Modesto -- As federal investigators audit how Modesto spent $25 million in stimulus money, they are likely to find extravagant purchases, suspiciously high expenses, allegations of shoddy workmanship and at least one home sold at a deep discount to a city employee.
That's what The Bee has found doing its own review of city files for the Neighborhood Stabilization Program.
From the purchase of a $2,500 designer bathtub to a painting bill that appears to be three times higher than the going rate, there's plenty for auditors to question.
If auditors do a little digging, they will find that one taxpayer-funded home was sold to a Modesto city employee for $37,378 less than it cost. The account clerk also received a discount-rate loan for 100 percent of the purchase price.
At another Modesto home — where nearly $43,000 in taxpayer money was spent on renovations — the new owner said "it was a lousy job."
He said his supposedly renovated home has holes in the sewer line, defective electrical outlets, leaky doors and squeaky floors.
That's not the picture city officials paint when describing the Neighborhood Stabilization Program, which is part of the Obama administration's economic stimulus.
Modesto received $25 million in February 2010 to "purchase and renovate a minimum of 175 housing units."
To date, more than $13 million has been spent on 130 houses and apartments.
"We believe we've been doing the job to the best of our ability," said Judith Ray, deputy director of the city department overseeing the project. "We want these homes to be kind of the shining star in their neighborhoods."
Flaws with house
Gary Freeman laughed at that, saying the rehabbed home he bought on Severin Avenue is no shining star. Taxpayers paid $85,243 to acquire the two-bedroom home and $42,951 to renovate it.
Freeman, 66, was sold the home for $100,000 in April — which was $28,194 less than what taxpayers spent on it — and he got a discount-rate mortgage. Still, he's not happy.
"I'm disappointed," he said. "I thought I was going to get a better built house."
Freeman is particularly upset with his home's sewer line, which is rusted, clogged with roots, punctured with holes and "crumbles like crazy when I touch it."
Freeman wonders how the renovation passed city inspections, considering many of the electrical outlets don't work. He suspects some of the 63-year-old home's structural defects were patched over rather than repaired.
The home is so energy inefficient, Freeman said he can't afford to run the air conditioner.
City officials, however, claim Neighborhood Stabilization Program renovations cost more — and are worth it — because extra work is done to make the homes "green."
"We want to make sure the program has done things right," Ray said. She insisted taxpayer funds are being well spent on items like dual-pane windows and energy-efficient air conditioning units.
Ray said the Neighborhood Stabilization Program is "aggressively competing to prevent the investor purchases that were prevalent" in Modesto because private companies primarily are motivated by profit so they make minimal repairs "with no real investment in the community."
By contrast, Ray said the city requires higher standards. "We put in the best quality products we can at affordable prices."
The city has approved generous renovation budgets — including numerous rehab projects of $100,000 or more.
Expensive renovations
Federal stimulus funds were used to purchase foreclosed homes for nonprofit agencies, including 21 for Modesto's Stanislaus Community Assistance Project and 12 for San Francisco's Mission Housing Development Corp.
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