Money kept from Richmond’s affordable housing fund because city had no plan: OCA

RICHMOND, Va. (WRIC) -- For several years, Richmond's dedicated affordable housing fund did not receive the money it was meant to because no plan was ever put into place to ensure this happened, among other issues, according to city auditors.

On Friday, Feb. 6, Richmond's Office of the City Auditor (OCA) released a report regarding the city's compliance with a law on the books that was meant to provide a funding source for the Affordable Housing Trust Fund (AHTF).

The AHTF was designed to aid Richmond through its ongoing housing crisis by providing "consistent, predictable funding for affordable housing initiatives across the city," as officials said on Jan. 12.

The Richmond City Council passed two ordinances meant to create a steady funding stream for the AHTF in both 2019 and 2021, sourced from both the sale of tax-delinquent properties and the expiration of partial real estate tax exemptions, respectively. However -- as Friday's audit further explores -- it was recently learned that these ordinances were "unpredictable and never fully implemented."

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Richmond leaders discovered this disconnect when the city had to come up with $5.8 million to pay the wrongfully incarcerated Marvin Grimm and discovered that over $9 million had accumulated in the city’s "Delinquent Tax Sales special fund." While this reserve ended up being essential in settling the city’s debt to Grimm, the idea that these funds had sat untouched for so long upset both citizens and councilmembers.

“We need to make sure that we are not passing and leaving legislation on the books that we have no intention of following,” said councilman Andrew Breton during a Sept. 3, 2025 city council meeting, during which this matter was heavily debated.

The opinion of many residents who attended that meeting was that the city's actions had been illegal, with one public commenter saying Richmond had "been breaking the law for a long time."

At the request of the City Council, the OCA looked into the relevant Code Section of Richmond City Code -- as established by the 2019 and 2021 ordinances -- to better understand the law at the heart of this controversy and where things may have gone wrong.

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The report contains information that was up-to-date as of late December 2025. Here's a few of the key findings:

• There was no plan in place to implement the relevant code section. Implementation of this code section was inconsistent -- at least, in part -- because the city had no documented plan, nor related procedures, to ensure it was done.
• The relevant code section itself is unclear. The existing code section is vague. In the case of the Delinquent Tax Sales special fund, it only says that City Council may appropriate "up to $1 million" from the fund. It does not say how often this should happen.
• The Delinquent Tax Sales special fund is at risk of going negative. City auditors found that $3 million in costs are waiting to be paid out of the special fund -- but there's only about $2.77 million in the fund. The city said this deficit may remain an issue for years.
• One of these costs is a recently-promised investment in the AHTF, which has not yet been made. The city vowed to make a $2 million investment into the AHTF in November 2025. However, city auditors found no record of this transfer having taken place.
• The city is proposing using funds that could have gone to the AHTF to revive the Delinquent Tax Sales special fund. Leaders are suggesting using a sum of more than $2.4 million in expired partial real estate tax exemptions -- which, under the code section, could be allocated to the AHTF -- to help relaunch the city's delinquent real estate tax sales program, which 8News previously reported hasn't been utilized in years.

However, city auditors did note that, despite all of this, the city did make notable investments in affordable housing throughout the years when this code section was left largely unused.

Keep reading to learn more about what city auditors learned, their recommendations on next steps and how the city responded.

OCA: Code section wasn't followed because no one knew how

According to the OCA, the city did not have a documented implementation plan for how to carry out the requirements laid out under the ordinances, including how to calculate the amounts of funding that were meant to be set aside for the AHTF. This created several issues and heavily contributed to why the resulting code section's requirements were not met.

Since the passage of the 2021 ordinance, city code has required that the city's Director of Finance annually credit funds relating to the expiration of partial real estate tax exemptions to a special reserve for the AHTF.

However, the OCA found that this only ever happened in fiscal year 2022, to the amount of about $2.47 million. It did not take place in any other year.

"Due to staff and leadership turnover, the OCA could not determine whether the policies were implemented or why additional amounts required by City Code were not credited to the special reserve in other fiscal years," city auditors said.

This $2.47 million was never added to the AHTF and was still in the special reserve at the time of the OCA's investigation.

Additionally, the OCA learned that there were conflicting approaches in how to calculate how much of these expired exemptions should be set aside for the AHTF. The city's financial advisor, a relevant draft policy and the actual calculations carried out for the 2022 credit used one method, while the law as written mandates a different method be used.

These two methods were tested by city auditors and each produces "materially different results."

This, by extension, made it impossible for the OCA to determine how much money the special reserve could have accumulated if payments had actually been made in the several missed years.

Vague language only further muddied waters

The ordinances that the Richmond City Council passed creating these funding sources, which ultimately became adopted into City Code, were unclear in multiple ways, according to the OCA.

The 2019 ordinance associated with the Delinquent Tax Sales special fund, as written, required the city's Director of Finance to credit the fund with "up to $1 million" of net proceeds from the sale of tax delinquent properties after program costs are paid out.

However, the code does not state how often this credit should be applied -- despite city leaders previously claiming these credits were meant to be annual. It also does not state how "up to $1 million" should be interpreted -- for example, as a one-time cap or as a recurring amount.

As a result, no funds have ever been transferred from the Delinquent Tax Sales Fund to the AHTF, despite back taxes amounting to about $15.8 million being collected by the city between fiscal year 2020 and December 2025.

In the absence of these important pieces of information, city auditors could not determine how much money should have been allocated to the AHTF during this time.

This lack of clarity, when combined with the city's absence of a documented plan, "resulted in inconsistent reserve crediting and made it difficult to implement and demonstrate compliance with the City Code requirements as written," the OCA said.

Special fund has still seen use -- and it could go negative

Though no funds from the Delinquent Tax Sales special fund has been allocated to the AHTF, dollars from the fund have still been spent. According to the OCA, since 2019, a total of $10.8 million has either been paid out or promised to be paid out to cover various costs, including:

• $1.7 million for the "Enslaved African Heritage Campus" in 2020
• $1 million for the "Enslaved African Heritage Campus" in 2021
• $300,000 for the "National Slavery Museum Foundation" in 2021
• $5.8 million for the restitution payment for Marvin Grimm in September 2025
• $2 million in funds promised to the AHTF in November 2025

City auditors noted that there is no record that the $1 million allocation for the Enslaved African Heritage Campus, as well as the $2 million promised to the AHTF in November 2025, were ever paid out. Notably, the latter investment was announced right after the restitution payment for Grimm was approved.

As of Dec. 19, 2025, the Delinquent Tax Sales special fund contained about $2.77 million, per the OCA. This means that, if the two payments outlined above were to come out of the fund, the fund would go negative by just over $277,000 -- and that's not accounting for any future costs, or the more everyday costs it continues to incur.

Without auctioning tax delinquent homes, how will the fund be refilled?

8News previously reported that the city hasn't utilized its delinquent real estate tax sales program -- which is tied to the Delinquent Tax Sales special fund -- since 2023. As of July 2025, it was owed a shocking $32 million in unpaid taxes. Some of these property owners haven't paid taxes in decades.

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The program was paused under former Richmond mayor Levar Stoney -- though it's not clear why at this time. His successor, Mayor Danny Avula, told 8News in fall 2025 that his administration was digging into how to restart the program and that it hoped to resume auctioning properties in "early 2026."

Tucked into Friday's report is information on how this process is developing. The Avula administration has set its sights on the $2.47 million sitting in the fund relating to tax exemption expirations, saying that this could be used to replenish the Delinquent Tax Sales special fund and "preserve the program's financial sustainability with any remaining balance being appropriated in accordance to current/future legislation."

"Replenishing the fund will position the City to successfully relaunch the tax delinquency program in 2026, strengthen revenue recovery efforts and support long-term fiscal stability," the city said in the report. "Further, the CAO (on behalf of the administration) intends to coordinate with City Council to obtain the necessary approvals to ensure alignment in delivering in a manner that both benefits Richmonders and aligns with City policy."

Even then, the city expects that the Delinquent Tax Sales special fund will continue to be in a tenous position for multiple years.

"It may take approximately three years after properties are added to the program before surplus proceeds are realized," the city said in the report. "As a result, the fund will operate at a deficit until sufficient revenues are generated to offset expenditures."

Still, $60.7 million invested in affordable housing since 2020

Though the AHTF itself may not have been used as much as intended, the OCA found that many affordable housing-related initiatives saw funds appropriated or committed to them between 2020 and 2026. According to the report, these appropriations amounted to $60.7 million.

The city paid for these initiatives using funding sources like:

• Expired partial real estate tax exemptions and the sale of tax delinquent properties
• American Rescue Plant Act (ARPA) funding
• General-purpose revenues
• General Fund capital funded through general obligation bonds

An additional $20 million in capital bond funding -- $10 million in fiscal year 2027 and $10 million in fiscal year 2028 -- is set to be allocated to affordable housing initiatives.

City auditors' recommendations, leaders' response

The OCA made seven recommendations to the city as to how it can resolve the concerns raised by this report. Five out of the 7 are considered "high priority," or urgent, while the remaining two are considered "medium priority."

Per city auditors, the city should:

1. Take formal action to resolve the gaps left within existing legislation regarding funding the AHTF. Develop clear, concise new legislation, as well as formal policies and procedures.
2. Determine how to appropriately allocate the $2.47 million that has been sitting in the special reserve relating to expired tax exemptions since 2022.
3. Establish a formal quality review process for proposed ordinances and implementation plans.
4. Develop a process that enhances oversight, accountability and transparency regarding how ordinances are implemented.
5. Establish a documented process within the Department of Finance to track approved ordinances relating to financial transfers and to monitor said transfers through completion.
6. Create a separate AHTF within the city's accounting structure to enhance oversight and to reduce the risk of errors or overspending.
7. Establish a minimum operating reserve threshold for the Delinquent Tax Sales fund, implement periodic monitoring of the fund and evaluate if additional funding is needed to ensure approved transfers can be completed without making the fund go negative.

The city concurred with all of the OCA's findings and agreed with all of its recommendations.

All recommendations are due to be completed by the end of 2026, with some due as early as March 31.

City leaders are already in the process of creating new legislation funding the AHTF.

"The new ordinance is intended to not only solidify a path forward on providing necessary resources to Richmonders but clarify statutory requirements, establish a definitive calculation methodology and provide a stronger framework to support consistent implementation and oversight in doing so," the city said in the report.

The city has also already established a separate AHTF within its accounting structure.