How to blow $30 million with nothing to show for it.

Beavis and Butt-head Do Government 

How to blow $30 million with nothing to show for it.

Nine years ago, flushed with optimism, local housing authority officials hatched an ambitious plan to fix public housing in Ohio City. It involved hundreds of homes and millions of dollars. Unfortunately, it also involved two government agencies with a talent for wasting money. The Cuyahoga Metropolitan Housing Authority and the U.S. Department of Housing and Urban Development (HUD) might be best described as the Beavis and Butt-head of government. Bad things were bound to happen.

The plan was to tear down Riverview Terrace -- an ugly, sinkhole-ridden public-housing complex taking up prime real estate on the banks of the Cuyahoga -- and replace it with about 400 condos and apartments, affordable to both rich and poor.

There was just one problem: The land had been slowly falling into the river for at least 36 years.

Everyone knew this. Everyone, it seems, except the housing authority. "We just kind of assumed that certainly we could build back where there were buildings before," says Scott Pollock, its planning director.

That was 1996. Today, the hilltop is just a grassy patch of land. Nothing has been built, and nothing will be, because the housing authority has just discovered that -- who knew? -- the hilltop is unstable.

Meanwhile, the housing authority has already spent $10.5 million. Faced with a deadline at the end of next year, they have asked for more time, so that the feds don't take back an additional $8.5 million.

After nine years, the case provides an intimate look at how truly inept local government is -- and how the feds abet that incompetence, all on your dime.

Former City Councilwoman Helen Smith says it best: "It's just this interminable list of governmental screw-ups."


Claire Freeman, the authority's former executive director, was once considered the savior of Cleveland's public housing.

Before returning to her native city in 1990, Freeman was a powerful player at HUD. She was an assistant secretary under Jack Kemp -- a onetime vice-presidential contender who was widely credited with reforming the corrupt agency, though he wasn't entirely clean himself.

Under his watch, auditors discovered that millions of dollars' worth of housing subsidies had gone to the wrong places -- including one agency in Kemp's hometown of Buffalo, according to the Associated Press.

Freeman's Washington connections served her well in Cleveland. She racked up federal grants as if they were pumps at a Payless buy-one-get-one-free sale.

She scored $50 million to renovate housing on Woodland Avenue, then $21 million more to redo a complex a few blocks away in Central. One of the projects even won praise from President Clinton.

With no limit on the feds' credit card, Freeman kept asking for more.

In 1996, she applied for another multi-million-dollar grant -- this time to tear down and rebuild Riverview Terrace on West 25th Street. She wanted to replace the project with a whole new neighborhood -- roughly 400 apartments and condos -- and renovate nearby Lakeview Terrace. The project would start immediately and be finished by 2000, the application promised.

HUD quickly forked over $29.7 million, without asking many questions. If the agency had looked more closely, it might have seen ample reason for alarm.

Freeman wanted to put new construction on the Riverview site, despite the fact that because it was built on a landfill, it was "sinking." The application cheerfully pointed out that Riverview's foundation was cracked, sidewalks had collapsed, and sinkholes made the complex a minefield. The problems, it further noted, "pose a life threatening hazard for residents."

But apparently "life threatening" conditions were of little concern either to Cleveland or the great minds of Washington. Not when there was $30 million just waiting to be wasted.


Lillian Davis remembers the sinkholes. She lived at Riverview for 26 years and watched as holes appeared in the basketball court and sidewalks.

"That's when they knew something wrong here," says Davis, who now works for the housing authority.

In fact, officials had known of trouble since 1960, three years before Riverview was built. An engineering professor from the University of Michigan "concluded that the entire hillside was probably unstable and was undergoing downhill creep."

In non-geek speak, that meant the hill was falling into the river.

So housing officials decided to build on top of the slope, where the professor thought the ground would be more stable. Then the sinkholes appeared.

In 1995 -- the year before the authority applied for the Riverview grant -- a new study of the hillside just north of Riverview, between Detroit Avenue and Franklin Avenue, brought bad news. It found that "the entire west bank slope in the project area is unstable." The estimated cost to repair that part of the slope ranged from $10 million to $14.5 million.

Yet housing officials either ignored the findings or figured that somehow the top of the hill, just down the river, would still be safe. So they did what Cleveland leaders have always done: learned their lessons the hard, expensive way.


Cash in hand, Freeman now had to get rid of the old Riverview complex. She tried to sell residents on the idea of the new neighborhood that would replace their crumbling homes. Roughly 20 percent of the new apartments would be rented or sold to low-income families; the rest would be sold at market rates. The idea was to eliminate the slums created by housing projects built in the '60s and replace them with neighborhoods where rich and poor lived side by side.

Davis was unimpressed. "To me, that was a bunch of hoopla."

She and other residents were more interested in the plan to kick them out of their homes. About 54 of the 135 families were moved to houses the authority bought throughout the city. They paid a subsidized rent, with the goal of eventually buying their homes.

The rest of the families were scattered to other housing projects, with the understanding that they would have the first shot at coming back to Riverview. Plans were drawn up to provide all the displaced people with job training, education, and other services.

In 1998, Davis says, she was the last person to move out. That was also the year Freeman was fired.

The housing authority board had discovered that she was using public funds to pay the mortgage on a Virginia townhouse. In fact, with a salary-and-benefits package that topped $400,000, Freeman treated federal money as if it were her own personal checking account.

State auditors blasted her for charging thousands of dollars' worth of travel, flowers, theater tickets, and other perks to a housing authority credit card. She was later sent to prison for theft of public funds, mail fraud, and making false statements about a loan.

After Freeman left, Riverview sat empty for two years as the agency floundered. New director Terri Hamilton Brown finally demolished Riverview in 2000 -- the year the rebuilding was supposed to be completed. She also paid a firm of Boston architects $245,000 to design the new houses.

First, however, more land studies were needed.

This time, the engineers suggested that the hill was stable 50 to 60 feet west of its crest -- but they recommended further study. The architects unveiled a plan for building between Franklin Avenue and West 25th Street.

That plan, in true Cleveland fashion, sat on the shelf for more than two years. The authority slowly got around to signing a $2.4 million contract with a developer, Telesis Corp., a Washington, D.C. company that has specialized in building mixed-income developments.

Telesis came up with its own idea for fixing the hillside the fast and cheap way -- by taking dirt from the top and using it to shore up the bottom. But this plan wasn't made public until 2004.

Then, just to be safe, the authority decided to do one last engineering study. Last April, EDP Consultants once again reported what Cleveland officials had known since 1960: None of the land was safe to build on. And now it would cost $20 million to $25 million to fix it.


The housing authority was now in a tough spot. It had been almost nine years since it received the grant, and nothing had been built. Even the relatively simple renovations at Lakeview weren't done; only a third of the apartments were complete.

Yet more than a third of the grant had been spent -- and HUD was threatening to take millions of dollars back if they weren't used by the end of 2006. The authority had to turn in a revised plan by the end of September.

Back in Washington, patience was wearing thin. Cleveland, it turns out, was not the only city that had wasted its grant.

In 1993, HUD launched a program to tear down the nation's worst public housing and replace it with mixed-income development. Since then, the agency has given out 224 grants totaling $5.6 billion. But only 42 projects are finished, according to spokeswoman Donna White.

The failure was so obvious that even bureaucrats couldn't ignore it. Two years ago, HUD told Congress it wanted to end the program, saying the projects were too time-consuming and expensive. The General Accounting Office criticized HUD for not keeping better tabs on grant-winners. For years, the agency hadn't taken past failures into consideration when handing out money. Which is probably why Cleveland won six grants in 11 years.

Embarrassed, HUD tightened the rules. Housing authorities would have to prove that they had a developer, owned all the land they wanted to build on, and had guarantees of funding from private businesses. If they missed deadlines, they could be fined.

Still, Cleveland has never been punished.

On September 30, Cuyahoga Metropolitan Housing Authority officials asked for an extension until the end of 2009 to finish the Riverview project. In November, they announced that HUD had approved their request. But White says that HUD is still reviewing it.


Meanwhile, the City of Cleveland -- despite having given at least $1.1 million to the Riverview and Lakeview projects -- has demonstrated a profound lack of interest in where its money has gone.

Some Ohio City residents say that Riverview would have been built by now if the city that brags about new development had actually dirtied its hands, instead of just cutting ribbons.

John Wilbur, the assistant director of community development, insists that the city is merely looking for "consensus" before it acts. "I think we have actually, behind the scenes, taken a pretty active role," he says.

He compares Riverview to half a dozen other projects that could transform the city -- if anyone bothered to actually build them. But he doesn't expect that to happen in all cases, and he doesn't seem to mind.

"If one or another of these projects doesn't happen, that's not the end of development in the city," he says.

The authority is now scrambling to find other Ohio City sites. But with time running out and a third of the money gone, its land choices are scarce. The search isn't going well.

First, officials angered West Side Market merchants with a plan to build 268 condos and apartments on a parking lot near the market. Shop owners worried that the construction would block access to their stores, create traffic, and eliminate parking for customers.

"Is this just a waste of our public money?" asks Lucille Walker, who runs a deli at the market.

Chastened, housing officials decided to move the bulk of the homes to Columbus Road, to a ravine next to the RTA tracks between Lorain Avenue and West 25th Street. Yet they never asked the neighbors, many of whom were furious at the idea of adding hundreds of condos and apartments to their single-family neighborhood.

Tyree Thompson, a Cleveland fireman, lives in a storybook-cozy house with his wife and baby daughter, less than two blocks from the RTA tracks. He'd rather the city get rid of the abandoned houses across the street than build hundreds of condos there.

"It's enough crime on my street already . . . then, to have a bunch of low-income housing . . ." he says.

Most of the Columbus Road housing would be sold to wealthier buyers at "market rate." Only 20 percent is being designated for poorer families. But those details don't matter to Thompson and his neighbors. They find it hard to trust the same authority that took nine years to come up with a plan almost no one likes. Moreover, the authority doesn't have a reputation for maintaining its properties. Some fear that the high-end condos will become another Riverview.

"Everyone's afraid. If they don't sell, what are they gonna do?" asks Troy Hilsenroth, who lives a few blocks away.

He and Thompson say they would welcome new homes -- just not hundreds of condos.

"If they build houses and make it a neighborhood, that's what people want," Thompson says.

The proposed site is also fraught with problems. From the road, it looks as if there are only a few yards to build on before the land drops into a ravine and the train tracks. Thompson figures that a developer would have to clear trees and bring in dirt to shore up the hillside.

It probably will be expensive to build in a ravine, Pollock admits, but "we haven't looked at it that close yet" to know the exact price tag.

Joe Mazzola, executive director of the Ohio City Near West Development Corp., says that architects believe it's possible to build on Columbus Road. But even he concedes that 242 condos and apartments might be too much for one spot.

"Is it the most desirable situation? Not necessarily," Mazzola says.

Ironically, even some of the residents who were kicked out of Riverview don't like the new plans to replace it. While some people do want to return to their former homes, Davis wants the authority to build affordably priced houses -- like the one she lives in now-- scattered throughout the area. In her mind, a condo is just a fancy name for "projects," where families are stacked on top of each other.

"Nothing is more miserable than living like that," she says. "I know I wouldn't go back to that."

Still, some Ohio City merchants support the project, arguing that the neighborhood -- struggling to strike a balance between homeless people, wealthy condo owners, social services, and suburbanites in search of nightlife -- could use hundreds of new customers for its shops. They point out that the new development would be managed by a private company, not the government.

"I would be crazy to oppose it," says Koula Lazar, who co-owns Something Different Gallery on West 25th. "The more people that live here, the better."

Councilman Joe Cimperman, who represents Hilsenroth's neighborhood, has suggested moving most of the condos and apartments downtown, to a city-owned parking lot on East Ninth Street. His idea is to combine housing for poor and middle-income families with lakefront views. Also, he doesn't want to have to give back the federal housing grant.

But at this point, some residents wouldn't mind if Cleveland lost the money. One evening in September, Thompson, Hilsenroth, and other angry neighbors armed with brightly colored fliers packed a meeting room at Lutheran Hospital. One by one, they demanded to know why the number of homes planned couldn't be reduced -- or at least scattered throughout the city.

"Sometimes the best deal is no deal at all," Hilsenroth says.

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