Inflationary Pressuring

Minneapolis leaders want the feds to make up the shortfall in funds for the Hollman redevelopment

[Editor's note: A correction ran concerning this story; see end of article.]

Here's a truism that almost every homeowner has encountered at one time or another: A remodeling job will always cost more than contractors say it will. Of course, some cost overruns are much bigger than others. Take the case of the Minneapolis Public Housing Authority. The agency figures it needs more than $36 million to make its dreams for the Hollman redevelopment come true. And, according to documents obtained by City Pages, MPHA officials are looking to the U.S. Department of Housing and Urban Development to pick up the tab.

With the help of St. Louis-based developer McCormack Baron, the city aims to build a $198 million mixed-income community made up of 900 apartments, townhouses, and single-family homes on the former site of the city's largest public-housing project. The controversial project is riddled with unresolved budget conundrums, but right now the city is pouring its energy into finding the money to comply with a court order to replace hundreds of units of affordable housing.

According to a letter prepared by MPHA attorney Jack Cann and mailed to the other parties involved in the project--the NAACP, the Legal Aid Society of Minneapolis, the City Attorney's Office, the Minneapolis Community Development Agency, the Metropolitan Council, and HUD--MPHA wants the federal housing agency to fork over the money voluntarily. If HUD refuses, the city is prepared to ask federal courts to force the agency to cough up the cash. MPHA needs the money, Cann asserts in the lengthy document, so it can fulfill its court-mandated commitment to replace the 770 units of public housing that were torn down on the site as a result of the 1992 lawsuit known as Hollman.

The only problem is, HUD has already paid the city every cent called for under the terms of the Hollman decree, the 1995 settlement of the lawsuit brought by the NAACP and Legal Aid on behalf of public housing residents, including a woman named Lucy Mae Hollman. The suit charged that federal, state, and local housing authorities had a long history of segregating the poor, many of whom were black, into 73 acres of dilapidated public housing on the city's north side.

Under the terms of the decree, HUD paid $117 million to be used by the city to house residents in affordable units spread out across the metro area in what's described as an effort to "de-concentrate poverty." A little more than $74 million of that sum was to be used to pay for the replacement of the 770 lost units, an amount MPHA officials now say was far too small to accomplish that task. (Two hundred of the replacement units are to be located in the Hollman redevelopment; city officials hope the rest will be built in the suburbs and other parts of the city.)

Just how much more money will be needed to replace the demolished housing remains unclear. But one thing's for sure, the amount just keeps getting bigger. In February the budget deficit was estimated at $11 million. By April that figure had climbed to $22 million. Now, eight months later, it has jumped another $14.4 million to a total of $36.4 million. In his letter to the other parties to the suit, Cann attributes the ever-widening gap to rising construction costs. He explains that HUD's money will stretch to pay $96,268 per unit, while most of the construction bids the city is receiving are closer to $125,000.

"The funds previously provided by HUD for development of these units is insufficient to produce all 770 units and this shortfall has created an immediate and serious impediment to the MPHA's efforts to develop the replacement units," Cann writes. "In addition, the 200 units to be developed in conjunction with the North Side redevelopment have been estimated to cost in excess of $162,000 a unit."

Critics of the redevelopment concede that housing costs are going up. But they say blaming such dramatic cost overruns on contractors' estimates alone is to tell only part of the story of how a development born out of a fight for racial justice has turned into a quest to create a gentrified subdivision. "Cann is just carrying water for [city council president] Jackie Cherryhomes, who wants an upscale development in her ward," says Kirk Hill, former director of the Minnesota Tenants Union. "We told Legal Aid and the city that the amount HUD was giving them to build the units was too low way back when the decree was signed, but they just pushed us aside. I think they thought that because the settlement was court-ordered they were in the enviable position of being able to force the federal government to pay whatever they wanted for this development....They thought they had it all sewed up. But they didn't."

Legal Aid attorney Tim Thompson, who represents some of the plaintiffs in Hollman, explains that the city has been seeking additional HUD funds to build Hollman replacement housing since February of 1999. The requests were general at first. But since last spring, Thompson explains, the city has been pushing a more specific plan. The MPHA wants to use Minneapolis's share of what's called "Moving to Work" money, Thompson says, to bolster the redevelopment. Moving to Work is a HUD program aimed at increasing housing choices for low-income families while at the same time helping them to become economically self-sufficient. Minneapolis asked to be allowed to exchange unused Section 8 vouchers--rent subsidy certificates available to low-income families--for cash to close funding gaps in the Hollman redevelopment. HUD didn't reply.

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