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House of Pain

Under a New HUD Administration, Baltimore Faces Federal-Funding Withdrawal

John Ellsberry
New HUD Secretary Mel Martinez carved out a tax-cutting reputation as a Florida politician, but his housing work there won praise from some liberal activists.

By Van Smith | Posted 5/16/2001

On April 5, mayors from around the country descended on Washington's Ritz-Carlton Hotel to listen to a man who, more than any other of President Bush's Cabinet members, holds the purse strings closest to the hearts of America's cities: Mel Martinez.

Before his high-profile appointment to head the U.S. Department of Housing and Urban Development (HUD), Martinez was virtually unknown outside of Florida, where for two years he had been the chief executive of Orange County. His only public-housing experience was serving on the Orlando Housing Authority board from 1982 to '86. Now he's in charge of a major federal bureaucracy with a proposed budget of $30 billion, earmarked mostly for affordable housing and economic development in urban areas. The mayors, aware of this tenderfoot's fiscal power, listened intently for clues to what Martinez's brand of "compassionate conservatism"--a philosophy he says he practiced before Bush made it a political slogan--would mean for their cities.

Couching his message in the bipartisan rhetoric of results-oriented governance, Martinez explained that his "first order of business is to restore credibility and accountability" to HUD. He derided "mission creep," the agency's tendency to take on an ever-growing roster of ill-defined functions: "HUD will not be an ensemble of social-welfare programs that may have no cohesion to them. If we focus on the things that we are meant to do, we will do them far better. I will consolidate duplicative programs and turn over those that are properly the responsibility of other programs or departments."

Then came the numbers the mayors were waiting for: "President Bush has made a commitment to our mission by proposing in the HUD 2002 budget an increase of almost $2 billion, a 6.7 percent increase. As a former governor, President Bush knows what you know: What matters most is how money is spent, not just how much is spent." The mayors gave him a standing ovation.

Four days later, on April 9, Martinez released the details of HUD's proposed 2002 budget, and city leaders stopped cheering and started learning that, in the logic of compassionate conservatism, more can actually be less. The figures were picked over by the likes of Baltimore's housing commissioner, Paul Graziano, and U.S. Sen. Paul Sarbanes (D-Md.), who discovered deep cuts to programs they believe to be critical to the city's housing programs. "We're not happy about a number of those cuts, obviously," Graziano said in an April 24 interview. The next day, at a hearing on the HUD budget before the Senate Banking Committee, Sarbanes sniped that "the administration's proposal is sorely inadequate. The proposal for FY 2002 cuts almost all the core HUD programs."

In the weeks and months to come, the annual congressional budget battle will likely lead to changes in the HUD budget. But the implication of compassionate conservatism for the future of Baltimore's housing programs is clear: For better or worse--and despite Martinez' spin to the contrary--it's time to learn to live with less.

Trimming government is not new to Mel Martinez. In 1999, after his first year as the elected chairperson of the Orange County Board of Commissioners, Martinez boasted of budget savings that allowed a property-tax-rate reduction and promised more of the same for the year to come. "Reduced operating expenses, restricted budget growth, and curtailed travel budgets are now the norm for Orange County," he declared in his first "State of the County" address.

Today, concern is growing on Martinez's former home turf that his tax-reduction initiative was overzealous. Martinez "wanted to reduce taxes every year," says Linda Stewart of County Watch, a nonpartisan government watchdog group in Orange County, "and he does believe in privatization [of government functions]. Now that he's left, every one [of the county's six commissioners] say, 'Oh no, we can't do that any more.' So they've kind of really done a reversal of his policy--they won't cut taxes any further. They can't afford to do it," she says, because of a looming budget crunch.

While Martinez fits the mold of a tax- cutting, privatizing Republican, he has garnered support--and accolades--from at least one dyed-in-the-wool liberal. Jay Rose, a housing lawyer for the nonprofit Greater Boston Legal Services, has nothing but good things to say about Martinez.

Rose's opinions are based on his experiences as a housing lawyer for the poor in Orlando, where he and Martinez worked behind the scenes to divert an economic-development project that would have leveled an impoverished black neighborhood. When Martinez chaired the Orlando Housing Authority in in the mid-'80s, Rose says, he quietly wrested power away from the authority's executive director, who had a reputation for disdaining public-housing residents and treating the city's projects as his "plantation."

"While Martinez didn't do what we wanted, which was fire the guy, he, over the course of the year or two, took back a lot of power," Rose says. "He changed the whole dynamic of the way things were done."

Rose says Martinez, who fled his native Cuba as a child and bootstrapped himself up from humble beginnings, is sensitive to issues of race and class. "One of the reasons I'm hopeful about his tenure at HUD is that he is someone who can relate to working people," he says."Although he doesn't talk about it all, he in fact experienced discrimination in central Florida."

While Stewart, who like Rose has known Martinez for about 20 years, agrees that Martinez is a likable and ethical politician, she isn't convinced the new secretary is up to the challenge of running HUD on reduced resources. "I really don't know that Mel would do a bad job, but he's got so little to work with," she says. "He's going to have to be extremely creative. Now, is he capable of doing that? I don't know."

Rose, though, is cautiously optimistic. "I think the difficulty for him in a tax-cutting Bush administration will be to hold onto enough money to increase the production of low-income rental housing," the attorney asserts. "On another, nonbudgetary level, what I'm hoping is that he will involve public-housing residents in some of the choices and not just defer to the local housing authorities.

"If in fact he does what he did in Orlando--meeting with poor people, respecting that they know as much about what should be done with their housing as anyone else, if not more, and giving them equal weight in the decision-making process along with the housing authorities and the local HUD officials--then a lot can be done with a limited budget."

In Baltimore, the limits of Martinez's proposed HUD budget are raising the specter of hard times for low-income public-housing residents. If the proposed budget is passed as is, the Housing Authority of Baltimore City (HABC) would lose $6.7 million currently earmarked for capital improvements at its properties, which are already suffering from a backlog of incomplete modernization projects. Martinez, in the budget document submitted to Congress, says the department's proposed capital budget--reduced 25 percent from last year--is "sufficient to meet all new modernization requirements." But HABC's budget analysts say meeting the shortfall in Baltimore would mean canceling several projects, including:

· $3.6 million in planned renovations for Claremont Homes in Northeast Baltimore, resulting in the need to relocate approximately 200 families;

· $1.3 million in electrical upgrades at another facility housing 298 families, resulting in more power and heating outages and potential fire hazards;

· $1.4 million in street and sidewalk repairs;

· $160,000 for elevator repairs at two developments for the elderly; and

· $190,000 for replacing air-conditioning components and furnaces at a facility for adults and the physically challenged.

The capital-budget cut also could curtail HABC's ability to issue bonds--something Graziano would very much like to do in order to improve the authority's financial health. Floating bonds "would give us a major shot in the arm, a major capital infusion to tackle these problems," the housing commissioner says. "But when the bond raters in New York see major reductions proposed in appropriations for the capital programs, it makes them nervous."

Abolished under the proposed HUD budget is the Public Housing Drug Elimination Program (DEP), which subsidizes law-and-order and safety functions at public-housing developments. Graziano says DEP "has had bipartisan support over the years," but Martinez maintains it simply duplicates other programs' efforts. In Baltimore, according to HABC, the end of DEP will cause the loss of 12 patrol officers at public-housing projects, 19 welfare-to-work counselors, 23 building monitors at senior-housing developments, four Youth Development Centers (which provide after-school tutoring and other activities for children), and $370,000 in drug-treatment funds.

The entire budget increase Martinez touted before the mayors is taken up by a proposed $2.2 billion spike in Section 8 rental subsidies--enough to cover inflation. In effect, Graziano's numbers-crunchers say, HUD is essentially being funded at the same level as last year.

It's been some time since Baltimore has had to live with such constraints on its federal housing largess. Throughout the two terms of President Clinton, with whom Mayor Kurt Schmoke enjoyed a firm friendship, the city's housing programs enjoyed solid federal support. Baltimore was designated an Empowerment Zone, giving it access to subsidies aimed at spurring job creation in poor neighborhoods. From 1993 to 2000, Baltimore received more than $170 million in federal HOPE VI grants to demolish and rebuild distressed public housing, second nationally only to much-larger Chicago.

In all, hundreds and hundreds of millions of HUD dollars flowed into Baltimore during the 1990s. The exact amount is hard to calculate, because the money comes from so many different pots within the department, many with different criteria for determining allocations, according a spokesperson at HUD's Baltimore office, which was unable to come up with a concrete figure before this article's deadline. Even more difficult would be determining just how all that money was used--and whether it was used properly.

In 1998, the inspector general of HUD, Susan Gaffney, tried to do just that, announcing she would dispatch dozens of investigators to spend three years hitting Baltimore's books looking for waste, fraud, and abuse. She quickly learned how well connected the Schmoke administration was to the White House--the mayor complained that Gaffney was going after majority-black cities (her other targets were San Francisco and New Orleans), and then-HUD Secretary Andrew Cuomo quashed the investigation. (Gaffney was still able to muster an investigative team that has been helping the U.S. Attorney's Office in Maryland to prosecute mortgage-fraud and flipping cases in Baltimore.)

The proposed Gaffney probe was averted, but even with a friendly administration in Washington the issue of Baltimore's management of HUD funds has been a live one since 1995, when abuses in a $25.6 million no-bid housing-repair program resulted in federal convictions of 13 Baltimore contractors who had been paid with HUD funds. The city faces federal takeover of its Section 8 voucher program after an audit of the program for 1997-'00 determined it to be "barely functional."

Under Martinez's HUD, Baltimore can likely look forward to less funding and much more stringent oversight. The city's recent handling of HUD money may be a contributing factor, but the reverse also has a political dimension.

"Republicans are not in love with big cities because they don't get a lot of votes out of big cities," says Donald Norris, director of the University of Maryland-Baltimore County's Institute for Policy Analysis. "So one has to assume that any Republican administration is going to be less amenable to working with or doing things for big cities--unless it happens to be Phoenix or Indianapolis, where there are Republican voters. And Baltimore is very, very Democratic."

Baltimore's trump card, though, is the influence of Maryland's two long- serving U.S. senators, Paul Sarbanes and Barbara Mikulski, both of whom have deep political roots in the city. Together, they can pretty well assure their hometown is well served amid the budget wrangling, Sarbanes from his position as the ranking Democrat on the Banking Committee and Mikulski as the top Democrat on the Senate panel that approves the HUD budget.

"The two of them have just enough clout to make sure that things keep happening for Baltimore," Norris says. "The politics of the situation would suggest to me that the administration isn't going to do anything to harm the city--that the reported problems that the city has had with its HUD money will probably be looked at, but I wouldn't anticipate that the administration would be out to get the city. But I don't imagine that they're going to be out to do any great favors for the city either, largely because of the political differences."

Graziano, meanwhile, says he can take the federal scrutiny--but wants the money too. "We're not afraid of oversight," the housing chief says. "We want to run a responsible program. We'd like to have the dollars to go with it. We'd like to show that we can responsibly spend HUD dollars."

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