Modesto has become face of federal Neighborhood Stabilization Program

MODESTO -- For better or for worse, Modesto became the face of the federal Neighborhood Stabilization Program, which pumped nearly $50 million into Stanislaus County to help local governments with the foreclosure crisis and provide affordable housing.

The good news for Modesto is that it received $36 million, significantly more NSP money than similar-sized cities affected by the real estate crash.

For instance, in Southern California's Inland Empire, Riverside received $9.8 million and San Bernardino $11.7 million. Closer to home, Stockton received $16.4 million.

The city continues to use the money to build and renovate about 290 units of affordable housing, such as single-family homes and apartments.

Modesto has put the money to work on innovative projects, such as a partnership with the Housing Authority of the County of Stanislaus to build a 32-unit apartment complex and renovate a nearby duplex to provide housing to low-income former foster care children who have aged out of the system.

But the city got caught up in the scandal involving the nonprofit Stanislaus Community Assistance Project, one of its NSP partners. Modesto awarded more than $8 million in NSP money to SCAP, which since has changed its name to Community Impact Central Valley.

The Bee began running stories in May 2011 about questionable spending of government funds by SCAP and the placement of the agency's family members or staff in homes that had been remodeled with federal funds.

By December, the couple who ran the nonprofit — Denise and Joe Gibbs — had been fired, most members of SCAP's governing board had resigned and the FBI had seized the agency's files. No charges have been filed.

In January 2012, the U.S. Department of Housing and Urban Development's Office of Inspector General criticized City Councilman Joe Muratore for accepting a $62,500 real estate commission related to the sale of an NSP property. Muratore and his business partner returned the commission. Muratore called the incident an oversight on his part and said he had not been aware of HUD's conflict-of-interest policy.

In July 2012, the Stanislaus County civil grand jury issued a report criticizing Modesto officials for a lack of oversight and poor management of the NSP. Modesto had reformed the program before the report's release.

Despite the problems with SCAP, City Manager Greg Nyhoff said the NSP's benefits have been felt across Modesto.

"There would have been no jobs created, no affordable housing, no neighborhood stabilization," he said. "If you ask me if it was worthwhile, absolutely. How can you say all the jobs and all the people employed in this community were not worthwhile?"

Nyhoff said one way to understand the NSP's magnitude is to compare it with the Obama administration's 2009 federal stimulus program. Modesto received $36 million for NSP projects, more than twice as much as the $17.2 million it was awarded in stimulus funding to hire police officers, fix roads, retrofit public buildings, help the homeless and for public transit.

NSP funding was distributed in three rounds, with the first and third rounds based on federal formulas. The second round was based on competitive grants.

Modesto received $25 million from the NSP2. Among California cities, only Los Angeles was awarded more: $100 million.

City officials say Modesto received so much NSP2 money because the city was in the epicenter of the foreclosure crisis and staff members had done their homework and knew to include the special housing projects, such as the foster youth apartment complex, in the grant application.

NSP FUNDING

• Stanislaus County: $49.93 million

• San Joaquin County: $25.46 million

• Merced County: $11.19 million

• Total: $86.58 million

Note: The amounts include money received by a county as well as cities within a county. For instance, Modesto received $36 million of the Stanislaus amount, and Stockton received $16.4 million of the San Joaquin amount.

Source: U.S. Department of Housing and Urban Development and California Department of Housing and Community Development

LOCAL NSPFUNDING

• Modesto: $36 million

• Turlock: $1.5 million

• Stanislaus County: $13.9 million

Note: The county received the money as the lead agency in a consortium that includes the cities of Ceres, Newman, Oakdale, Patterson and Waterford.

Source: The cities and county