A nonprofit organization working to redevelop East Baltimore is being investigated by the city's housing department and comptroller's office for its slow progress and unreported spending of part of a $34.1 million federal housing loan.

City officials say they launched the investigation because redevelopment efforts by the Historic East Baltimore Community Action Coalition (HEBCAC) were limping along and the organization had not submitted the required monthly progress reports in more than a year.

"There is an ongoing review," said Housing Commissioner Daniel P. Henson III. "I was concerned about a lack of progress."

Michael Seipp, HEBCAC's executive director, acknowledged the organization's lax reporting record and plodding progress, attributing the latter to unforeseen problems. But he said all expenditures are accounted for, and his agency's affiliate, Community Solutions Inc. of East Baltimore, has been "working full time" and making solid progress in purchasing vacant houses.

Baltimore Comptroller Joan M. Pratt said she plans to audit HEBCAC's records to see whether the organization has worked in accordance with its contract with the city. She has asked the housing department and mayor's office to provide a copy of the contract. She is seeking documentation of HEBCAC's agreement with Community Solutions, a small property acquisition company it hired to help purchase vacant property for redevelopment.

Pratt said one of her concerns is that $500,000 was paid to Community Solutions, but she has found evidence of only five purchases in the last year. She also voiced concern that %J Community Solutions was duplicating services the city's real estate officer, Anthony Ambridge, performs.

"I just want some accountability for the number of properties acquired," Pratt said.

Seipp acknowledged yesterday that the comptroller's office -Z should have been informed of the organization's progress in its redevelopment efforts. He said better bookkeeping would have helped HEBCAC early in the process.

"It's a legitimate issue," Seipp said. "I think it's my fault because I should have talked to Mr. Ambridge and Ms. Pratt. The whole purpose of doing this was to see whether we could shorten the time in acquiring properties."

The city's arrangement with the coalition began in October 1997, after housing officials decided to use private means to acquire properties. They thought it would be easier than going through the city bureaucracy, which they suspected would be more costly and time consuming.

The city selected the coalition, a nonprofit organization set up by the Johns Hopkins University, to lead the unprecedented east side redevelopment campaign.

After securing a contract to manage the $34.1 million federal loan, the coalition hired Community Solutions to streamline the purchase of 500 vacant buildings for renovation and identify hundreds more for demolition. The goal was to purchase the houses directly from the owners at the lowest possible cost, to buy them through tax sales, or to condemn the houses, Seipp said.

Community Solutions would then deed the property to the city or HEBCAC for renovation, he said. The federal loan would be repaid through block grants. Seipp said they have bought 50 houses, and are finalizing deals on 320 others.

Alan Piscatelli, president of Community Solutions, did not return repeated phone calls yesterday. But he explained in a recent interview that acquiring properties in East Baltimore's crumbling wards turned out to be more difficult than anyone anticipated.

The company inventoried 18,400 buildings on the east side and discovered that 3,600 of them, nearly one out of every five dwellings, were vacant. Most were so run down that the company couldn't identify 500 that were worth buying and rehabilitating in a targeted survey of 750 properties.

In some instances, the projected cost of rehabbing these vacant rowhouses approached $100,000, at least three times the renovated building's projected market value.

Community Solutions expanded the search to include 1,200 houses, but quickly ran into a fresh problem. Most of the buildings were heavily burdened with debts, mostly unpaid taxes owed to the city, that must be paid off before they can be acquired.

"That has been a huge problem," Piscatelli said last month. "The debts on these properties are so astronomically above what the buildings are worth that our acquisition budget would be shot if we had to pay them off."

Further complicating the task is that city officials have said they are loath to let Community Solutions cut deals with owners of certain buildings that lie in the path of HEBCAC's revitalization plans.

Pub Date: 12/10/98