Cover Story: A Shaky Foundation

Demoralized city development bureaucrats forge ahead

Cincinnati's Department of Community Development and Planning has felt as unsteady this past year as some of the blighted buildings it's charged with redeveloping.

The low point was Dec. 1, 2003, when City Manager Valerie Lemmie had police lock employees out of their offices while investigators searched through files and e-mail. Lemmie said she wanted to prevent evidence from being destroyed before an investigation.

The results of police and federal investigations and an internal audit will soon be available, according to members of city council.

The investigations compounded a series of events that all but destroyed the department's morale: highly-publicized failed projects, the director's resignation, cuts in middle managers' pay raises and being blocked from joining a new union.

Staffers spoke about the department's problems on condition of anonymity.

"Everybody's so degraded and insulted," one says. "If all of us could afford to walk out, we would."

Instead they get on with the work of trying to hedge the city's bets on the highly risky work of encouraging development, especially in blighted areas.

Staff under siege
Services provided by the 75 employees in the Department of Development and Planning include planning, human services, housing, neighborhood development, small business, contract compliance and historic conservation, according to Assistant City Manager Deborah Holston. For instance, the human services arm administers arts grant programs and emergency shelter grants.

The department offers financial incentives and guidance to developers looking to rehabilitate or build housing. One way is by offering "gap financing," which makes up the difference between what a bank loans and what a developer can afford, Holston says.

Holston says city-assisted projects spread largely unnoticed across the area.

"I think the best compliment for a city-assisted project is you didn't know it existed," she says.

When the department gets attention, it's often for what it didn't do. Two failed projects in a string of questionable deals happened within six months of each other last year.

A deal to renovate the Empire Theater on Vine Street ended with $184,000 of city money gone, a young basketball star-turned-developer on the lam, an FBI investigation, the literal collapse of the theater and fingers pointed at the community development staff and then at Mayor Charlie Luken and Vice Mayor Alicia Reece for pushing the politically popular deal. Finally, Lemmie was reprimanded for deleting council members' involvement from an internal report and Director Peg Moertl resigned.

In November 2002, yet another deal fell through. The husband-and-wife team Scheer and Scheer spent $338,000 they'd gotten from the city to renovate eight buildings near Findlay Market. When the money ran out, the Scheers were living in Utah. Rehab stopped short while the city foreclosed to reclaim the unfinished buildings. Investigations into the department followed.

There have been other blows.

When she first arrived two years ago, Lemmie eliminated overtime and comp time. In this year's budget crunch, non-unionized middle managers' cost of living raises were chopped to half of what other city employees received.

In response, middle managers formed a new union, but the city demanded the exclusion of the Community Development Department. Council later voted to restore middle managers' full cost of living adjustments.

Councilman David Crowley, who chairs the committee that oversees community development, says he called a meeting of the entire department to reassure them that the audit wasn't meant to single out any one person or group.

"A number of people were feeling that they, as kind of the foot soldiers, were going to be blamed for some of the management weaknesses," he says.

Managing the risk
Council seems to want it both ways, employees say: grassroots community development without the risk involved.

"There's no trust," one employee says. "Working together with city bureaucracy is a total anathema to council members and the administration."

They've heard people saying their department is beyond repair.

"If they care that little, lay us off instead of this sneaky criminal investigation, instead of this death by a thousand cuts," one staffer says.

Councilman Pat DeWine agrees.

"I think they ought to start over," he says. "It's not an organization that's performed very well or shown accountability."

Karen Domine, who's worked in downtown real estate for 22 years, takes it one step further.

"I don't believe in city assistance," she says. "It's a waste of time and effort."

The development department is slow, unprofessional and lacks leadership, she says.

But big developers aren't interested in places like Over-the-Rhine and working with small and sometimes novice developers simply can't be as highly efficient, according to employees.

"If the market could address what's going wrong in our neighborhood, we wouldn't need to be there," one says.

"You have to have good internal controls because it's a risky business or we wouldn't be needed," Holston says. "The risk is much greater, so we have to manage the risk. And what you saw last year was a lack of effective management of risk."

Holston acknowledges that morale has been low. But she believes "the 75 people in community development have turned the corner."

The department has "looked at itself and created a new point of view" as well as internal controls, she says. For instance, a committee that reviews loans has added private-sector lenders.

The recent reorganization and merger of several city departments, as well as the creation of Cincinnati Center City Development Corporation (3CDC), a new public-private development partnership, left many people confused about their roles. Holston expects that those details will soon be clarified so a permanent director can be hired.

The department recently appointed its second acting director in six months. During that time it's largely been Holston's responsibility to get the department "shaped up," Crowley says.

The city has no plans to eliminate or downsize the Department of Community Development and Planning, Holston says. That's news to some department employees, who are worried about their jobs and are looking elsewhere.

Holston says she's supportive of the department.

"We are but each other," she says. "The city is made up of workers. The city is made up of employees. It's not an entity unto itself. It is living and breathing and it gets up in the morning and it goes to work and it drives home and has car trouble and it has children who are challenging and it has very successful days and it has days that are unsuccessful." ©

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