Michigan City housing authority labeled 'troubled' by HUD; board outlines recovery steps

The Michigan City Housing Authority Board of Commissioners learned June 25 that the agency has been "officially labeled a troubled housing authority" by the U.S. Department of Housing and Urban Development for the fiscal year ending Sept. 30, 2024, and staff outlined a short-term recovery process.

That designation came during the authority's regular meeting, when the Executive Director told the board HUD's fiscal assessment (FIS) reflected historical performance measured through Sept. 30, 2024 and that the agency must respond to HUD by July 1. "We were officially labeled a troubled housing authority," the Executive Director said, adding that HUD will conduct an assessment and that the authority will negotiate a recovery agreement.

Why it matters: HUD's FIS aggregates multiple program scores and can trigger additional oversight and documentation requirements. At the meeting the Executive Director said HUD evaluates physical condition, financial management, and program administration. Staff reported component scores referenced in HUD's report — a physical score of 33 out of 40, a financial score of 9 out of 25 and a management score of 11 out of 25 — and said some capital-fund obligations were recorded late, which reduced the capital score.

Staff also described a substantial administrative effort to reconcile long-standing accounting items. Finance Manager Tammy Cook presented April figures and explained that staff had identified roughly $1.1 million in historical unearned revenue; after a manual document search the agency accounts were reconciled down to about $79,000 that remain under review and that the auditor will reconcile definitively once the current audit completes. "We went through boxes and boxes of old paperwork until we found most of it," Tammy Cook said.

Board members pressed staff on timing and context. Several commissioners noted HUD's troubled label references a past period and questioned why the agency had only now been labeled despite corrective steps taken since that time. "It's not a reflection of what has happened over the course of the last year or two," Commissioner Fly said in reference to the Sept. 30, 2024 score date; other board members echoed frustration that HUD's reporting often lags current operations.

Staff explained that HUD's scoring and monitoring processes can be retrospective and can produce delayed notifications. The Executive Director said that many of the corrective actions HUD would require were already under way — including stronger unit inspections, more timely obligations of capital funds, and a strategic planning process to evaluate development and repositioning options for older public housing stock.

Operational context presented at the meeting included a Housing Choice Voucher lease-up rate of 61 percent and an agency occupancy rate reported at about 78.92 percent, both factors the executive director and staff said affect management scores and program outcomes. The director described steps to reduce turnover and backlog: placing eligible units in modified (MOD) status when long-term rehabilitation is required, contracting an annual inspection provider (US Inspection Group) to detect and clear deferred maintenance, and preparing a strategic plan with a consultant to evaluate repositioning or redevelopment opportunities.

What comes next: staff have a July 1 deadline to reply to HUD's notice; HUD will then conduct an assessment and the housing authority expects to enter a recovery agreement with specific timelines. The Executive Director said she is optimistic the agency can meet those timelines because many remediation efforts were already underway at the time the FIS data were recorded.

The board did not take a formal vote on the FIS label during the meeting. The Executive Director said she will provide additional documentation to HUD and follow up with commissioners as the assessment and recovery agreement progress.