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Since an initial review in August, Yonkers has discontinued its U.S. Department of Housing and Urban Development Section 108 Loan Guarantee program and has begun recouping millions from delinquent borrowers, Inspector General Kitley Covill said Monday.
Under the program, established in Yonkers in 1996, the city issued federal loans to private borrowers who promised to create and retain jobs in the city. Borrowers were expected to repay the city, which would then pay back HUD.
Between 1997 and 2007 Yonkers administered 24 loans, totaling nearly $23 million, for development projects such as a restaurant and office space, a ferry landing and the construction of a plaza. Additional loans were made as recently as 2009.
But in March of 2009, HUD auditors issued a report which found a number of weaknesses in Yonkers’ program, including a lack of accountability to HUD and failures in reporting.
Last summer, Yonkers Mayor Mike Spano requested Covill look into the program after learning that as much as $12 million was still owed by borrowers, money the city would be on the hook to HUD for.
Covill’s initial report, in August, found many of the same issues auditors had found in 2009, including haphazard record keeping, a lack of documentation and disorganized files.
Five months later, Yonkers inspector general followed up on the program with a second review, finding the city had begun to take action to tighten up the program.
Now, in her third report on the Section 108 loans, Covill said the mayor’s office and planning department has improved the way the program is being handled, including freezing the loan program and taking legal action to collect monies already owed.
The city has also hired a budget analyst to service the portfolio and previously ignored bank statements are finally being analyzed, she said.
“The ongoing review reveals improvements in the way the current Section 108 loans are now being handled,” she said.
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