county-level organizations such as Miami Beach's CDC.

HUD is demanding Miami Beach repay $742,240 in misused HOME funds and $336,150 in incorrectly used  block-grant money. Morales said yesterday the city had initially asked HUD whether it could pay back the money by requesting less HUD funding in the future. 

Morales said it's unlikely that the federal body, run by Ben Carson, would approve a request like that. "As such, the Administration is recommending that we proceed with the repayment to HUD of the $1,078,420 with non-Federal funds," as HUD demanded, Morales wrote.

(HUD also says more than $300,000 in federal money spent on the Barclay Plaza Apartments, one of the few affordable-housing complexes on the island, could have been "better" allocated, and demanded the city figure out a better use for the money. The city sent that money instead to its London House Apartments project.)

Morales and the city have been working to clean up messes left by past administrations. The Miami Beach Community Development Corporation was a particular issue until 2013. After Morales took office, he fired problem employees at the agency; he noted in a December 16, 2013 memo that employees regularly processed incorrectly filed reimbursement requests without double-checking if the documentation was accurate. One CDC employee, Rocio Soto, resigned immediately after Morales questioned her.

"The replies [to city questions] were, in some cases, insufficient and, in others, contradicted what was found in City e-mails," Morales wrote in 2013. "Ms. Soto asserted that she was following orders in the conduct of her job. She resigned after the meeting."

Morales says that on July 24, 2013, he "discovered a pattern in which HUD rules were not complied with" when the city filled out applications for federal housing money. The city found the Beach CDC had double-billed more than $300,000 related to one housing development.

Then, in December 2013, the CDC's longtime president, Roberto Datorre, also stepped down. According to the Miami Herald, law enforcement was also involved in the city-level probe, but no charges were filed.