In yet another subterfuge to inflate the city’s purported budget surplus, the Elorza administration has inappropriately taken over $1 million from a state-mandated revolving fund that is supposed to cover the costs of housing maintenance and repairs for low-income and insolvent property owners.
Since Mayor Jorge Elorza assumed office, his Department of Inspections and Standards (DIS) has gone all out to impose and collect fines on property owners for violations of the state’s Housing Maintenance and Occupancy Code. As shown in the graph below, the city’s revenues in the category “Inspection Violations (43177)” increased tenfold from $61 thousand in the fiscal year ending June 30, 2014 — the last full fiscal year prior to the Elorza administration — to $637 thousand in the most recently completed fiscal year ending June 30, 2017 . Since Elorza took office, accumulated revenues from inspection violations have grown by more than a million dollars. Rather than depositing the additional million dollars in the state-mandated revolving fund, as required by law, the Elorza administration has instead swept the money into the city’s general fund.
Housing Maintenance Revolving Fund
The Rhode Island Housing Maintenance and Occupancy Code sets up a system whereby each municipality enforces minimum standards on the physical condition and the maintenance of all its dwellings. The City of Providence, in particular, has designated Jeffrey Lykins, the Director of DIS, as its “enforcing officer.” In accordance with Section 17 of the Code (more precisely R.I. Gen. Laws § 45-24.3-17), the City issues a Building Inspection Notice of violation (or “BIN”) to a property owner who, upon inspection of his property, is found to have violated the Code. If the property owner does not correct the violation within 30 days, the enforcing officer can issue a second BIN notice of violation, to be recorded in the land registry. In accordance with Section 18 of the Code, the City is then allowed to charge a civil penalty of $50 per day for each violation. In Rot at the Foundation of the Providence Building Department, I noted how Kevin Mahoney, the Deputy Director of DIS, has been given broad discretion to authorize, reduce and abate these fines, which can run in the tens of thousands of dollars.
In an ideal world, all property owners would correct all violations within 30 days after receiving an initial BIN. The reality, however, is that many property owners simply do not have the resources to correct the violations that the City identifies. Accordingly, the very next Section 19 of the Code authorizes the enforcing officer himself to undertake the necessary repairs when there are serious safety issues and, in extreme cases, to board up, condemn, and even demolish the building. The section also requires the City to offer decent, safe housing accommodations to anyone who is relocated as a result of condemnation or demolition of a structure.
The legal story, however, does not end there. Section 19 of the Code goes on to state:
(e) Revolving fund. There is created a revolving fund for the purpose of supporting the cost of repairs and other corrective action or demolition made by the enforcing officer pursuant to this section. Into this fund shall be paid: (1) All civil penalties collected for violations of this chapter pursuant to § 45-24.3-18. …
Accordingly, the City of Providence must set up a revolving fund to support the “cost of repairs” that Jeffrey Lykins, the enforcing officer, chooses to make on non-compliant properties with serious safety problems. The revolving fund is also supposed to support the cost of providing safe housing accommodations to relocated residents in cases of condemnation or demolition. All accumulated fines collected from second BINs must go into the revolving fund, and not into the City’s general fund . The law makes it crystal clear that this requirement is mandatory, and not discretionary: “Into this fund shall be paid … all civil penalties.”
At least through the end of fiscal 2017, there were no expense categories corresponding to the state-mandated revolving fund in the City’s operating budget, its revenue budget, or its open checkbook. None of these databases had any entry for the allocation or withdrawal of any moneys from this legally mandated revolving fund. If the revolving fund existed, it was in the imagination of the Mayor, his Finance Director Larry Mancini, his City Solicitor Jeff Dana, or some other higher up in the Elorza administration.
Back to the Bowdoin Street Fire
In Rot at the Foundation, Part 3, I chronicled the events leading up to the disastrous, fatal fire at 110 Bowdoin Street on January 6, 2018. I related how the City had condemned the property on May 5, 2015, but apparently never enforced its condemnation order. Section 19 of the Code was precisely the legal provision that the City relied upon when it condemned the property. But this same section required the City to offer decent, safe housing accommodations to anyone who is relocated as a result of condemnation or demolition of a structure.
Let’s connect the dots. The Elorza administration goes all out to collect fines for housing code violations, but it funnels the revenue into the general fund in order to paint a rosier picture of the City’s finances. With the state-mandated revolving fund starved of cash, the City has effectively chosen not to make repairs when there are serious safety risks. It has effectively chosen not to relocate the residents of condemned and demolished buildings. While it could seek repayment of the expenses in court, such legal proceedings take time and many property owners are simply insolvent. Accordingly, the City may look good when it condemns an uninhabitable property, but through its financial manipulations, it has effectively chosen not to follow through on the condemnation. Thus, we had the fatal 110 Bowdoin Street fire two and a half years after the property was officially “condemned.”
Public Policy Disaster
The Bowdoin fire is just one striking example of this public policy disaster. The reality is that a great many property owners in Providence simply don’t have the funds to fix up their buildings. The state law contemplates an equitable public policy solution to this pressing problem: a revolving fund, financed through the fines paid by more fortunate property owners who have the ability to pay. Unfortunately, Mayor Elorza, fixated on his budget surplus numbers, has chosen to flaunt the state law.
In the meantime, the City’s supposed budget surplus for fiscal 2017 seems to have undergone a remarkable disappearing act. Last July, the surplus supposedly exceeded $10.2 million. Then the settlement with the firefighters erased $5.9 million, but somehow an independent audit managed to push the purported surplus back over $5.4 million. Then came the judicial slam by the First Circuit Court of Appeals in the Lori Franchina case, upholding a jury award against the City that, when combined with attorneys’ fees and interest, will lop another million off the Mayor’s coveted surplus. As I documented in The Providence City Law Department Is out of Control, the Franchina verdict has just begun to unmask the millions of dollars in legal liabilities that the City must confront but continues to deny.
And now we’ve lost at least another million, which must go back into the revolving fund that never was, but has to be.
 As part of a public records request, I asked the City for the breakdown of revenues collected by the Department of Inspections and Standards for the first seven months of fiscal year 2018. In response, the City gave me a breakdown that included every category except “Inspection Violations (43177).” It is virtually impossible that the City suddenly ceased collecting fines for inspection violations. During the first seven months of fiscal 2018, DIS had posted 79 BIN notices of violation in the City’s land records.
 The dollar amount that must be put back into the revolving fund may be far more than $1 million. Subsection (e) of Section 19, quoted in part above, further states that “(2) All license fees pursuant to this chapter” should likewise go into the revolving fund. The question is how much of the other revenues collected by the city’s Department of Inspections and Standards are subsumed by this additional provision. Here is the breakdown of all revenues attributable to the Department of Inspections and Standards for fiscal year 2017.
|MISCELLANEOUS FEES (43001)||2,852.90|
|BUILDING INSPECTOR MISCELLANEOUS (43170)||35,992.02|
|STRUCTURE ZONING (43171)||3,636,899.75|
|PLUMBING DRAIN GAS (43172)||342,808.25|
|INSPECTION VIOLATIONS (43177)||637,008.75|
|ABANDONED PROPERTIES REVENUE (43178)||47,400.00|
|BLDG/INSP-BOARDING LIEN REVENUE (43901)||111,617.11|
|MISCELLANEOUS REVENUE (48001)||5,271.47|