Santa Paula: Highly Leveraged Low-Income Housing Fund

By Sheryl Hamlin

Item 7: Discussion of the Administration of the Housing Authority Board and
Affordable Housing Trust Funds

Agenda Item 7 on the February 5, 2018 Santa Paula City Council meeting was a reprise of the Affordable Housing Trust Fund discussion at the council meeting on October 3, 2016. Read summary of the 2016 discussion here.

Mr Ramsey Jay, director of the award-winning Santa Paula Housing Authority (SPHA), attended and presented at the 2016 meeting, but did not attend the recent 2018 meeting. Mr. Jay made it very clear in 2016 that in anticipation of funds, he used bridge loans and grants and all projects were highly leveraged.

The “anticipation of funds” of which he spoke resulted from a June 16, 2014 council resolution giving the Santa Paula Housing Authority (SPHA) control of the East Area 1 Housing In-lieu fees. Below is the paragraph from the Development Agreement (DA) codifying these funds:

The fund itself is described as follows in the Santa Paula Development Code:

However, according to the staff report of February 5, 2018, the Affordable Housing Trust Fund has a balance of only $1,448.09.

In the staff report, Deputy Planning Director James Mason explained the chronology of the SPHA, but had no information on the operational aspects or the scope of the SPHA. Neither staff nor council had received the financial reports from the SPHA, nor could staff provide the names of the SPHA Commissioners, which were appointed by council. No SPHA board member was present for the February 2018 council meeting, nor was the Director, Mr. Ramsey.

Mayor Gherardi asked if the SPHA was working on behalf of the city. City Manager Rock said “no”.

Unscheduled Appearance by Fire Chief Rick Araiza

Chief Araiza arrived unexpectedly saying that they were “confusing the whole situation”. Having been an SPHA commissioner for 37 years since 1982, he gave a history of the organization and its work.

Originally, SPHA was founded to administer federal Section 8 housing vouchers only. A third party, non-profit is required to be an administrator for Section 8, he said. They have by-laws showing their chain of command to the federal government.

Starting originally at 200 homes and now up to 550 units, the SPHA provides housing vouchers in the amount of $5,084,274 according to the SPHA 2017 Comprehensive Audited Finanaicial Report (CAFR) which can be downloaded here.

Chief Araiza was very specific saying that former City Manager Fontes approached the SPHA to create a mechanism for accepting and using the in lieu monies to build homes. The Development Agreement (DA) shown above describes payment per C/O (certificate of occupancy), which indicates that monies will be coming in gradually and not in a lump sum.

The staff report says: “On April 14, 2014, the City received a request for consideration to partner with the Housing Authority for the future use of the East Area I affordable Housing Trust Funds.” Who made the request and why?

There have been three projects, said Araiza, where short-term down payments were obtained from the Ventura County Housing Trust Fund (VCHTF). These have been repaid, he said. City appoints the commissioners, he said, but did not provide any names.

Mayor Gherardi said it would have been helpful to have this information in the staff report.

City Manager Rock tried unsuccessfully to end the discussion by saying they will return with more information.

Public Comments

Former Mayor Mary Anne Krause said they did appoint commissioners as recently as 2006. She also said that state law does not require “inclusionary housing”, but that Santa Paula’s Housing Element stipulated it. But inclusionary housing does not allow for rehab housing. Only new stock is allowed, she said. She said the group Santa Paula Together is concerned about the East Area 1 development and in particular the $6.5 million in lieu fee. She also asked council to review the granting of $2,000,000 to the SPHA ahead of the schedule.

Ellen Brokaw, Santa Paula House Farm Workers, explained the history of her organization formed sixteen years ago with a goal of safe housing for all. Listening to Chief Araiza, she said, proved that the city needs to take charge of the housing trust fund monies. And she reiterated that SPHA reports to the federal government, not to the city.

Former council member Laura Espinosa and LULAC board member, said the transparency is weak. There must be an RFP process for the frunds and that council must revisit the June 16, 2014 resolution (included in James Mason’s staff report) giving SPHA control of in lieu fees from East Area 1.

At this point, Mayor Gherardi asked about the SPHA trust fund. Chief Araiza said yes, there are no monies from the city. SPHA went to the county trust fund for the down payments. The $2,000,000 was used as collateral, but not spent. He did not state which financial institution would accept a payment not yet received and with no future date. He also reiterated that SPHA would participate in RFP’s and never said that they would not build farm worker housing, contradicting Laura Espinosa’s statement that Ramsey Jay’s strategic plan excluded farm worker and family housing.

Council Member Hernandez excitedly said that the 2014 resolution was “forced down our throats” by people no longer here. They made the decision that night in 2014.

Rock said that EA1 is breaking ground now so there should be some monies in just over a year from now.

The CEO of the Ventura County Housing Trust Fund, Linda Braunschweiger, explained the VCHTF model, which consists of public, private and charitable monies to provide short-term pre-development gap funding. SPHA has gone to VCHTF three times: $300,000,$250,000 and $300,000 for a total of $850,000. The city of Santa Paula, she said, donated $50,000 and has received the most in funding. She closed saying there was “rarely a fund leveraged like this one”, referring to the SPHA.

Council Member Procter said there should be a separate third party to administer Section 8 different from the in lieu fees, which should not go into the city’s budget. The funds should not be dispersed until there is a pool of funds available. He also asked what is the city’s legal exposure to the SPHA properties.

The council voted 4-1 to return with a new motion rescinding the 2014 motion along with more details on the SPHA.

SPHA 2017 Comprehensive Audited Financial Report CAFR

The CAFR is detailed in reporting monies, but excludes sources of the loans. The report lists $8,649,718 in long-term loan liabilities (including pension liabilities) and $552,928 in short term loan liabilities, but does not list the maker of the loans. The “expendable fund balance” is .2 months, which means that the SPHA could only operate for .2 months without its regular funding.

The SPHA receives $5,705,939 from the federal government for housing vouchers, of which $5,084,274 is distributed. At 550 vouchers, this amounts to $9244 per year per recipient. Administrative costs are $718,762. The report says that SPHA employees are members of CalPERS, but the SPHA data does not appear to be on Transparent California.

Reporting Entity

On page 6 of the CAFR, the relationship between the SPHA and the City of Santa Paula is made quite clear: the SPHA is considered a “primary government….legally separate and is fiscally independent of other state and local governments…. The Authority is a related organization of the City of Santa Paula since the city appoints a voting majority of the Authority’s governing board. The city is not financially accountable for the authority as it cannot impose its will on the Authority … “

SPHA Board

As of June 30, 2017, the Board of Commissioners consisted of the following members: (page 7 CAFR)

From the City of Santa Paula’s archived minutes, Marjorie Fernandez was appointed on November 17, 2008 to a four year term, Lourdes Juarez appointed to fill a two year term expiring in 2013 on September 6, 2011, Heather Wright appointed to a four year term on May 9, 2013, Bob Russell was appointed to his third term of the SPHA in 2001, Philip Caruso was appointed in 2010 to a term ending in 2011 and Ramon Castillo was appointed in 2008 to a four year term. Rick Araiza appears to be the longest serving member having served 37 years.

Summary of Business Activities

The SPHA owns and operates a 22-unit apartment complex, a 6-unit complex, a 4-unit complex, 20-unit complex for retirees and a 6-unit seniors complex, all located in Santa Paula, with another 6-unit senior project in process. Page 7 CAFR.

Auditors Statement

On page 34 of the notes from the auditor, the box labeled “Auditee qualified as a low-risk auditee?” is checked ‘yes’. How can such a highly leverage real estate venture be considered low risk when the entire model of the SPHA’s agressive development is based on the receipt of the East Area 1 in lieu fees?

To watch the video and download the staff report, click here.

For more information on author click sherylhamlin dot com

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