After a flurry of inquiring phone calls from various media, I received an email today from the city manager as follows:

The City received today an audit report HUD Audit Report regarding administration of the Neighborhood Stabilization Program (NSP) funds received from HUD which were used to acquire and contract with developers to rehabilitate these properties.  The report is critical of the administration of these funds, with the problems largely attributable to three projects, all of which were under the control of developers established by Kevin Hampton.  The City is in the process, and has been for some time, of resolving the problems associated with these developments, including collecting funds paid to Mr. Hampton for work that was not performed.

I would direct your attention to Appendix B of the audit, which provides the City’s response to the draft report.  This Appendix provides a summary of the steps that have already been taken, or that will be taken, to address deficiencies that were identified.

The principal criticism (one of several) by HUD is:

Three of the four developer proposals included the same principal consultant, general contractor, and real estate broker. These three firms were Community First Development, LLC, MissionRich Development,LLC, and KL Hampton Group, LLC. When evaluating the capacity of these three developers, the City did not consider that using the same individuals could impact the capacity of the service providers to complete projects in a timely manner. The three developers also did not use the general contractor, Eastmont Builders, as specified in their proposals. In place of this contractor, the three developers hired another general contractor, Isamar Construction, which had certified to the Contractors State License Board that it had no employees for the past7years. The City did not question this substitution. Because the three developers were managed by the same principal consultant and all rehabilitation was performed by the same general contractor, the developers lacked the capacity to administer the program. Since the developers did not have risk through leveraging and lacked the capacity to complete the rehabilitation work in a timely manner, there were unreasonable delays to the rehabilitation and resale of the properties. Some properties took up to 3 years to complete. After more than 3 years, rehabilitation on three properties had not been completed(see appendix D). This condition resulted in the City’s having to take the unfinished properties back via the deed-in-lieu-of-foreclosure process

On November 5, 2010, The City Manager’s Weekly Report described the program:

Neighborhood Stabilization Program Update. The City of Richmond is a recipient ofa Neighborhood Stabilization Program 1 (NSP 1) grant from the U.S. Department of Housing and Urban Development (HUD) to purchase and rehabilitate foreclosed, abandoned and vacant homes. The Richmond Community Redevelopment Agency is administering the NSP 1 on behalf of the city, and has formed the Richmond Neighborhood Stabilization Corporation (RNSC) to implement and assure that HUD’s program requirements are met. The total award of $3,346,105 was allocated and expended by the RNSC in accordance with the guidelines and rules of the Housing and Economic Recovery Act. The RNSC entered into partnership with four (4) selected development organizations: KL Hampton Group, LLC; Parkway Housing, LLC; Mission Rich Development, LLC; and Community First,LLC. The NSP 1 has successfully completed the acquisition of 25 units, including nine (9) units targeted for low income families, and 16 units targeted for families of moderate income. Currently, rehabilitation is complete on two (2) units, and the homes are for sale. Proceeds of the sales will be rolled back into the acquisition fund to provide money for more site acquisitions. Richmond Youthbuild will rehabilitate six (6) units as part of a “Teaching Lab” for their students to receive real time construction skills training. The remaining units are scheduled to begin rehabilitation before the end of this year.