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Sep 01 2011

Ogdensburg misused federal grant funds to pay itself taxes

Troubled property: Ogdensburg used stimulus money to pay taxes on a house the municipality owns

Watertown Daily Times (New York) - by Christopher Robbins

A federal official says the city misused federal grant funds to pay taxes on a property it obtained through tax foreclosure.

“The taxes were paid on the property,” Philip A. Cosmo, city comptroller, said Tuesday. “I believe we used one of the grant programs.”

The property in question is a house at 819 Knox St., a subject of recent controversy when it was revealed that a family had lived there for three years without paying taxes or rent to the city after the city foreclosed.

Records from the city comptroller’s office show the city paid $1,232.56 in combined city and county taxes on the property for this year.

It is not clear why the city was paying itself taxes on a property it owned. Government-owned property is tax exempt.

St. Lawrence County Treasurer Kevin Felt said sometimes taxes are paid on municipally owned property that is not being used for government purposes, but the payments go to other municipalities. For example, the county sometimes pays taxes on forest land to the school districts and townships that collect from that area.

“We do not pay taxes to ourselves and we do not collect a county property tax on the parcels we own,” Mr. Felt said. “When the bills are generated, we pay them directly to the local tax collector.”

After a lengthy renovation effort, the home was assessed this year at a value of $86,200. The property was previously valued at $48,000.

Mr. Cosmo was unsure which grant program the money came from. However, in an Aug. 16 email to city council members, J. Justin Woods, director of planning and development, wrote that the city paid the taxes using funds from the U.S. Department of Housing and Urban Development’s Neighborhood Stabilization Program.

“It’s important to note that all new taxes were paid out of the grant funds, as they were on all NSP properties,” Mr. Woods wrote.

M. Adam Glantz, public information officer for HUD’s New York regional office, said Friday that paying property tax was not an appropriate use of the grant funding.

“In general, a locality cannot use Neighborhood Stabilization Program funds to reimburse taxes,” Mr. Glantz said. “The city is repaying itself in a way.”

Mr. Glantz said his agency would look into the matter.

“New York distributed HUD funds for eligible activities to areas in need,” Mr. Glantz said. “They were supposed to use the funding for demolition and redevelopment of tax foreclosed properties. If there is documentation that they used the funds for any other purposes, we would like to see it.”

Alan Gelfand, a spokesperson at HUD’s Newark, N.J., offices agreed.

“The payment of current city taxes is not an eligible Neighborhood Stabilization Program activity,” said Mr. Gelfand. In an interview on Aug. 17, Mr. Woods maintained that the grant funds were spent according to HUD rules.

“It was an acquisition and holding cost, which is an appropriate use of the grant funds,” Mr. Woods said.

Ogdensburg received $400,000 in funding through the program, which was established as part of the 2009 American Recovery and Reinvestment Act. According to the HUD website, the program was established to stabilize neighborhoods whose viability has been damaged by the economic effects of properties that have been foreclosed upon and abandoned.

The wording of the act allows funds to be used to pay utilities and any relocation cost for families in tax-foreclosed properties that are being rehabilitated. However, it does not clear municipalities to use the grant money to pay property taxes.

Planning and Development Director J. Justin Woods and City Manager Arthur J. Sciorra could not be reached Tuesday for comment.

Mr. Woods and Mr. Sciorra last week signed a confidentiality agreement that Mr. Woods has said bars them from discussing the Knox Street property.

“It doesn’t seem right to me,” said Michael D. Morley, deputy mayor. “This program exists to help people fix up and buy their homes, not to pay taxes.”

Fellow council member Douglas G. Sholette agreed.

“I don’t know the legalities of the situation, but I don’t think that is proper use of the money,” Mr. Sholette said.

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