County assumes $3.6 million more of KCCHA debt

The Kitsap County Board of Commissioners Monday night approved taking out a $3.6 million loan to pay off an outstanding debt of the Kitsap County Consolidated Housing Authority that the county guaranteed three years ago.

Prior to the board voting, Olalla resident Rob Daugherty expressed frustration that county taxpayers would have to pay more of the agency’s debt.

“I don’t feel obligated to pay for the (KCCHA’s) mistakes,” Daugherty told the commissioners. “I would like to know what the extra debt is all about and where it came from.”

The county took out a loan of more than $40 million earlier this year to cover KCCHA debt, mostly related to Bremerton’s Harborside Condominiums, which remain largely unsold.

County Administrator Nancy Buonanno Grennan said the $3.6 million loan is needed to cover a line of credit the county guaranteed for the KCCHA in 2006.

“This is a commitment made by a prior board, and I’m not clear why the decision was made,” said North Kitsap Commissioner Steve Bauer. “You’re right to raise your concerns, but there weren’t a lot of good solutions. This is the best solution.”

Central Kitsap Commissioner Josh Brown agreed that the situation was “frustrating, but it’s a legal obligation that we can’t just wish away.”

Brown said the county had “signed agreements” to sell 10 of the 40 condominiums, and in “just past the six months we’ve paid off a quarter of the debt. This (loan) is our last major hurdle.”

He added that he hoped the county could “enact very different policies, so that future boards can’t just sign over the county’s line of credit.

South Kitsap Commissioner Charlotte Garrido agreed.

“This is way beyond frustrating, and in the future, we’re going to have to make very cautious steps forward,” Garrido said. “This is the best possible solution we could have found.”

Grennan said if the commissioners approve, the county will borrow $3.6 million from Key Bank, then pay $9,000 a month until the KCCHA’s collateral, which includes an office building in Siverdale, two fourplexes in Port Orchard, and two vacant lots in Poulsbo, is sold.

“They will also pay us $6,200 a month, which are the lease payments on the Silverdale office building, until it sells,” Grennan said, explaining that while the assets have a $4.1 million value, after debts and costs are subtracted, the county will net $2.8 million, and will need to finance more than $800,000.

The commissioners passed all three action items related to the loan unanimously.

In another item related to the KCCHA’s debt, the commissioners approved giving Mercy Housing “an option to lease” county property and provide housing for low-income seniors.

Mercy Housing representative Alisa Luber said her agency plans to provide “far more appropriate apartments” for the 32 residents currently living in the Poplar Apartments complex in Silverdale, which represents $5 million of the $40 million in KCCHA assets that the county now owns after assuming the agency’s debts.

Luber said her nonprofit agency will use a $5 million grant from the U.S. Department of Housing and Urban Development to build a complex with 60 apartments “set aside for seniors, particularly those living exclusively on Social Security.”

Brown said not only would the residents of the Poplar Apartments benefit from this arrangement, the county would as well.

“This gives us the ability to relocate the residents into a new, first-rate building, then see how the county can leverage the old Poplars building,” he said.

“I’m just really excited — this organization is really solid,” said Bauer of Mercy Housing. “For the dedication of the land, we get 60 units of affordable, comfortable housing.”

Garrido said she also liked the project, but worried that the county was offering the land too cheaply at a cost of only $10 a year.

“That seems really low, and I’m wondering how those terms were reached,” she said. “I want to make sure we’re not repeating the mistakes of the past.”

Luber said the low cost of the land made it possible for her agency to offer such low rents to its residents.

“If we had to borrow money to pay more, we would have to raise our rents,” she said.

Bauer said the county was not losing out in the deal.

“The Poplars is a dysfunctional building that loses money, and we are trading less valuable land (so we can) open up a commercial property that is more valuable that we can turn a profit on,” he said.

Brown agreed, saying “we owe it to the county residents.”

Bauer and Brown then voted to approve the contract with Mercy Housing, but Garrido abstained.

“I don’t want to oppose it, but in the future I would like a bit more say in the details,” she said.

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