Scott Wedel: Time to dissolve Yampa Valley Housing Authority
June 18, 2013
I am very interested in the troubles of the Yampa Valley Housing Authority. I think affordable housing is an important issue that directly impacts local people's lives. I attended the YVHA board meeting Thursday.
YVHA can claim a couple of successful projects before the Great Recession. YVHA's policy was to have ongoing development projects. If it had been able to receive financing in early 2008, then it would have been in the middle of a $32 million development project when the recession hit locally later in 2008. The consequences of that would have been immediate and would have bankrupted YVHA.
YVHA has been in shambles for years. Its website lacks agendas and meeting minutes for 2013, 2012, 2011 and 2009, its current budget and its current annual report. From the minutes that are available, the agency has been fighting its computerized billing system since YVHA was created. Problems with incompatibilities with its multiple accounting systems were cited in 2012 by then-Executive Director George Krawzoff, causing him to think there were ongoing financial issues before he was fired.
YVHA's current financial situation is that Hillside Apartments is run on a break-even basis and is financially sound. Fish Creek Mobile Home Park is run on a break-even basis but has an unfunded $1.5 million infrastructure repair project. YVHA's Development Enterprise owes more than $100,000 for two Sierra View lots that are worth less than half of their purchase price. YVHA's Development Enterprise owes more than $2 million for the Elk River parcel. YVHA cannot afford the interest payments on that Elk River parcel.
There appears to be no doubt that YVHA could allow the Elk River parcel to be foreclosed. First National Bank of the Rockies could ask YVHA to pay any losses, but because YVHA is a government body, there is no way for the bank to collect that balance.
If the parcel is foreclosed, then there is no future for YVHA. There would be no property to develop, and it would have a negative credit rating and insufficient cash flow from other properties to start a development project. Thus, last fall, it asked for legal advice from a Denver law firm that specializes in municipal debt issues. YVHA received that legal advice Nov. 16.
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That legal advice presents a legal theory that YVHA could be allowed to purchase the Elk River lots for current value. The legal advice also presents some troubles for YVHA because it calls into question the validity of all of YVHA's debt on other properties. From the Denver legal counsel's letter:
"First, the Loan secured by the Deed of Trust constitutes debt and was entered into without advance voter approval as required by the Colorado Constitution.
“Second, the Loan constitutes a multiple fiscal year financial obligation and was entered into without an election as required by TABOR.
“Third, there is no express statutory authority for a multijurisdictional housing authority to mortgage or otherwise encumber property.
“For these three independent reasons, it is our opinion that the Loan, secured by the Deed of Trust, is invalid and therefore unenforceable."
All of YVHA's properties have debts that never were approved by local taxpayers. The YVHA board ignored its own legal opinion for its other properties and applied it only to the Elk River parcel. More than $1 million has been spent by YVHA on debt service after it received legal advice stating its debt agreements were invalid.
In May, the YVHA board decided it would stop making loan payments to First National Bank of the Rockies for the Elk River loan. YVHA released a letter to the Steamboat Springs City Council and the Routt County Board of Commissioners stating, "Unfortunately, although as YVHA has approached these discussion in good faith, FNBR has been unwilling to consider YVHA's restructuring proposals." YVHA's letter mentions numerous times its desire to negotiate and the bank's unwillingness to listen.
But YVHA received a letter from Peter Waller, chairman, president and CEO of First National Bank of the Rockies, that states:
"So far our negotiations have been such that the authority wants the Bank to take a huge loss on our loan and the authority retain all the upside assuming that the value of the property will recover over time, and history indicates that will be the case. Such a proposition is unacceptable to the Bank.
"As I expressed to you in our last meeting, the Bank is willing to work with the authority in a manner that is mutually beneficial. The Bank can provide terms through a new lease/purchase arrangement (subject to a non-objection by our regulator) that may decrease the authority's monthly debt service. We are not in a position to incur loss of principal. Why would the Bank incur all of the temporary loss in value and give the authority all of the upside for future increases in value? That simply is unacceptable."
Thus, Waller's letter clearly states he has considered YVHA's restructuring proposals and states why they have been rejected. First National Bank of the Rockies has negotiated and considered YVHA's proposals. It has rejected them. To gain public support in its negotiations with the bank, YVHA now has taken to misleading the Steamboat Springs City Council, the Routt County commissioners and the public regarding the real state of negotiations with First National Bank of the Rockies.
The disaster that is YVHA is complete. It is administratively incompetent, has incompetent business practices, ignores its own legal advice and misleads the public.
YVHA should be dissolved as a government authority. Hillside Apartments and Fish Creek Mobile Home Park should be transferred to a nonprofit. YVHA is an argument against local government affordable housing efforts. No longer would the city of Steamboat and Routt County give so much money for a good purpose to receive so little in return.