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County assumes $40 million housing debt
The Kitsap County Consolidated Housing Authority (KCCHA) received a financial reboot on Monday night, when the Kitsap County commissioners ratified an agreement that assumes responsibility for a $40 million debt.
“This has been a challenge to the commissioners,” said North Kitsap Commissioner Steve Bauer, who also serves as KCCHA Board Chair. “We were confronted with several choices, and none of them were good ones. If we hadn’t assumed this responsibility, it would have driven the Housing Authority into bankruptcy, and we still would be on the hook for $29 million.
“It wasn’t this board that created this mess,” he said. “But it was up to us to resolve it.”
The trouble began when KCCHA, which began as a vehicle for low-income housing, sought to build condominiums in downtown Bremerton and convinced the county to guarantee the loan.
The previous commissioners approved the guarantee in 2005, but a series of events led to the current financial straits.
The project was delayed due to faulty windows, and was ready for occupancy just as the housing market crashed.
The loan will be due later this year, and there is no money to pay the debt.
Sales were far short of projections, and the county was unable to sell the condos because current market was below the minimum price allowed by the bank.
The county has negotiated a new loan with Bank of America, also the current lender, which requires interest-only payments for three years.
After that, the county will need to pay on the principle, but the assumption is that sales will pick up before those payments are due.
The loan is structured to allow pre-payment, with no penalties, so that any money from a sale can be applied directly to the principle.
Along with the restructuring of the debt, the commissioners are examining the idea of restructuring KCCHA itself.
Interim Director Deborah Broughton said she expected the agency “to return to its core mission,” which is to coordinate low-income housing.
Silverdale resident Jack Hamilton said the KCCHA board members should not be drawn solely from local elected officials, since it makes it difficult for the commissioners — who all sit on the board — to evaluate themselves.
Bauer said such action was under consideration.
“The Housing Authority never should have entered the business of building condominiums,” said Central Kitsap Commissioner Josh Brown. “Governments should not enter into agreements to develop buildings for non-government entities. The rules are different.
The mission of the Housing Authority has been re-focused to providing quality low-income housing for approximately 2250 seniors, families and special needs residents of Kitsap County county.
The KCCHA Board on Monday adopted a resolution officially withdrawing as Bremerton’s Urban Renewal Agency, stating in a press release, “the KCCHA board now confirms the over-arching goal of the authority is to provide a continuum of affordable housing opportunities, both rental and homeownership, to low-income households.”
On Monday afternoon, the county distributed a question-and-answer document (see window for link) to all employees meant to provide reassurance that the money saved through staff cuts and budget measures was not squandered by the new agreement.
This included the assertion that the situation could not repeat itself, guaranteeing that KCCHA will no longer participate in renewal projects for any jurisdiction and the county commissioners will approve a resolution that limits the county’s ability to guarantee debt of other agencies in the future.
Throughout the process, the action to guarantee the initial loan was attributed to the previous commissioners, none of whom are still in office. But the assertion by one speaker that “none of those who are responsible for this are here today” was incorrect, as former Central Kitsap Commissioner Patty Lent attended the hearing.
“We made what looked like a good decision at the time,” she said. “The market was booming and there was lots of money available. We wouldn’t make the same choice today. But I came here to take responsibility for this action, and to tell the current board that they are on the right track.”
After the meeting, Bauer approached Lent, greeting her with a hug.
“Thank you for coming,” he said. “That took a lot of courage.”