Cuomo tries to clean house at HUD

Andrew M. Cuomo, the Secretary of Housing and Urban Development, may be at a crossroads. A year ago, he launched a massive reorganization and management reform effort to save his department. His own political future may well ride on the outcome. "There's certainly an element of 'improve, or die' in the equation," said David Osborne, Vice President Al Gore's favorite public management consultant, who coined the phrase "reinventing government" and helped design the HUD plan.

The 40-year-old Cuomo is in a delicate position. He has to create excitement about an unglamorous task and convince skeptics in the Administration, Congress and the public that the Cabinet's most dysfunctional agency is making a comeback. So he's been putting on an elaborate show to demonstrate early success. But Cuomo also has to be careful not to exaggerate his accomplishments, and thereby give his enemies evidence to support their contention that the overhaul is merely a public relations gimmick.

Thus, when Cuomo on May 6 opened a model HUD storefront office in Washington, D.C., to showcase what is supposed to become a more user-friendly bureaucracy, he made this extravagant observation: "At HUD, the 21st century has arrived ahead of schedule. . . . Here, we can see that we're not just talking about reform--we're making it happen, with new innovations that turn our hopes for a new, more responsive and effective HUD into reality."

In a subsequent interview, however, Cuomo acknowledged that "HUD has further to go. We're not bumping up against perfection yet." He said that while people argue about the amount of progress the department has made, "implicit in those arguments is that we are moving and have progressed. And that's the bottom line."

HUD has always offered a big, slow-moving target for antigovernment snipers. Its responsibilities--housing and community development--are by their very nature extremely expensive and excruciatingly complicated. The Federal Housing Authority (FHA), for example, manages more than $450 billion in mortgage insurance. Many HUD programs are controversial: Voters don't like big public housing projects, but they also don't want poor families living in their neighborhoods. And the agency has compounded its other problems with a history of inept management, heavy-handed regulations, scandal, waste, fraud and abuse.

"We've all lived through the mess that existed" because of poor management at HUD, said Monica Hilton Sussman, a former HUD associate general counsel who now is a partner with the Washington law firm of Peabody & Brown. "You'd send out a letter to the owner [of a HUD-subsidized property] and it's, like, five addresses ago. The left hand and the right hand of the computer system don't even know where the goddamned property is located, who the owner is or who is in charge.

"So, is it the kind of thing that has to be straightened out? Absolutely," she continued. "And I give [Cuomo] a lot of credit for trying to deal with it. Frankly, for a politician, it's not the glitziest stuff to deal with."

Opponents have called for HUD's abolition practically from its creation in 1965. When the Republicans took over Congress in January 1995, the elimination of HUD was high on their priority list, and a notion floated around the White House to offer up HUD as a sacrifice.

But as a result of the reform efforts by President Clinton's first HUD Secretary, Henry G. Cisneros, and Cuomo, those attacks have largely subsided. The budget resolutions passed this spring by the House and Senate leave HUD intact (although House Budget Committee chairman John R. Kasich, R-Ohio, continues to suggest that the Commerce and Energy Departments be shut down). But the threats to HUD haven't gone away.

"In a sense, the Congress has said there is a truce that exists," said Sen. Connie Mack III, R-Fla., chairman of the Senate Banking, Housing and Urban Affairs Subcommittee on Housing Opportunity and Community Development. "But I think it is fair to say . . . that HUD's future frankly depends on whether they can pull this off."

Some of Mack's colleagues are less patient. The day after Cuomo opened the storefront office, Mack held a hearing on the Secretary's reorganization plan, which is called HUD 2020. "I believe [this] should be HUD's last management reform hearing," Sen. Lauch Faircloth, R-N.C., one of the agency's most consistent antagonists, said in his opening remarks. "I hope HUD doesn't think it is going to exist until the year 2020."

Faircloth quoted the dire recommendation that the usually circumspect National Academy of Public Administration (NAPA), a private, Washington-based research organization, made on HUD in 1994: "If, after five years, HUD is not operating under a clear legislative mandate and in an effective, accountable manner, the President and Congress should seriously consider dismantling the department and moving its core programs elsewhere."

"This report is now four years old," Faircloth said. "The clock is ticking, and I don't see much promise on the horizon." (NAPA has not conducted a follow-up study, so the academy staff won't comment on HUD's progress.)

Also in 1994, the General Accounting Office (GAO) designated HUD a "high-risk" department because of poor management and financial practices, inadequate organization and unskilled staff. Subsequent GAO audits acknowledged improvements, but didn't lift the label. Now Cuomo wants HUD 2020--which cuts the department's staff, consolidates its regional structure and modernizes its operations in line with the private sector's--to erase that stain within the next year. That's a very ambitious goal, GAO officials say.

"When we put HUD on the high-risk list, we didn't do it frivolously," said Judy A. England-Joseph, the GAO's director of housing and community development issues. "There are very deep problems at HUD. If [the problems were such] that they could get off the list in a year or 18 months, we wouldn't have put them on."

The Balloon Man

HUD 2020 has a larger agenda than just correcting management flaws. As Cuomo acknowledged in the document outlining the plan, it is also aimed at restoring the department's "credibility--with Congress, with local government and with the customer. They must all believe that HUD has the competence and capacity to perform its functions."

He could have added to that list the Clinton White House, demoralized HUD staff, and skeptics within the housing and community development organizations. Cuomo is trying to use management reform to show that HUD can do more with less, as a way to convince the White House and Congress to give him more. It's not an easy trick.

Cuomo's predicament elicits many metaphors, with those describing a balancing act, a juggler and a tightrope walker among the favorites. Perhaps the most insightful metaphor, however, is the depiction by a former HUD official who compared the department to a balloon stuck in a tree. Cuomo's first task was "to dislodge the balloon so it's floating again. He's accomplished that," said this ex-official, who asked not to be named. "But he doesn't have the foggiest idea how to get the balloon to go where he wants it to. So, it's going to be at the mercy of the winds. And there are a lot of people out there waiting to shoot it down."

The first essential audience that Cuomo had to win over was the White House. Of course Cuomo's Democratic pedigree--he's the son of former New York Gov. Mario M. Cuomo and he's married to a Kennedy (Kerry)--didn't hurt. He's also had a close personal relationship with the Vice President. Indeed, Gore has appeared at several events to plug HUD 2020. But Cuomo also had to convince the White House to make HUD issues--and funding--a priority. That's been a tougher sell.

Cuomo's even had difficulty getting the White House to fill top jobs in his department; many are held by "acting" officials. Yet Clinton's fiscal 1999 budget request, released in February, appeared to demonstrate that Cuomo has won some strong supporters in the Administration. It was HUD's best budget in a decade. Not only would it provide the funds to renew all the expiring contracts for rental assistance, for example, it would also support 100,000 new rental vouchers. (No new vouchers have been issued since 1995.) The housing and urban lobbies cheered.

Later in the spring, however, to pay for an emergency disaster-relief bill, Congress--with the White House's acquiescence--took more than $2.3 billion from the contract renewal pot, promising to put the money back in the fiscal 1999 appropriations bills. The House and Senate Appropriations Committees are beginning to write those bills now. Cuomo isn't likely to get everything he wants, but preliminary Senate subcommittee action would give HUD more than many observers had expected. The subcommittee would replace the renewal money and provide 10,000 additional vouchers.

Meanwhile, Cuomo has been involved in a civil war with Susan M. Gaffney, HUD's inspector general and one of his toughest critics. The battle has become so fierce that housing advocates joke about it. The Feb. 27 issue of the newsletter put out by the National Council of State Housing Agencies, for example, posed this question: "How many people does it take to run a Cabinet agency? How about two: a Secretary to decide things and an IG to tell him later that everything he or she decided was wrong."

Gaffney, who refused to be interviewed, has testified about HUD 2020 at a series of congressional hearings, always finding fault. Before Mack's subcommittee on June 2, she said: "HUD 2020 is a far-ranging and complex reform effort that lacked a sufficient analytic basis at the outset and assumed that material weaknesses in HUD's infrastructure could be corrected at the same time that massive personnel and organizational changes were implemented. Not surprisingly, implementation of this effort has been slow."

Cuomo in the interview responded: "You have some very bright people who actually studied HUD reform objectively and then looked at GAO and IG [criticisms] and say that the IG's and GAO's points make no sense."

In a formal evaluation released on May 6, Osborne, a private-sector consultant who was an adviser to the departmental drafters of HUD 2020, praised the plan as "a model for reinvention in the 1990s." He also took a direct hit at the inspector general: "Our experience has been that because bold, strategic reinvention plans are so different from the traditional audit mind-set of most inspectors general, IGs are rarely the most valuable sources for evaluations of management reform plans."

To fully implement HUD 2020, Cuomo needs legislation to consolidate some programs and allow for some privatization of the department's activities. And congressional action depends on the personal and political dynamics of a New York triangle: Cuomo himself; Sen. Alfonse M. D'Amato, R-N.Y., chairman of the Senate Banking Committee; and Rep. Rick A. Lazio, R-N.Y., chairman of the House Banking and Financial Services Housing and Community Opportunity Subcommittee.

For a variety of reasons that no one can fully explain, these three New Yorkers have been unable to get together on another major piece of legislation that affects the way HUD does business: a sweeping public housing reform bill that has passed both chambers several times in the past four years, but can't make it out of conference committee and to the President's desk. Neither D'Amato nor Lazio would agree to be interviewed for this article. Observers say that Cuomo and D'Amato have made peace with each other; on HUD matters, D'Amato defers to subcommittee chairman Mack, with whom Cuomo has made compromises. Lazio, however, has insisted on his own approach. As one Capitol Hill aide put it, "He's not about getting to 'yes.' "

"The [public housing reform] legislation is what is going to drive this train," said Robert Rigby, the executive director of the Jersey City (N.J.) Public Housing Authority. "How the Secretary organizes HUD is the Secretary's prerogative. We're interested in the results."

Not There Yet

Even Cuomo's fan Osborne acknowledges that HUD 2020 is still a work in progress. "They've got a good plan that they've begun implementing," he said. "But they haven't done it yet. It will take them 5-10 years to do it."

How efficiently Cuomo makes the transition to a modern, streamlined HUD and, perhaps more important, how the department operates in the meantime are major issues that critics such as Inspector General Gaffney keep raising. "Merely having a plan doesn't correct the internal control problem," she testified at the June 2 Senate hearing. "Not until staffing and resources are put in place and [are] working will the department have successfully addressed this issue."

At the heart of HUD 2020 was a magic number: 7,500. To save the department from the threat of abolition during Clinton's first term, then-Secretary Cisneros promised to reduce HUD's staff (which at the time was more than 13,000) to 7,500 employees by 2000. By the time Cuomo was promoted to Secretary in early 1997 from his first-term job of assistant secretary for community planning and development, HUD's staff had been cut to about 10,500.

Cuomo in mid-1997 negotiated an agreement with HUD's unions to reduce the staff to 7,500 systematically, without layoffs, by 2002. Nonetheless, turmoil ensued. Hundreds of the most experienced employees took buyouts; others moved from the shrinking FHA shops to other slots in the agency. But hundreds of others, labeled "the unplaced," remained in limbo. They were guaranteed a paycheck until 2002, but their current jobs had officially been terminated.

"Morale is garbage because people keep leaving and there are not enough people to do the work," said a veteran employee in a HUD field office, who asked not to be identified. "And the unplaced people are sitting around, and don't have real jobs. It's insanity."

By the time of Mack's May 7 hearing, HUD's personnel complement numbered about 9,100 and Cuomo had changed course: He announced that's where it would remain. A few days later, he officially transformed "the unplaced" into "placed." It seemed that 7,500 was no longer a magic number. "We can make the department smaller if we consolidate programs, but that will require congressional action," Cuomo said in the interview. "Until Congress takes action consolidating programs, we will be at this level."

Cuomo's move may calm some nerves at HUD. Union official Tim Coward, president of the National Council of HUD Locals, said, "I think, now that we have put word out that everybody is 'placed,' I would expect to turn the corner on the morale problem."

Now HUD's auditors worry whether the agency can operate smoothly with only 9,100 employees. "We know that they don't know whether 9,100 is enough," said GAO official England-Joseph. "Once [GAO auditors] get in and delve into a program, we discover that the 2020 design doesn't address the real meat of [running] the program. So [HUD managers are] going to realize, 'Oh! You know, we do need more people.' "

HUD 2020's biggest personnel cuts are from the labor-intensive FHA programs that provide mortgage insurance and real estate management for single-family homes. This reorganization consolidated the insurance functions of 81 field offices into four processing centers and opened a single center in Oklahoma City to deal with loans in default. The plan calls for contracts with private firms to handle foreclosures. Management professionals praise these steps as the new way to do business, already adopted by major private financial institutions.

"The question is, can HUD really put a lot of that work out to various partners in [private] industry," said Casimir J. Kolaski, who was director of HUD's housing office in Boston until he took a buyout late last year. "If they can do that, then I think it can work."

England-Joseph isn't so sure. She worries about HUD's ability to supervise these operations. "HUD lacked the capacity to oversee contractors and hold them accountable when HUD had 81 field offices. They just didn't have enough people," she said. "Now that they've centralized to four locations, it's going to be next to impossible."

Others are less concerned about the drop in HUD field personnel than the decline at HUD headquarters. "There's been a real brain drain in Washington," said Dan Burke, vice president of the Chicago Community Development Corp., an affordable-housing development company. "If a matter is highly complex or controversial or needs clarification from Washington, there's really nobody home."

Also in keeping with private-industry practices, HUD 2020 intends to substitute technology for manpower. To beef up the inspection of HUD-assisted multifamily properties, Cuomo has announced the acquisition of handheld computers. Inspectors would enter information into the computer, which would figure out whether the property passed or failed.

"I've never seen a property where you can make a decision like that based on a single number," said Vincent F. O'Donnell, director of development for the Community Economic Development Assistance Corp., a Boston-based agency that works with nonprofit housing organizations in Massachusetts. "It's over-reliance on what I call the spurious precision of a technological instrument that doesn't have in it the capacity [to deal with nuance]."

The HUD 2020 innovation that has received the most publicity so far is the decision to split HUD personnel between "public trust officers," the bureaucrats who run the programs, and locally based "community builders," an elite new corps to deal with mayors, community groups, builders and other HUD constituents. Some old housing hands remain skeptical, questioning whether these community builders will simply be public relations specialists or delay decision making by inserting another bureaucratic layer. "It's not a matter of, are they warm and fuzzy?" said Rigby, the public housing official from Jersey City. "It's a matter of, do they have the authority to make a decision?"

HUD officials concede that 2020 may have some bugs to work out and is certainly not yet a fait accompli. But some of them are excited about its prospects. William C. Apgar, assistant secretary for policy development and research-designate, arrived at HUD last October from Harvard University. "The basic principles of management reform that we're teaching up at the [John F.] Kennedy School [of Government at Harvard]--they're being played out here," he said. "It's not that they invented them here, but they're making them work here."

Cuomo acknowledges that "progress is a relative term." At an April 22 conference sponsored by Government Executive, Cuomo asked: "What did the snail say when he went for a ride on the back of a turtle? WHEEEEEEEEEEEEEEE!!!!!"

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