7th Issue:
City of San Jose Advance – Accommodating Friends, Not Whistleblowers
Like the HUD liability and the County overbilling, the City
of San Jose advance represented a failure by a governmental agency to reclaim funds
held by HomeFirst, but this time the victim gave up its money willingly.
In 2010 HomeFirst entered a $1.4 million contract with the
City of San Jose to provide rent and deposit assistance to families that were
homeless or being evicted from their homes.
The program, called Housing Services Partnership (HSP), was expected to
require large cash outflows that might not be reimbursed for up to three months
because of the City’s slow reimbursement process. To minimize our negative cash flow from the
program, in September 2010 the City gave us $350,000 as an advance on the $1.4
million.
The way it worked, we would bill the City each month for
expenses and keep the advance in reserve.
By the end of the first year, we had spent only half of the $1.4 million
contract, and we still held the $350,000 deposit. The contract was extended for another year. The second year activity was again half the
expected amount, and the $350,000 deposit was still in our bank in June 2012
even though the City had sped up its reimbursement processing. The contract was extended for a third year. By June 2013, $283,000 of the deposit still sat
unspent, and the balance was rolled into yet another contract.
By 2013 the City of San Jose’s salaries and pension costs had
created such fiscal pressure that USA Today suggested that it might follow
Stockton, California in declaring bankruptcy[i]. In September, the City Housing Department’s
Assistant Director (Jacky) called HomeFirst CEO Jenny to let her know that the
City would be asking her to return the unused advance balance so that it could
be used more productively. Jenny argued
that returning the money would be a hardship for us and we could spend it in
the coming months. Jacky, who knew Jenny
socially and had been an invitee to her 45th birthday celebration in
January, relented, and the contract was rolled over for a fourth time. By the time the final contract expired in
September 2014, HomeFirst still held $138,000 of the advance from four years
earlier and, cash being tight, continued to hold it.
I filed my first complaint against the City in January 2014 on its whistleblower hotline site. I
followed that complaint with a public records request in June that yielded no
evidence of action on my complaint. In
July I complained to the City’s oversight group, the Council Open Government
Committee, and in August I complained to Mayor Reed, who did not reply.
Jacky, who was now the Interim Housing Director, responded
to the Open Government Committee that she had not been contacted about the
January complaint but she would research the status of the advance. Over the next six months I followed up with her
half a dozen times, and each time, she said her research was not complete.
Finally, Jacky demanded repayment of the
$138,000 unused balance in February 2015. By then
HomeFirst was facing a severe liquidity problem, which delayed payment again. Three months later, at Jacky’s recommendation, the City decided
to give HomeFirst a $25,000 “capacity building” grant – essentially free money
– and to allow the company to apply the unused advance retroactively to shelter
costs unrelated to HSP. Repayment was
not necessary; the complaint was moot.
In addition, the City kicked in another $146,000 grant for future
shelter costs.
Governments get their funds from a variety of sources. Money for the HSP program came from something
called the City’s Housing Trust Fund, which received developer fees and other
funds for its operations. The Housing
Trust Fund made grants to nonprofits that provide services to people who are
homeless or at risk of becoming homeless.
Because the HSP program and HomeFirst’s emergency shelter
both suited the charter of the Housing Trust Fund, the City could easily
shift the unused $138,000 from HSP to shelter beds as long as it was generally
happy with HomeFirst. I filed sixteen
complaints and follow-ups on the issue, which was essentially a long-term
interest-free loan to HomeFirst, but my whistleblowing was doomed from the
start (it is now clear) because the City liked HomeFirst. Much more than either liked me.
A lesson for the whistleblower: a complaint can be made
irrelevant at the whim of the victim who does love the perpetrator.
[i] Welch, William M. “These
California Cities Could Be Next in Bankruptcy.” USA Today. May 15, 2013
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