NEIGHBORHOODS DEPARTMENT

New director vows she will overhaul unit

Lourdes Santiago

Toledo's new neighborhoods director assured city councilmen Thursday she is moving swiftly to overhaul the department in the wake of an internal investigation that outlined allegations of widespread mismanagement, bid-rigging, and possible misuse of federal funds.

Lourdes Santiago, who took over as head of the department last month after the previous director was fired, spoke at a committee of the whole meeting to address the report's findings and discuss recommendations made by investigators. Ms. Santiago said many of the recommendations -- which include staff training and changes to bidding procedures -- are already under way. She pledged to ensure the department is run in a way that is "accountable and transparent."

"Very aggressive steps have been taken and will continue to be taken to make sure this department stays on target, stays within its core mission, for the betterment of this community," Ms. Santiago said. "I can assure you that I will be checking to make sure that any expenditure of those federal dollars coming into our community are properly spent."

The steps include instigating new bidding procedures for projects over $10,000. Instead of inviting select contractors to bid, the department will post requests for proposals online and allow all qualified applicants to submit an offer, Ms. Santiago said. Bid openings also will occur at the same time -- 3 p.m. Wednesday -- and will be held in city offices under the supervision of management officials.

The changes address allegations that bids were compromised, certain contractors favored, and that openings occurred outside the supervision of city officials. City investigators have said that files were too poorly kept to fully verify these accusations.

For bids under $10,000, the department will continue to invite contractors from a rotating list, but steps will be taken to make sure applicants are fully qualified, Ms. Santiago said.

"All of the bids will receive managerial oversight," she said. "I will oversee everything going on in that department."

Department staff also will receive new training. Ms. Santiago said three staff members already are being trained in rehab technician skills in Cleveland.

The director said she is exploring technology options to improve department record-keeping.

The city's 19-page report, which was released Wednesday, painted a picture of a deeply dysfunctional department, but investigators said they couldn't confirm some of the more serious allegations because of conflicting claims among interviewees and poor record-keeping.

Still, the probe uncovered problems that included an off-the-books petty-cash fund, alleged document falsification, alleged intimidation of a police officer who was investigating a department employee, an employee running his or her own contracting business, licensed contractors lending their names to unlicensed contractors, and a "probability" that one contractor was given access to another's sealed bids.

The city investigators -- Law Director Adam Loukx and Special Projects Manager Dan Hiskey -- emphasized that the focus of the investigation was to fix problems, not make judgments about wrongdoing or criminal prosecution. They're leaving that to law enforcement authorities, they said.

Council avoided discussion of the criminal allegations Thursday, and declined to discuss the names of individuals or organizations implicated, citing the information as sensitive given an ongoing, separate investigation by the U.S. Department of Housing and Urban Development and the FBI.

Councilman Adam Martinez, who chairs the neighborhoods committee, said he was pleased with the administration's response. He said council will continue to monitor the department's progress during regular committee hearings. "The administration did what they could with the resources that they had," he said. "From an administrative and policy side, I'm satisfied."

But Hugh Grefe, senior executive director of Toledo's Local Initiatives Support Corp. who spoke at the meeting, said changes need to encompass other departments too.

"To be truly useful, this investigation and report must be the basis of a sustained change in the organizational culture, not just within the department of neighborhoods, but also among those with whom the department interacts," he said. "The city's success in addressing issues identified both in the administration's investigative report and in the media requires senior city leadership to hold all departments using these federal funds accountable for their proper use and reporting."

Mr. Grefe also criticized the city for retaining two department of neighborhoods employees, even though they have been implicated in the alleged wrongdoing. Former housing manager Jody Prude and rehab specialist Toni Thomas were demoted and moved to a different department.

"I urge the council, the administration, and the city unions to change to strengthen the system of accountability within the city if they wish to have the confidence and support of Toledo taxpayers," he said. "This system clearly has protected poor performers from appropriate accountability and must be changed."

The city's report also revealed that federal investigators were looking into a federally funded housing repair program administered by the municipal housing court. Court officials confirmed Thursday that agents with the FBI and HUD's Inspector General's Office had interviewed two of the court's housing specialists and had reviewed program documents. Judge C. Allen McConnell, who presides over the court, said the investigation began after the publication of a Blade article in November documenting allegations of wrongdoing in the city's neighborhoods department. He said his employees were questioned about contracts and contractors, but that he didn't know anything about the investigation beyond that.

"What their bottom-line concern is, I have no idea," the judge said. "I think it's basically a general examination."

The program provides up to $4,500 to income-qualified homeowners to bring nuisance properties into compliance with city code. The city provides about $100,000 annually in federal community block grant money to fund the program, Judge McConnell said.

During Thursday's hearing, Mr. Hiskey said the city has sent documentation to HUD justifying more than $300,000 in questioned costs from a 2010 audit of the city's federal spending. The documents show the money was spent on utilities, rent, gas for city vehicles, and demolition work, among other things. One mysterious charge for an address that didn't exist -- 1009 Indiana Ave. -- was actually a Toledo Edison bill for electricity at the Frederick Douglass Community Center, which uses the address of 1001 Indiana Ave., according to documents the city submitted to HUD.

The city did not try to justify the use of federal money for a $1,246 Delta flight for the mayor's trip to China. That money has been paid back with general fund money, Mr. Hiskey has said.

Contact Claudia Boyd-Barrett cbarrett@theblade.com or 419-724-6272.