LORAIN — The city is looking to make some changes to how it spends the money it received from the federal government last year.
At a public hearing Monday night, the administration detailed a “substantial amendment” to the city’s Community Development Block Grant plan, which involves taking the $1.1 million in CDBG funding from 2017 and applying it to an outstanding loan balance of more than $1.2 million.
Building, Housing and Planning Director Kellie Glenn said the changes are being mandated by the U.S. Department of Housing and Urban Development because the city has too much outstanding CDBG money that isn’t being spent.
“We don’t have a choice in this matter,” she said. “HUD is mandating that we do this. We have too much money on hand, and HUD is saying we have to use it to pay this balance down.”
The balance is on a Section 108 loan, which helps fund economic development. By taking the $1.1 million allocation from 2017 and applying it to the loan, the balance would shrink to $154,969, which would be paid off by the lendees making payments back to the city.
Mayor Chase Ritenauer said HUD would like to see the loan paid off because it would lower the ratio of what HUD allocates to Lorain versus what Lorain actually has on hand.
Glenn said that ratio is supposed to be about 1.5, so if HUD allocates $1.1 million to the city, it should have $1.65 million when funds leftover from previous years are added in.
However, Glenn said in recent years that ratio has ballooned to more than 4 and is currently at 2.7.
“So we’ve made great strides but not enough for what HUD wants to see,” she said.
Ritenauer said one of the biggest hurdles to lowering that ratio, though, is the revolving loan program, which was frozen several years ago due to over $600,000 in loans being written off and thousands of others were delinquent.
“The problem is HUD counts that credit against us so that’s inflating our ratio,” he said. “It’s just north of a million dollars and when we get payments that makes it go up. Well, we can’t spend it to make it go back down because they’ve frozen it. We’d be in good shape if they would unfreeze that money and we could put it where it needs to be.”
Ritenauer said HUD reevaluates the city’s CDBG funds Nov. 2 every year and the ratio needs to be down by then and until then, programs should be using the funds they’ve been given.
“You need to spend your dollars as soon as possible,” he said. “We need to get this money down.”
Because the 2017 funds are being applied to the loan, the city is having to reallocate money left over from previous years to fund projects, such as public improvements and summer employment programs.
The total amount being used for projects this year amounts to $769,539, but Ritenauer said that could go up if Congress chooses to continue its resolution that mandates CDBG funds and the city received its allocation for 2018.
“Right now CDBG money is eliminated in the president’s budget but I don’t think that will happen,” he said. “If it does, this is a moot discussion in the future.”
The Monday night hearing was part of a mandated period where the city listens to residents’ opinions on how the CDBG funds are spent. Residents have until March 12 to send in additional comments to the city at Kellie_Glenn@cityoflorain.org.