Merced may owe HUD $450,000 on failed projects

03/04/2014 10:00 PM

03/04/2014 10:37 PM

Two failed projects in Merced could cost nearly half a million dollars from the city’s general fund.

The City Council voted Monday to look at appropriations from the general fund that could total $450,000 already spent on projects including the Wal-Mart distribution center and a supermarket in south Merced, neither of which has come to fruition.

The city was counting on the U.S. Department of Housing and Urban Development and other sources to cover the costs, but that money fell through with the projects. HUD requires “measurable results” in the projects funded by the federal money, so the city could be required to pay it back.

Wal-Mart, the world’s largest retailer, proposed in 2005 to build a 1.2-million-square-foot distribution center on a 230-acre site at the northwest corner of Gerard Avenue and Tower Road. The corporation announced in December that Merced would not see the facility break ground in 2014.

The other project, a supermarket for residents in south Merced, also fell through. The requirements for the federal funding became too much for the developer, city staff said.

City Manager John Bramble said city staff is still working out the details with HUD, so the price tag may be smaller. “You don’t want things like this to occur, but there’s always things that happen with grant money,” Bramble said. “Sometimes grant money comes and it isn’t as free as it looks.”

The rules and regulations for HUD funding have changed over the last few years, Bramble said. City staff has caught up on the training it needs to meet those regulations, he said.

Councilman Mike Murphy said during Monday’s meeting he looks forward to a more in-depth discussion on HUD’s findings. “I think that there’s some unforced errors in this building,” he said.

HUD also found issue with a graffiti-abatement program. Mark Hamilton, a housing specialist for the city, said HUD requires the abatement take place in designated disadvantaged neighborhoods. He said the city was paying to conduct the abatement citywide.

The council also shuffled around another $360,000 it received from HUD to allow the city to put the money towards other efforts in town as long as the projects are completed within the fiscal year. Hamilton said he expects the money to be used by the end of the fiscal year. He said there is a long line of homeowners looking for help with repairs.

Merced prepares a plan for submission to HUD every year. The framework for the plan is found in the 2010 Consolidated Plan, a five-year planning document that outlines the city’s strategy for pursuing federal, state and local resources to meet housing and community development needs of low- and moderate-income Mercedians.

The last HUD plan was adopted in September.

Mayor Stan Thurston said he is still unclear about what went wrong with the HUD reporting process. He said he expects to get more background from city staff before the final vote either later this month or in April.

The numbers will continue to shake out, city staff said, and will come for approval before City Council at a yet-to-be-determined meeting.

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