After claiming they didn't owe the federal government "diddly" for a program that misspent tax money to repair run-down homes in Baltimore, Baltimore's mayor and his housing chief received the final notice yesterday: Pay up $725,759.
The federal government is demanding that Baltimore come up with the money within 60 days because the Housing Authority and its contractors inflated costs in a program that doled out more than $25.6 million without competitive bids to renovate publicly owned homes.
A Department of Housing and Urban Development manager said yesterday that the federal government doesn't care where Baltimore gets the money, as long as Mayor Kurt L. Schmoke and his housing chief, Daniel P. Henson III, don't use federal funds to pay the debt.
"If they want to hold bake sales, that's fine," said William Tamburrino, director of public housing for HUD in Maryland. "If they want to pass the hat, that's fine. How? It's their choice -- their problem, not mine."
The $725,759 bill is more than the amount of real estate taxes the city will receive this year from the owners of One Charles Center, a 23-story downtown office building at 100 N. Charles St.
HUD also resolved a number of disputes it had with the Housing Authority. The agency has assured HUD that it will closely monitor lead paint test results. It will pay $100,000 to study maintenance problems. It will submit monthly reports to HUD, which will monitor the waiting list for public housing. It will require all employees to file statements to guard against conflicts of interest.
Mr. Schmoke, in a statement issued last night, said, "I am pleased that they have closed most of their findings. We intend to continue our appeal of the few remaining issues, and we're confident that this matter will be resolved in our favor at the conclusion of the appeal process."
The mayor's spokesman said he was not sure where the city would find the money.
Mr. Henson said he doesn't think the Housing Authority owes HUD anything.
"My knowledge of these HUD audits over the last number of years is that [in] every single one of them, the city has wound up closing up all the issues without paying out money," he said. "I would expect that this would happen eventually."
Mr. Tamburrino said Baltimore has two options: Repay the money or document why the city doesn't owe federal taxpayers a refund from the no-bid program.
"So far, they've not been able to provide any evidence," Mr. Tamburrino said. "They gave it their best shot."
Mr. Tamburrino said there is no appeal for the city to pursue. "The only thing they can do is to go over my head. But that's not a formal appeal process. I'm not compromising," he said.
It might not be the last bill Baltimore receives from the federal government because of problems with the no-bid program.
Besides paying inflated prices, federal auditors say, the Housing Authority paid contractors $175,068 for work they never performed. Some contractors later refunded money or performed the work, reducing the bill by $62,669.
Mr. Tamburrino said yesterday that Baltimore still owes HUD $112,399 in the bogus charges. He said HUD will give the city about two months to recover the money from contractors or produce evidence that the work has been performed.
HUD also told the Housing Authority that it should not award contracts without bids again unless it receives permission from HUD or in extreme emergencies such as a natural disaster.
Mr. Henson and the Housing Authority have maintained that they didn't need permission to award the no-bid deals.
In reviewing 65 of more than 1,100 homes renovated, auditors for HUD's inspector general's office found inflated costs, bogus bills or poor work at every one. In September, they urged HUD to demand a refund.
Ever since, Mr. Henson has claimed that the auditors were wrong and that the methods they used to reach their conclusions were flawed.
"I don't think we owe them diddly," Mr. Henson said in November.
Mr. Schmoke has stood by Mr. Henson. In a recent interview, the mayor said he was unconcerned by the audit and was confident that HUD ultimately would side with the city.
HUD demanded the refund the same day The Sun concluded a three-part series detailing problems with the renovation program.
Yesterday, the Housing Authority continued to counter The Sun's series. The agency, which on Monday spent more than $12,000 in tax dollars to defend itself in newspaper ads, spent another $12,000 in public money yesterday for three more ads that appear in today's editions.
The latest ad is a seven-point rebuttal signed by Mr. Henson.
In it, Mr. Henson denies that contractors were overpaid or received money for work that was not performed. He also says "friends" who won contracts received no preferential treatment.
AUDIT FINDINGS
Here are the findings of a federal audit of the Housing Authority of Baltimore City and the status of each:
Finding: The authority improperly used no-bid contracts to award $25.6 million for renovations in publicly owned apartments.
Status: The authority pledges to seek bids for contracts to repair public housing and to seek HUD approval if emergency situations justify awarding future no-bid contracts.
Finding: The authority owes HUD $725,759 for inflated costs at 65 homes reviewed by auditors. The agency also paid $175,068 for work that was never performed.
Status: HUD has ordered the authority to repay $725,759 for inflated costs. HUD also has asked the agency to provide refunds or evidence of $112,399 worth of work that was never performed. The agency obtained added work or refunds from contractors worth $62,669.
Finding: The authority exposed residents to lead poisoning.
Status: The authority will ensure that young children will be in lead-safe homes.
Finding: The agency has a poor maintenance operation.
Status: The authority will spend $100,000 to study how to improve maintenance.
Finding: Applicants on the authority's waiting list were not given apartments according to rank; some received preferential treatment.
Status: Beginning in March, the authority will submit monthly reports to HUD.
Finding: The authority needs to change how security contracts are awarded. The agency awarded a $4.6 million contract to a security firm that was the highest bidder and employed 29 felons as guards.
Finding: The agency ignored safeguards that led to potential conflicts of interest in awarding no-bid contracts to relatives of a board member and an agency employee. The agency was wrong to spend $150,000 on eight Chevrolet Blazers for take-home use by managers.