Cleveland City Hall must change the way it spends federal grants or risk losing millions of dollars in annual funding for community projects and nonprofits, a new report says.
A 12-page memo from the law firm Taft outlines how the U.S. Department of Housing and Urban Development, or HUD, has flagged issues with how City Council spends millions in Community Development Block Grants.
The report, obtained by Ideastream Public Media on Thursday and shared by Mayor Justin Bibb’s administration with council leadership earlier this week, says that process must change.
“These recommendations and indeed the resulting changes may be difficult to accept because they differ fundamentally from how things have been done in the past, but the City and Council are at a crossroads with their CDBG program,” the report said. “The path that the City and Council choose today will determine the viability and even the existence of future CDBG activities in Cleveland.”
According to the memo, Taft also found that Cleveland did not adequately monitor subrecipients, or organizations that the city gave CDBG funding to. It also spent too many dollars on administrative costs.
The stakes are significant. According to the memo, HUD is expected to conduct a major review of Cleveland's use of Community Development Block Grant funding within the next two years, and findings of noncompliance could force the city to repay previously awarded funds, or result in substantially less federal funding in the future.
Grants are usually awarded each June, so city officials’ goal is to make changes before March 2027.
Each year, Cleveland receives roughly $28 million in grants from HUD, the bulk of which comes from Community Development Block Grants. These dollars are meant for a variety of projects in low- to moderate-income neighborhoods, and are often used to fund Community Development Corporations, or CDCs, and other neighborhood-based nonprofits throughout the city.
Historically, about $7 million was split between Cleveland’s elected council members, who had discretion over how to spend roughly $435,000 in their wards. That, Taft said, is one of HUD’s biggest issues.
The report concluded that the city's current approach has left public involvement in spending decisions "fundamentally deficient and not compliant with HUD's extensive regulatory requirements."
Community Development Director Arin Miller-Tait told Ideastream that HUD has long flagged this as an issue, and so officials sought out Taft to analyze the rules and state clearly what must change in how Cleveland spends these dollars.
Her department has seen turnover, and Cleveland is due to turn in a five-year plan to HUD, which set the stage to start addressing this problem.
In a statement, Council President Blaine Griffin said they just received the report and must do their due diligence.
"Our neighborhoods have distinct and varied needs, and our Community Development Corporations rely heavily on CDBG funding to address them," Griffin said. "Before Council can move forward, we need to work with the CDCs and the administration to understand the impact of these recommendations."
Miller-Tait, during a May council committee meeting, said the main issue is that residents must have a chance to comment on projects, and projects must be submitted to HUD before funding is committed.
Giving each council member an allocation to decide how to spend federal funds doesn’t follow that model, according to the report.
Cleveland can still spend money on community needs chosen by council members, but it has to do so differently, she said.
“If you can tell me before I submit a plan, this is what I want to do and this is how much it’s going to cost, I can make it happen,” Miller-Tait said in May.
Miller-Tait told Ideastream Thursday all the projects council funded with grants in the past were subject to CBDG rules and compliance processes. The biggest change is the city announcing plans, projects and priorities ahead of time and gathering feedback before HUD allocates dollars.
Councilmember Kris Harsh, who previously worked at a CDC, said at the May committee meeting that "the writing is on the wall" and Cleveland must make changes.
"Cleveland is the only city in America that allocates funds the way that we do," Harsh said. "Nobody else does it this way."
In 2025, City Council introduced legislation that would fundamentally change how neighborhood projects are funded. Under that proposal, local tax dollars with fewer restrictions would be allocated to each CDC, and more restrictive federal dollars would be spent in other ways across the city.
That proposal, often called a swap of local and federal tax dollars, has been heavily discussed but has largely sat dormant.
Miller-Tait said how Cleveland funds CDCs must change, but how to make that happen and where funding comes from are still open questions. She said the administration is open to finding new revenue streams for CDCs from local sources.
While the CDBG dollars being flagged mostly went to these local nonprofits, becoming HUD compliant and funding the CDCs are two different issues, she said.
Any changes could fundamentally change how local CDCs operate, as many of the nonprofits rely on these dollars.
Cleveland Neighborhood Progress, an organization assisting CDCs across the city, has advocated for City Hall to fund these nonprofits with local tax dollars for less restrictions than CDBG grants.
Spokesperson Edward Stockhausen didn’t comment on Taft’s memo, but said CNP was deeply appreciative of the work City Hall was doing to solve these issues going forward.
“Cleveland CDCs and the neighborhoods they serve really depend on their leaders to create a new path forward,” Stockhausen said.
