Six ways the city has wrecked a vital agency. Two projects that work anyway.

Like most cities of its size, Kansas City gets millions of dollars in federal money to provide safe, secure and affordable housing to its residents. For 30 years, the city used an outside agency, the Housing and Economic Development Finance Corporation, as a middle man to divide federal money and handle housing programs. The HEDFC's no-bid contract was renewed each year while it administered loans, bought and sold parcels of land, and oversaw the development of large multifamily housing projects.

It didn't take an urban planner to recognize that the HEDFC's business model wasn't working. Even before the nationwide mortgage crisis tore through the metro, broken windows and empty lots announced neighborhoods in peril.

A 2004 scandal, concerning two homes that HEDFC rehabbed on Tracy Avenue, shone a light on potential financial wrongdoing, and Kansas City lost access to 1,100 loans and 360 parcels of land when a judge placed the assets of the HEDFC into receivership. On February 1, the city will go to court to try to get the former housing contractor's assets back. How did it come to this, and who's been trying to fix this mess? The mayor, the city manager, various members of the City Council and a supporting cast of city employees star in Six Ways to Screw Up Your City's Housing Program.

Step 1: Blow up your old housing program without a plan to replace it.

Something was majorly wrong with the HEDFC.

After the HEDFC's assets were handed over to David Bahner — U.S. District Judge Gary A. Fenner's choice of receiver — the St. Joseph banker began uncovering the agency's incompetence. For one thing, Bahner discovered that the HEDFC had been operating with no idea how many properties were in its charge. At the HEDFC's last count, presented in court in April 2005, it controlled 174 parcels of real estate. Bahner's count, after four months of searching county records, came to 381.

The HEDFC's plans for the properties, some of which were just little slivers of land or drainage ditches, were unclear. All had been bought with federal money. Kansas City has received an average of $14.2 million in federal housing money every year since 2001. As one source close to City Hall tells The Pitch, "Do you see $14 million worth of housing going on in Kansas City?"

City Manager Wayne Cauthen had a solid argument for severing the city's contract with the HEDFC and filing suit against it: The organization in charge of the city's housing program operated with little to no city oversight.

Then he dissolved the housing department.

"The mind-set of many people in the housing department was that they were another layer of government because they were receiving federal dollars," Cauthen explains. "They didn't believe they had to be under the same city human resources classification. They could go out and buy furniture, they could go do different things because they were receiving federal dollars. I kind of wanted to break that culture away. What I wanted to do, and what is still my intention, is to break the housing department down and build it back up ... after some degree of reform."

But nearly five years and at least two housing task forces later, many of the duties that should be performed by a housing department remain on hold.

Cauthen says he knew the reform process would take at least three years, but he acknowledges that it has taken longer than he expected. The HEDFC's records were in "deplorable shape," he says, and 30 years of haphazard record keeping didn't allow a fast turnaround. Cauthen argues that leaving receivership isn't simple, either; he points out that the Kansas City Housing Authority has been under receivership for at least 15 years.

Councilwoman Deb Hermann, who headed the Neighborhood and Housing Committee between 2003 and 2007, has some choice words for the city manager's approach.

"It's very evident to me that the management of our city apparently doesn't want us to have a housing program," Hermann says. "In five years, we've built the Sprint Center; we've built the downtown," she says. "All these wonderful things we're doing, but we can't put together a housing program? It tells me that we don't want to."

Step 2: Wipe out or ignore institutional knowledge.

Keeping housing money flowing from the federal tap requires staying in the good graces of the U.S. Department of Housing and Urban Development. When Cauthen demolished KC's housing department, he scattered its veteran workers to other City Hall offices. The city's most experienced handlers of complex federal-housing paperwork went out with the department's staff. As a result, once-routine tasks foundered.

Jim Rice, the executive director of Northland Neighborhoods, Inc., and Joanne Bussinger, executive director of Blue Hills Community Services (two community-development corporations that receive HUD money through the city), say their contracts have been delayed as long as six months at a time in the years since 2004. Rice calls this logjam one of the housing program's "symptoms of dysfunction," a sign that city workers covering housing duties are slow even to execute relatively simple filings.

In February 2005, Cauthen hired Stacia Johnson, then a housing-department head in Dallas, as housing administrator. Despite the fanfare that greeted her arrival (she told reporters that her tenure would mark "the end of business as usual"), she lasted about a year and a half before resigning in October 2006, claiming illness due to stress and a "discriminatory and retaliatory" relationship with her supervisor, Tom Coyle, head of the City Planning and Development Department.