The Chicago Housing Authority revealed Thursday that it cannot pay millions of dollars in debts and, as its financial crisis escalates, Mayor Harold Washington is taking the unprecedented step of becoming directly involved in the search for solutions.
The CHA`s financial situation has grown so bleak that many major suppliers and contractors have stopped deliveries, sales and services to the agency because of a huge backlog of unpaid bills.
On Thursday, CHA spokeswoman Helene Colvin disclosed that the agency has no money to pay its debts though it owes contractors and suppliers $17 million, dating back months and even years.
”The CHA is in financial distress. The CHA is clearly facing a major cash-flow crisis,” Colvin said. But she stopped short of saying that the agency is broke. ”I`m not going to use that language,” she said.
”We don`t have the money right now, but we know we have the responsibility and obligation to find it,” Colvin said. ”We fully intend to live up to that obligation.”
The authority`s perilous financial condition and management difficulties were discussed Wednesday at a private breakfast meeting between Washington and Gertrude Jordan, the top local official of the U.S. Department of Housing and Urban Development, HUD spokesman Adolph Slaughter said.
At that meeting, Washington took the unusual step of establishing a direct line of communication between his office and Jordan`s, bypassing CHA officials, Slaughter said. As a liaison between him and Jordan, the mayor appointed his chief of staff, Ernest Barefield, Slaughter said.
”The mayor definitely intends to become personally involved in the resolution of the problems of public housing in Chicago,” Slaughter said.
”He wants to be kept informed, not only from his own people, but from us as well.”
Although local HUD officials often work closely with mayors and county officials, Chicago mayors historically have kept the CHA at arm`s length.
In fact, throughout his first term and during his recent reelection campaign, Washington was criticized for his failure to take a more active role in the direction of the CHA, particularly his failure to intervene in the way former CHA chairman Renault Robinson ran the agency.
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”Ms. Jordan emphasized that the mayor does have to take a real leadership role and get involved,” Slaughter said. He said the meeting, which was held at the Union League Club, 65 W. Jackson Blvd., was arranged at Washington`s request.
”The mayor wanted to get a good overview as to what the problems are, their criticalness and their seriousness,” Slaughter said.
Alton Miller, the mayor`s press secretary, confirmed that the meeting took place but declined to comment on the discussions. ”It was a private conversation over items of personal interest,” Miller said.
Colvin said no CHA officials, including interim executive director Brenda Gaines, Washington`s deputy chief of staff, knew any details of the Washington-Jordan meeting.
”No one from CHA was there,” she said. ”It was a private meeting between the HUD regional administrator and the mayor. No one here knows what matters were discussed.”
The CHA`s financial problems, which have been growing for more than a year, were exacerbated Dec. 31, when Jordan decided to take back $7 million in federal funds from the housing authority because it missed an end-of-1986 deadline to award contracts for elevator improvements at the Robert Taylor Homes.
That loss of money, which was a major embarrassment to Washington during his re-election campaign, led to the resignation under fire of Robinson, a close ally of the mayor.
Over the last three months, the CHA has been negotiating with Jordan to regain the $7 million and to save another $4 million in federal funds that is endangered.
In addition, in an unusual move, the housing authority has asked Jordan for $20 million in renovation funds, of which $16 million is for work that has already been completed. Typically, housing authorities do not order such work until funding has been approved by HUD.
At the same time, the CHA has been deflecting complaints from contractors and suppliers. Charging that the agency`s failure to pay its debts was threatening their livelihoods, many companies have halted deliveries, sales and services to the housing authority.
Recently, CHA financial officials began meeting with representatives from three security firms and six elevator companies to work out a payment plan for back bills.
Although they acknowledge a huge backlog of bills, CHA officials have been saying that they could not determine the total debt because of the agency`s decentralized purchase system.
Colvin`s statements Thursday were the first time an agency official has disclosed the size of the CHA`s debts and the authority`s inability to pay them.
”For the first time, we are getting a sense of what our current financial situation is,” Colvin said. ”We are now in a much better position to sit down with HUD and work with HUD and work out some agreement to pay these dollars as well as identify other potential funding sources.”
Colvin said the CHA owes $10 million for major renovation at CHA developments and $7 million for ordinary operating supplies and services.
She said the agency has verified that it owes contractors $6 million for major renovation work. The agency is trying to verify another $4 million in contractors` bills for other major renovations, she said.
Colvin said the housing authority has verified that it owes $5 million to contractors and suppliers for ordinary operating supplies and services. The agency is trying to verify another $2 million in vendors` bills for similar work, she said.
To pay off the renovation debts, the CHA is hoping to use a portion of the $20 million request from HUD. Anthony Drake, the CHA`s deputy executive director for finance, recently said that he is optimistic about getting the $20 million because HUD officials have not indicated any problems with the request.
But the CHA has begun developing a back-up plan in case HUD does not approve the request, Colvin said. ”We are looking at where it is that we might be able to get funding, such as from the city, the state or another federal source,” she said.
To pay off its $7 million in operating debts, the CHA will try to squeeze funds from its bare-bones 1987 budget of $141.9 million, Colvin said.
That budget is nearly $18 million less than the $159.6 million that the CHA spent last year, which was $13.3 million over budget.
In a March 31 letter to Jordan that was included with the 1987 budget, Gaines wrote, ”We fully acknowledge that the 1986 expenditures exceeded the 1986 budget. We further acknowledge that the authority`s needs far exceed the funding level established by this budget. However, we are fully committed to living within our 1987 budget.”
Because of this, the CHA will be asking the newly appointed CHA advisory council to come up with new sources of funding, Colvin said.
Despite Thursday`s disclosure, Slaughter said HUD did not know how much the CHA is in debt.
”We`re just beginning to sort out the financial situation at the authority,” Slaughter said. ”We`ll eventually get to the bottom of it, but we`re not going to rush. We want to make sure we do a thorough job.”
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