The meeting convened at 5:03. Muldoon moved to approve the agenda; seconded by Hogate; carried by unanimous vote. Hogate moved to approve the minutes of November 7; seconded by Volm; carried by unanimous vote.

OFFICER'S REPORT. Kahoun reported on recent City Council actions, including approval of the Federal Home Loan Bank contract, and the environmental review and carryovers for the HUD 2002 Consolidated Plan. Council also approved a carryover plan for the Institute of Social and Economic Development. Kahoun said the actual funding amounts for the Consolidated Plan had turned out to be very close to estimates.

FOURTH QUARTER AND ANNUAL CSBG REPORT. Schulte presented the fourth quarter and year-end report on the CSBG program. He said the division was continuing to automate its reporting and tracking systems. This year showed a major increase in use of the LIHEAP program. Dozier moved to approve the report and forward it to the Council; seconded by Muldoon.

NEIGHBORHOOD RECOGNITION. Van Essen updated the Board on the results of the annual survey of recognized neighborhoods. At the time of the survey, there were 50 neighborhoods, six of which have not responded to the survey in any way, nor to staff's follow-up calls. There is a requirement that an association send in one set of minutes as proof that the association is active and a forum for neighborhood concerns is being provided. Four neighborhoods have not fulfilled this requirement. Kahoun said she would like to give the nonresponders another chance before beginning action to de-recognize them and asked the Board to give them a personal call to urge them to send in the survey .

Volm asked when the neighborhood listing books would come out; Van Essen said they were no longer printed since the information went on the web under the City's website. Muldoon said the survey should be sent to the neighborhoods by email.

NEIGHBORHOOD COMMERCIAL REVITALIZATION PROGRAM. Vorbrich presented proposed changes to the Office of Economic Development's Neighborhood Commercial Revitalization Program. The program has been rarely used and updating was necessary to bring it in line with the realities of today's rehab costs. Volm asked what the funding source was; Vorbrich said it was CDBG.

Muldoon asked if the phrase, "terms negotiable" meant forgivable loans. Vorbrich said it depended on the project and what other sources of funds were involved. This program is aimed at reducing slum and blight, and it might be necessary to make a forgivable loan if it would make a project feasible and benefit a neighborhood by upgrading an eyesore. Primarily, however, the program is for revolving loans. Muldoon asked if this program was a duplicate of other programs the OED operates; Vorbrich said it was not, as the other programs were primarily for job creation rather than the elimination of slum and blight.

Hogate moved to approve the changes to the program; seconded by Dozier.

OWNER-OCCUPIED REHABILITATION PROGRAM MANUAL. Leipzig submitted a draft of revisions to the Owner-Occupied Rehabilitation Program's administrative manual. Dozier said the mission statement should be revised to say, "…housing opportunities throughout the community…" Leipzig pointed out revised limits for loans, and a simplified loan structure. He said the City and County were working out a coordinated referral system that should help cut down waiting lists. The new software NCS acquired for specifications is up and running and the level of detail it provides is producing more accurate bids.

NCS plans for 2002 include marketing the program, producing new brochures and flyers, recruiting more contractors, and upgrading performance standards. Hogate said she hoped the promotional materials would be provided in several languages. Leipzig said they were working on them already.

Volm asked why the referral list couldn't be put on NCS's database so they and the County could both work on it; Leipzig said NCS uses Tidemark, and the County is looking into using it also. If they did, then they could consolidate.

Dozier said she knew of two houses in her neighborhood that received rehab loans and were now to be demolished, and she didn't like to see money wasted. She also asked why the rehab loans done with HOME funds had to be mortgages instead of contracts. She said she found out a contract buyer was claiming homestead exemption. She said she was concerned contract buyers would use City money and falsify records and the manual doesn't address that.

Dozier and Leipzig discussed how NCS decided whether to use CDBG or HOME for a rehab project. Leipzig said the goal of the HOME program was sustainable affordable housing, and NCS used HOME funds when they could to further that goal, because the affordability restriction stayed with the property even if foreclosure occurred. Kahoun said for some projects CDBG was better to use than HOME because it was more flexible, especially for high-impact revitalization projects. Dozier said when projects are financed with these funds the City should used the opportunity to impose more restrictions than State law provides so as to prevent mismanagement and fraud. Dozier and Nancarrow discussed use of the program by contract buyers and the unwillingness of title holders to agree to liens on the property for their contract buyers.

Leipzig asked the Board to send in their written comments on the draft of the manual.

NEIGHBORHOOD DEVELOPMENT ADMINISTRATOR'S REPORT. Kahoun said now that the selection process is finalized, the planning staff would hold its first meeting with the planning committees of the newly selected neighborhoods and would start on the neighborhood plans after the first of the year. She said some people had suggested changing the words used to classify neighborhoods, "stable," "transitional," and "distressed," and submitted information on what is done in other cities. In researching this issue, staff found that few cities have a classification system, and the Board decided that none of the examples seemed better than what Des Moines currently uses.

Neighborhood Housing Services. Kahoun updated the Board on the situation with Neighborhood Housing Services, saying several financial irregularities had been discovered and the police and FBI were investigating. The City's funds represent only a small piece of the operation's finances, and files were so muddled that bank auditors were being brought in to figure them out. A report is expected from them soon that should sort out the sources of money and the loans made, and identify any missing funds.

Schulte said the City began to suspect problems in the middle of last year when it began discussing with NHS why certain projects were not being completed. The time allotted to use the funds was expiring, so the City reprogrammed funds allocated to NHS, and began to look further into the agency's operations. The City had a hard time getting information from the agency. As more problems came to light, the Manager asked the police to investigate.

Muldoon said she wondered how long this was going on, and why City staff on the NHS board did not know. When asked if the NHS board was aware of what was going on, Kahoun said an organization's board members might not receive the type of information that would alert them to these problems. Board meetings were cancelled, and there was considerable turnover. There seems to have been agreements between the board chair and the director of which the Board was unaware. The Board discussed the loans made by NHS to friends and relatives and the relatives who were employed. When some members asked how this could happen, Dozier said she had served on the NHS loan committee, and the identities of the clients were concealed from the committee – all they saw was an identifying number. Dodge said the loan committee had been disbanded some time ago.

Kahoun said there had never been a contract breach of this magnitude in all the years the City has contracted out Federal funds and it had come as a shock throughout the City's management. In light of this experience, staff intends to change the contracts to require that minutes and agendas of board meetings be sent to the monitors, and to require the monitors to visit the meetings of the boards on a spot-check basis. Kahoun said part of the problem with NHS was that the director signed documents, and the monitoring staff presumed that she was doing so pursuant to board action, but that was not the case. Kahoun said in the future the monitoring staff will make sure that the individual board members of these nonprofit organizations are very aware that the contract is with them, not with the executive director, and it is them who will be liable if misappropriations occur. Kahoun said the other nonprofits are very concerned about the impact this will have on all of them.

Volm asked if the City received audits; Kahoun said they did, and the audits were clean, but audits are not done until the year is completed, so information contained in them is post facto. Also the letters that routinely accompany the audits, which would have shown the auditors' findings that loans were going to friends and relatives, were not provided to the City, and NHS delayed giving it to the monitoring staff, despite numerous requests. Kahoun said the City's fact-finding abilities were limited to the parameters of the contracts and when they asked for information and the agency drug its feet in providing it, the City's enforcement abilities were also limited.

COMMITTEE AND REPRESENTATIVE REPORTS. None

OTHER BUSINESS. It was decided to cancel the next meeting. The next regularly scheduled meeting will be held January 2, 2002.

The meeting adjourned at 6:25 p.m.

Betty Volm, Secretary