The report could be a blemish on Castro's record as mayor. HUD: Castro's city misused money

San Antonio failed to properly spend funds approved by Congress to combat the housing crisis while President Barack Obama’s expected nominee to run the Housing and Urban Development Department was mayor of the city, according to a 2012 report from the agency’s inspector general.

The report could be a blemish on the record of San Antonio Mayor Julián Castro, a rising star in the Democratic party whose consideration for a spot in the cabinet is seen as a way to burnish his national political profile.


San Antonio was awarded $8.6 million from HUD in 2008 as part of the national Neighborhood Stabilization Program. The city used the money to buy, refurbish and resell homes left vacant after eviction and to also renovate large apartment complexes in the city that were rented out to lower-income tenants.

The HUD IG audited how the money was being spent from 2009 to 2011 and found that city officials had awarded $2.5 million in renovation contracts without a competitive bidding process. Castro, 39, became mayor in May 2009, a job he continues to hold.

The report also found that the city misused roughly $1.1 million when acquiring and fixing properties because some of the properties were not put toward housing lower-income families as required by HUD.

The IG found that the city failed to take certain steps to review the contracts with developers and that officials were “apparently unaware” of certain affordability rules.

San Antonio took action to correct the problems, and the HUD IG was not asked to investigate how the city spent program dollars again after the 2012 report. The report does not mention Castro.

A city spokesperson did not reply to a request for comment on Monday.

“The City of San Antonio places a high priority in ensuring federally sourced funding is utilized in a manner consistent with achieving the programmatic goals of its grant programs while complying with federal, state and local law,” San Antonio Office of Management and Budget Director Maria Villagomez said in a letter included in the 2012 IG report.

Obama is expected to soon nominate Castro for the HUD job, according to people familiar with the discussions, and current HUD Secretary Shaun Donovan will be nominated to run the White House Office of Management and Budget.

If nominated, Castro’s record as mayor will be scrutinized during the Senate confirmation process.

The initial round of NSP grant money was approved by Congress in response to the escalating amount of foreclosures at the height of the financial crisis in 2008.

State and local governments had 18 months to obligate their funds, and a review of past HUD IG reports shows that problems with meeting certain rules for the programs were widespread across the country.

“We got help so late that by the time we received assistance, we had already obligated our funds,” San Antonio officials wrote in a December 2011 report on the program put together by the Federal Reserve Bank of Dallas. “We could have designed a better program from scratch versus learning as we went. So, it would have been helpful if we didn’t have such a short deadline.”