County mulls plan to assume $40.5 million in Housing Authority debt
May 15, 2009 · Updated 10:18 AM
Kitsap County’s taxpayers would be responsible for more than $40 million of the Kitsap County Consolidated Housing Authority’s debt under a plan that will be up for approval before the Board of County Commissioners at the board’s May 18 meeting.
Key terms of the plan include securing deeds of trust for housing authority properties and ensuring county control over sales of the properties.
The commissioners also will consider approving a policy limiting the county’s ability to enter into contingent loan agreements in the future.
In 2005, Kitsap County entered into a contingent loan agreement requiring the county to loan the Housing Authority money in the event the agency would be unable to pay the loans needed to build the Harborside Condominiums in downtown Bremerton.
In 2004, the county had entered into a similar arrangement for the Poplars Apartments.
These loans have or will shortly retire and because of the economic downturn and implosion of the credit markets, the Housing Authority finds itself unable to restructure or repay the loans.
As a result, the county has been asked to perform on its legal obligations to loan the Housing Authority the funds necessary to pay these debts.
To meet those obligations in a way that minimizes the exposure of the county’s taxpayers, the county would enter into an agreement with Bank of America and the Housing Authority to assume direct liability for the debt the county guaranteed.
This arrangement would give the county direct control over several key assets, including the Harborside Condominiums.
It would also allow the county at least four years to sell the assets.
During that time, the county would be free from making payments on the loan, a key term to the county at a time when it has had to make cuts across the government because of its own revenue shortfalls.
The four-year term would hopefully enable the county to sell off the property during more favorable market conditions, which would reduce any balance it would ultimately need to pay by April 30, 2013.
It also gives the county control over timing, pricing and marketing of the assets.
Other conditions of the financing arrangement include:
• The county would assume $31.09 million worth of the Housing Authority’s Harborside Condominium debt, including the $22.2 million due to bondholders Aug. 1, 2009, ensuring bondholders will be paid in full and $8.89 million in bank loans or lines of credit.
The county would borrow an additional $4.32 million to ensure it can absorb the carrying costs of the condominiums for up to four years – including homeowner association fees, interest payments for the loan and other transaction costs.
• The final $5.09 million represents the debt the Housing Authority incurred in its acquisition of the Poplars Apartments.
The apartments have provided safe housing opportunities for seniors aged 62 and older with extremely low incomes.
The Housing Authority acquired this property as part of the replacement housing strategy for residents at Westpark Public Housing, owned and managed by the Bremerton Housing Authority.
Given its location, situated next to the Central Kitsap Community Campus, the county intends to purchase the Poplars.
The Housing Authority would relocate the seniors to other low-income housing, and the county would work to redevelop the property in keeping with its Central Kitsap Community Campus plan.
• The county would reserve the right to direct and manage the sale of specific properties, including the Harborside Condominiums, the Sinclair Lot and Tree Tops Apartments.
Additionally, the county would retain a property manager with full authority to act on behalf of and direction of the county commissioners and would benefit from any and all rental agreements.
In taking on the Housing Authority’s debt directly, in addition to minimizing the impact to its own core county functions, the commissioners are hoping to ensure the continued viability of the Housing Authority within its core mission of providing affordable housing opportunities.
To that end, it reached a separate agreement with the Housing Authority that ensured the agency would prepare and provide the county with a balanced 2009-10 operating budget, focusing on its core mission, no later than July 31.
Finally, the county commissioners are considering a resolution limiting the county ability to enter into contingent loan agreements in the future.