Federal housing officials are poised to propose a subtle shift in law to create a way for the Chicago Housing Authority to pay for a bold transformation of its developments, changing enclaves of poverty into “normal neighborhoods” of mixed-income families.
If the proposal-now extremely sketchy-is approved by Congress, the CHA would be able to use part of the federal money it already receives to finance the sale of as much as $1 billion to $2 billion in bonds, perhaps as early as October, according to CHA Chairman Vincent Lane.
“This is the revolution I have been waiting for,” said Lane, who has been a vocal proponent of a complete overhaul of public housing in Chicago and across the country.
The news came on the eve of an expected announcement by President Clinton of a new policy that gives public housing authorities broad crime-fighting powers to search apartments and frisk residents.
Lane’s plan for the transformation of the CHA is already scheduled to get under way with a $50 million project already approved for the Cabrini-Green complex on the Near North Side.
It involves a two-prong approach: attracting working-class families to public housing areas and helping public-housing residents find homes scattered throughout the city and suburbs.
While some high-rises would be rehabilitated under his long-range plan, more would be torn down and replaced with low-rise housing built and managed by private developers. One-fourth of those units would be set aside for the CHA to rent to public-housing families.
U.S. Housing Secretary Henry Cisneros tipped his hand about the new financing plan on Friday when he came to Chicago to announce that $29 million would go to the CHA to pay for a wide range of law enforcement and other measures, ranging from hiring new police officers to cleaning up children’s playlots.
But Cisneros eclipsed that announcement with larger news that came out as he answered another question about public housing:
His Department of Housing and Urban Development will propose on Wednesday that the CHA be allowed to redirect funds currently allocated for the repair and rehabilitation of public housing buildings, to replace outdated public housing units.
While some of the money would be spent directly on new buildings, Cisneros said, other millions of dollars could be leveraged into still much larger sums by financing the sale of bonds.
“I didn’t want to speak to it today, because the legislation is not yet unveiled,” he said, “but more importantly because it is still being worked on (to) work out all of the legal and financial quirks in it,”
But in an interview later, Lane said preliminary calculations showed that the CHA, which receives about $150 million in modernization funds each year, could set enough of that money aside annually to repay as much as $1 billion to $2 billion in bonds.
That, he said, would allow the CHA to pay for sweeping redevelopment of its housing stock throughout the city.
“I can’t do it with $150 million, but I can do it with one or two billion,” said Lane. “This means we don’t have to choose. We can redo Cabrini, ABLA, Horner,” he added, ticking off a list of developments.
Lane’s suggestion that the CHA could use about one-third of the $150 million in modernization money to retire debt from a billion-dollar bond sale, appears to jibe with the experience of the Metropolitan Pier and Exposition Authority.
The pier authority’s sale of nearly $1 billion in bonds in December 1992, was the largest bond sale in Illinois history. Its debt-retirement costs for fiscal 1994 total $54.3 million, according to authority records.
John Sebastian, executive vice president at Clayton Brown & Associates, a Chicago-based municipal bond firm, said the kinds of bonds Lane is talking about would be snapped up by investors-if they were guaranteed by HUD and if there were assurances Congress wouldn’t withdraw the funding later.
If HUD guarantees principal and interest payments on the bonds, “that’s going to be a terrific investment,” Sebastian said. “It’s like buying a tax-free, government-guaranteed bond. I believe it would be in substantial demand by investors around the country.”
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While the billion-dollar figures remained hypothetical, the $29 million package of safety measures was all but in the bank.
“We can call it a down payment on the president’s crime bill,” Cisneros said of that money, “because it has the elements of the crime bill: On the one hand, enforcement, security and policing measures; on the other, prevention, social services, youth programs, recreation.”
The plan includes $10 million to rehabilitate vacant apartments, places that often become lairs for gangs and drug dealers.
“We will have constuction personnel, with lights, working around the clock, just like we did after the earthquake in Los Angeles,” Cisneros said. “We have an emergency here.”
Meanwhile, Clinton was scheduled to announce a crackdown on violence in public housing on Saturday that will include requiring residents to consent to searches of their apartments, frequent searches with warrants and frisking of people entering the developments, according to White House officials.
CHA buildings will be a test case for the aggressive policy that the administration intends to encourage housing authorities around the country to use to stem killings and intimidation of residents, they said.
Atty. Gen. Janet Reno and Cisneros have signed off on the policy.
Apartment leases in the private-housing sector routinely give landlords the right to enter apartments to check for unsafe conditions, and the Justice Department believes that occasional searches for illegal firearms meets a test of reasonableness under conditions where dangerous gunfire is prevalent.
Though U.S. District Judge Wayne Andersen prohibited warrantless sweeps through CHA buildings, the administration’s policy calls for aggressively seeking the probable cause that police need to obtain warrants from judges.
The policy also recommends an aggressive application of laws that allow the frisking of suspicious people, which officials believe will slow the entry of guns into the apartment buildings.