The city has officially decided to spend federal Covid-relief funding on a project aimed at housing the lowest-income residents in Wilmington. It passed unanimously, but not without some questions from one council member.
The American Rescue Plan Act HOME funds include $2.5 million aimed at sheltering the homeless and other qualifying populations. After a request for proposals last year, the majority of the funding — $2.1 million — is set to go to one project by the Good Shepherd Center (GSC).
It’s a planned 32-apartment building at 3939 Carolina Beach Road, with each apartment designated as permanent supportive housing for the chronically homeless. The city gifted thet property to GSC in 2022 for that project, called SECU The Sparrow — before that, it housed a fire station.
Council Member Luke Waddell had questions about whether the non-profit would actually spend the federal dollars on the project itself, or if it would cover its operating deficit or fundraising efforts with the money.
“I know, first of all, that the Good Shepherd does a lot of good work, despite, I think, our ideological differences on Housing First policy, which I don't intend to rehash at the moment, but I just want to ensure these funds are, you know, going to the specific project,” he said.
He then raised concerns based on Good Shepherd's tax return, which, he said, included $300,000 spent on fundraising efforts, and an $800,000 deficit.
"How are we going to ensure that these funds, since they are ARPA and HUD is involved, that these funds are not going to go to supplementing budget shortfalls and will, in fact, be going towards this project?" he asked.
Staff responded to confirm the $2.1 million will go to construction, and will include substantial reporting requirements.
Representatives of the non-profit weren't available at the meeting to respond to Waddell's query, but sent an email to city staff with more details about their finances.
GSC Chief Finance and Operations Officer Lauren Henderson wrote and explained that Good Shepherd operates other entities that have their own 990 tax return forms.
"The primary driver of the net loss at Good Shepherd was the transfer of $791,578 in Home for Good Capital Campaign funds to Lakeside Partners," she wrote. "These funds—previously held in Good Shepherd’s balance sheet (across accounts at Vanguard, Live Oak Bank, and Truist)—were appropriately reclassified as an expense to Good Shepherd and income to Lakeside in order to support the SECU The Sparrow project." She provided both 990s from both nonprofits for 2023 as evidence.
As for the $300,000 fundraising budget, that represents 4.3% of Good Shepherd's overall budget. According to the Chronicle of Philanthropy, nonprofits spending less than 15% of their budgets on fundraising are considered "excellent."
Additionally, Good Shepherd launched a fundraising campaign in 2022 with a goal of raising $20 million to build or preserve 71 units of permanent supportive housing. In addition to the planned development Carolina Beach Road location, 24 units were planned for Good Shepherd's expanded campus on Martin Street, and Driftwood Apartments were planned for rehab. The Driftwood project was completed last year.
Asked to comment about his questions for GSC, Waddell wrote the following statement to WHQR:
"Good Shepherd’s most recent Form 990 reflected a nearly $800,000 deficit, which, on its face, raised valid concerns. My questions during the meeting were about ensuring clarity for both the Council and the public. This is not something I view as criticism but rather good governance.
The explanation provided after the meeting, clarifying the internal transfer of capital campaign funds to a related entity, as well as clarification from staff that the City’s funds would not be used to supplement the organizations budgetary shortfalls or fundraising efforts were helpful. But that kind of detail should be part of the conversation upfront when significant public funding is being requested.
Ultimately, I supported the allocation of ARPA funds because I believe in the importance of the work being done. Lastly, I would add that transparency and accountability should never be seen as adversarial; rather they are essential, especially when taxpayer resources are involved."
Beyond funding the development on Carolina Beach Road, an additional $350,000 of the ARPA money is going to wraparound services, and $50,000 will go to non-profit capacity building. Those funds are now designated for those purposes, but haven't been attached to any particular agency yet. ARPA Home funds are required to be spent before 2030.
The ordinance ultimately passed unanimously.
