Federal officials are at odds over whether the city of Chicago should reimburse the government for $1.6 million in misappropriated Empowerment Zone funds, The Chicago Reporter has learned.

In an audit released Oct. 15, the U.S. Department of Housing and Urban Development’s Midwest District Inspector General found that Chicago inappropriately spent $1.6 million on nine projects and did not properly document whether an additional $241,602 had benefited zone residents.

But another HUD official takes a different view. The audit “overstated the problems that exist within the zone,” said Dennis Kane, coordinator of the Empowerment Zone/Enterprise Community Initiative at HUD’s Office of Community Planning and Development, which oversees zones nationwide.

Kane and other federal officials are now reviewing Chicago’s audit, along with those in Detroit, Philadelphia and Atlanta. By mid-February, they will decide whether Chicago’s audit results are valid and whether it must reimburse HUD for misspent funds, Kane said.

But “we do not feel that we have to pay back the government,” said Lawrence J. Gorski, special assistant to Mayor Richard M. Daley and new chairman of the Empowerment Zone/Enterprise Community Coordinating Council. “The auditors were being far too restrictive,” he said.

The audit identified nine groups, including the Mexican Fine Arts Center Museum, 1852 W. 19th St. Auditors said the museum either spent $650,834 of its $2.8 million grant on jobs and programs that did not benefit zone residents or could not document that funds were spent on residents.

Carlos Tortolero, the museum’s executive director, said he is caught in the middle of a fight between the city and the federal government.

“My contract is with the city, so I have to make the city happy, and the city has to make the feds happy,” he said.

The audit already may have had some effect. On Nov. 9, after 18 months as the zone’s director-special assistant, Avery L. Goodrich Jr. became the second person to resign from the position. Goodrich would not comment. He was replaced by Ronald Carter, director of economic development at the Chicago Housing Authority since 1995. Before that, Carter worked for HUD and other government agencies.

A June 1997 investigation by the Reporter revealed that the $100 million in Empowerment Zone grants created only 283 full-time jobs and that members of the zone council were awarding money to themselves and their friends.

Sixteen months later, a Reporter story found that the city could not document how many new jobs had been created and that the federal government was auditing Chicago’s program.

As of mid-November, the Chicago City Council still had not disbursed $39.3 million of the $51.1 million in grants awarded in the program’s first round. Gorski said the zone council has not yet decided when to request new proposals.

James W. Payne, 68, is a board member of the Kenwood Oakland Community Organization, a Chicago non-profit. He helped shape the city’s Empowerment Zone application. “It started out wrong from day one, and this audit shows that it is doomed for failure,” he said. “It was supposed to be a bottom-up program of reinventing government.”


For more information on Empowerment Zones, visit the following web sites:

The Chicago’s Department of Planning

The U.S. Department of Housing and Urban Development

The complete HUD audit of the Chicago Empowerment Zone

The Chicago Reporter’s Oct. 1998 “Chicago Spending Scrutinized HUD Auditing Empowerment Zone.”