Two major City Council committees agreed Thursday to bail out the financially distressed Chicago Housing Authority with a $25 million loan and a $5.6 million grant.
The action, approved by a wide margin by the Budget and Finance Committees, means the bailout package is almost certain to be ratified by the full council, which, like the committees, is dominated by allies of Mayor Harold Washington. That vote could come as early as Tuesday.
The action Thursday also might have been enough to avert a threatened shutdown of the CHA`s controversial scattered-site program.
CHA officials, coping with the worst financial crisis in the agency`s 50- year history, had warned that they would halt the program Thursday unless they got $9 million in emergency aid.
But on Thursday, Brenda Gaines, the CHA`s interim executive director, said the combination of the city`s bailout package and funds promised the agency by federal housing officials might be enough to stave off a shutdown.
She said a decision will be made Friday morning. ”We`re going to have to figure out how many days we can last,” she said.
The housing authority has submitted nearly $68 million in requests for emergency aid to the U.S. Department of Housing and Urban Development, contending that much of that money is owed the agency for work already completed.
Federal officials promised to provide enough funding this week to keep the scattered-site program going, but HUD spokesman Adolph Slaughter said Thursday that the CHA will get something less than $4 million in federal funds this week.
The city bailout package was in the form of two ordinances, both of which were amended Thursday.
Under the first ordinance, Washington would get the authority to negotiate with the CHA the loan of $25 million in community development block grant money and determine what security the agency would post as sufficient collateral.
The money is to be used in part to pay off $15.6 million in old debts to the CHA`s contractors and suppliers, many of whom have cut off the agency. The rest would be used to keep the scattered-site program operating for six months.
Ald. Roman Pucinski (41st) criticized the ordinance because it did not specify what the collateral would be. ”It`s going to take $25 million to repay this loan,” he said. ”How is the CHA going to do this?”
Gaines responded that the loan will be repaid from a variety of sources, including management fees from the federal Section 8 program, future grants from HUD and rent receipts from newly renovated apartments.
The ordinance also would permit the CHA to mortgage property to the city, but many aldermen feared that such a mortgage might be used as a wedge to squeeze public-housing residents off valuable land, such as the Cabrini-Green development.
So an amendment was added to prohibit the city from doing anything that might displace or remove CHA residents if the agency defaulted.
Ald. William Henry (24th) complained that during two days of hearings on the proposal too much emphasis was placed on repaying the loan rather than providing housing for the poor.
Noting that the Chicago Transit Authority has repaid only $3 million of a $20 million bailout loan it received in 1981, Henry said, ”We should not be worried about being paid back because the CTA didn`t pay us back.”
Freshman Ald. Edwin Eisendrath (43d) sought to attach an amendment to the ordinance that would have required the removal of the entire CHA board.
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His motion was tabled, and on a roll-call vote of 23-3, the loan was approved by the combined membership of the two committees.
Under the second ordinance, the city would give the CHA $5.6 million in community development block grant funds only if the housing authority receives an equal amount from HUD for a program to renovate heavily damaged and vandalized apartments. HUD has indicated that it probably will give the CHA the money.
Before being approved by a voice vote Thursday, the ordinance was amended so that $200,000 of the grant would be set aside for a janitorial training program for CHA residents.
Ald. Timothy Evans (4th), chairman of the Finance Committee, said the program would be open to–but not limited to–the public-housing residents who have participated in the CHA`s controversial Operation Pride program.
Operation Pride has been highly popular with tenant leaders, who helped decide which residents received the 238 part-time low-paying janitorial jobs. But it also has been criticized as a political tool of the Washington administration.
The program was started on Jan. 20, just 35 days before the Democratic mayoral primary in which Washington was running against former Mayor Jane Byrne.
Many of those hired also did election work during the primary and the general election.
Two weeks after the general election, in which the mayor won re-election, CHA officials announced that because of the agency`s financial crisis, Operation Pride would end Thursday.
But after a strong lobbying effort by tenant leaders, the CHA board voted Thursday to spend $100,000 to keep Operation Pride for another month despite the housing authority`s financial problems.
On Thursday, Gaines apologized for telling aldermen and reporters Wednesday that the CHA was laying off 256 of the agency`s 800 administrative workers immediately.
In fact, most of those administrative layoffs were the Operation Pride workers who were to have lost their jobs Thursday, she said.
She said she had not realized that the Operation Pride workers were included in the 256.