Key Players Provide Comments on Housing Corp Funding Request
By FALLS CHURCH TIMES STAFF
July 28, 2010
On Thursday night, the Falls Church City Council will meet in a rare special session to consider an emergency request from the Falls Church Housing Corporation (FCHC) for early release of $1 million of a $2 million loan the City Council approved in March for support of the proposed affordable housing project, “The Wilden,” at 350 S. Washington Street. The request has been made because The Wilden’s sister project, “The McKeever” office building planned for the adjacent property at 360 S. Washington Street, has been unable to obtain the funding necessary to proceed. In order to continue with the project, the FCHC would like to assist in the funding of the McKeever project by purchasing the underlying property at 360 S. Washington Street, thereby relieving the McKeever developer, Bob Young of Jefferson One LLC, of that obligation and allowing him to continue with other aspects of the project.
In response to a request from the Falls Church Times, representatives of the FCHC and Jefferson One LLC have supplied comments regarding FCHC’s emergency request for early release of $1 million of City loan funding. Members of the Falls Church City Council have also provided brief comments of their position on the matter. All comments appear below.
Questions to Carol Jackson, Executive Director, Falls Church Housing Corporation
Jackson: I understand the City Manager is complying with your request to receive documents Steve Rogers used as his talking points in a closed door session with Mayor and Vice Mayor and City Manager laying out our partnership reasons for the request to release one half of the City’s Loan to The Wilden upon Loan Agreement settlement. We will be happy to answer clarifying questions once you have reviewed all materials.
FCT: How will the $1 million that would be diverted from the Wilden be made up?
Jackson: It’s not being diverted from The Wilden, it is part of The Wilden pro forma as the price for parking. It was always to go to 360 construction control, in exchange for a condominium deed for part ownership of The Wilden % of the 360 garage (39 spaces) on the 2 lower levels. That’s why we think this a reasonable request. We truly just need the funds a few months earlier than we would have requested them within the current set of 12A Loan Terms approved on March 22. What we are asking for now is just the first rung in the necessary 360 construction plan ladder. You can’t begin construction until the land changes hands, so The Wilden parking purchase budget item is to be used for that part of the garage construction instead of a slightly later part of the construction work plan. It’s a timing to the City’s funds to solidify the 360 property to begin building the necessary garage that will support the office development to follow.
[Additional comments from Jackson appear in the comments section of City Releases Documents on Housing Corp $1 Million Request.]
Question to Bob Young, Jefferson One LLC
FCT: Can you tell us what has changed from your perspective to make this request necessary? Originally you had planned to purchase the 360 S. Washington Street property, but now FCHC is planning to purchase that property. What has changed, and what will be your role going forward if the City Council grants the FCHC’s request?
Young: Much has changed since March when the Council approved the loan. We have considered and worked on many possible ways to get this building done, from the City occupying a large portion to obtaining a long term lease on over one-half the building to selling the entire building to one user to selling medical condominiums to starting up a Community Development Authority (CDA). One or more of those approaches will yet work, or more likely a combination. We always knew that obtaining a commercial loan in this economic environment would be difficult at best, but that now is our only choice. Under those circumstances, the Wilden Partners need to help us come up with the cash to buy the land so we can borrow the money to build the entire garage. Jefferson Investment Group [Young's company] still will be purchasing the property and building the commercial office structure on a non-profit basis. Nothing has changed in that regard.
Question to Members of the Falls Church City Council
FCT: Do you know what your position will be on the FCHC’s request? Do you have any other comment?
Mayor Nader Baroukh: What is being proposed is not a minor change. This is not an advance of the money already promised but rather it is effectively a new request for funds. FCHC is now proposing to purchase the 360 property. FCHC has not fully explained how they are going to cover other project costs if the City advances the $1 million now. The proposed change will place greater risk on the City and will increase the City’s financial exposure given the likelihood that the McKeever building will not be constructed or will be substantially delayed. When the Council originally approved the FCHC project, we linked the Wilden and the McKeever buildings. These linkages were critical to protect the City’s investments, ensure that there was parking for the buildings, and to reduce the overall costs to the City. The Council and City staff spent countless hours negotiating these linkages and now we are being asked to substantially change and effectively sever these linkages. The City has given FCHC every opportunity to succeed. It is now the responsibility of FCHC and The Community Builders to make the project work within the context of the original agreement.
Vice Mayor David Snyder: The FCHC project as it has evolved to include senior affordable housing, an office building and parking that is adequate for both buildings while providing additional spaces for surrounding commercial activity, is in the public interest. It also makes sense financially, in that we get all of this benefit and value with a City financial participation that leverages the investment of non-City funds that are many times greater than the City’s participation. The timing and substance of this latest request, however, raises questions that need to be answered. Most importantly, while the proposed earlier payment slightly increases the City’s risk, my main concern is whether the project as now proposed, can and will be built. I will need adequate assurances on that most fundamental issue. I will be interested in seeing the relevant financial documents, questioning the representatives of the interested parties, and determining whether there are new measures that could be put in place, if the requested change is made.
Councilwoman Johannah Barry: My deep concern is the position the City is being compelled to accept. We are first in line with risk and last in line with benefit to our citizens. It is unfortunate that the FCHC has developed a large financial shortfall, but I am concerned that for the City to bail out the organization in this way would result in much greater risk going forward. Our efforts to stabilize the City fund balance will be completely undercut, and the taxpayers could see a significant tax increase in the future. I am concerned about stepping in to resolve the FCHC’s financial problems while the City has other large budget pressures.
Councilwoman Robin Gardner: I have been working with our community for the past 10 years to bring affordable housing to our City. We are now at the point where we can realize this opportunity and increase our commercial base through the Wilden and the McKeever projects. The Housing Corporation, due to a change in the market, is asking for half of the the funding we approved in March now so they can meet the financial obligations they committed to, and we as a City committed to, as well. If we cannot work with the Housing Corporation to realize this opportunity, I believe that we will not see affordable housing in Falls Church, and that will truly be a shame for this community and the senior citizens who deserve this new affordable living space.
Councilman Ira Kaylin: I am concerned that the Falls Church Housing Corporation is no longer a “going concern”. The Wilden project has a $1 million funding shortfall. In addition the FCHC has a $2.7 million short term note due next week. According to the FCHC it cannot not meet that debt obligation and requires that the City’s accelerate payment of $1 million in order to continue with the project and prevent the financial collapse of the FCHC. Given the FCHC’s self-created financial stress, it is almost certain that future financial support above and beyond the $2 million originally authorized will be requested. Any future funding requests can only be covered through further budget cuts or tax increases.
Councilman Ron Peppe: I do not have a position yet. I am waiting to hear the discussion at the meeting.
Councilman Lawrence Webb: I have not made a final decision yet. I am trying my best to gather the information that I need between now and Thursday. I will say that I do have some concerns that have not been addressed fully, and I will be trying to get that information.
By Falls Church Times Staff
July 28, 2010
This is a question for Councilman Ron Peppe: Hi Ron. This is Sam Mabry. Just came in from watering and ran into a not so nearby neighbor with kids who was out for a walk and she had a question for you (I am the go between because she was concerned that her identity would make her verbal slap-around target of Mike Gardner. So here it is: “In addition to your citywide Council responsibilities, we also view you as a voice for the schools. I am told that this housing project will cost the city about $100,000 every year in tax revenue. That’s couple of teachers, few aides, etc. With revenues down, tremendous pressure of the school budget, why are you still open to this project? Please respond with a dollar and cents answer; I understand the social arguments—they have all been made.”
FCT: thanks for inviting the comments from these key players. Nice work.
Councilwoman Gardner mentions a change in the markets as the reason for the FCHC needing the $1M sooner. Has there been much of a change in the markets since March?
I know Carol Jackson says that the FCHC buying 39 parking spaces for $1M (over $25k/space) was part of the plan since the current agreement was reached. However, the first highlighted change to the resolution adds, “and 39 parking spaces located at 360 S. Washington Street…” If the 39 spaces were always part of the plan then why weren’t they included in the original agreement?
The original agreement also said that the funds would be released only after construction of the parking was underway (not just having secured loans).
So the original plan must have been for Mr. Young to secure a loan to buy the land and property. Then secure a loan to start building the parking deck – and only then would any of the City’s $2M become available.
I can appreciate the difficulty in securing these loans and I think in fact that was the point of the original agreement. If the FCHC and its partners could put together a plan solid enough for banks to provide financing then the City’s investment would be pretty secure. If not, then the risk would be more than the City Council was willing to take. At least that’s how I’d read it. I don’t see how the requested change by the FCHC doesn’t increase the City’s risk significantly.
One final question, would The Community Builders be willing to put up this $1M? If it’s really just a low risk advancement of the funds that can be reversed in a matter of months then it seems like something The Community Builders should be willing to help out with. Their organization stands to collect some fees later in the process so they have some incentive to make the deal happen. They could put in the $1M now, Mr. Young would then buy the land free and clear, secure his construction loan, and break ground on the parking deck. At that point the FCHC could get the $2M from the City and buy the parking spaces from The Community Builders.
Could FCHC borrow against their existing affordable properties (an equity line) and then pay that back in a few months?
Banks and financial institutions approving loans have no vested interest in this plan, other than getting their money back with interest.
If the banks dont think the numbers work, why should we?
I know that everyone on this board just wants to do what is best for Falls Church City and believe that providing affordable housing is a noble goal. However, in that no other financing can be found for this project and an “emergency meeting” is needed, it suggests to me that this is not a minor change and that this project is not so affordable. Moreover, the City Council just passed a budget that imposed possibly the largest tax increase in Falls Church City, cut the school budget, gutted the library budget, eliminated jobs, and made City employees pay more for their healthcare. The City is plainly not in a position at this time to finance projects that no one else is willing to support. If this project is approved in its current state, I would question the priorities of City Council members that supported such a financially unsound housing project at any and all costs but was willing to impose higher taxes, cut funding for education, and unwilling to support our employees and staff.
Charlie, my understanding is that the FCHC has already borrowed against their existing affordable properties (Winter Hill) – but I could be totally wrong about that.
I re-read Mr. Young’s comments and it is pretty clear that he intends to build a garage. “we can borrow the money to build the entire garage” The building will come later when that funding becomes available.
Give the FCHC one thing – if the City didn’t have them, Falls Church Times would have half the articles, half the comments and 90% less controversy.
I agree with Mr. DuBois. Council members should make their decision in the context of the tax increases and the cuts to schools and city services they have asked us to take on in recent months. There seems to be a mindset that this project has to go forward under any circumstances, yet the city is not in a position to financially support those circumstances. This project should not be too big to fail.
I also think some of the talking points used in city discussions are overblown. The city’s reputation with state agencies and our congressman, not to mention our commitment to diversity, should not depend on a developer’s access to commercial credit.
Future school budget and service cuts vs. the “Ms. Gardner” Building.
$1,000,000 for 39 parking spaces! Stop this now!
It’s not $1 million for 39 parking spaces — It’s a $2 million LOAN to help create 100 affordable apartments for the elderly – Even it was an outright gift — it’s only $20,000 per unit — the city may never have another chance to create that many affordable housing units at that little cost. The project may be flawed (and I dont claim to understand it all), but please dont lose sight of the actual amount of city participation and what would be created………
sorry, need to correct what I just said — I have read it’s 66 apartments. (30,000 in city loan money per unit )
So this new development surfaced immediately AFTER the election.
Um, why not BEFORE the election, so that potential council members might be asked – and express – their views on the subject?
When, exactly, did FCHC managment understand that this new “ask” was going to be required, and when did they first communicate that to council members, city staff, etc.?
Question – There was a 2008 $2 Million no interest loan to FCHC in connection with this project. See http://fallschurchtimes.com/18457/wheres-the-2-million-part-iv/
In March of this year there was still $531,174 still outstanding on that loan.
Was that amount finally repaid?
Maybe Mr Young should go here for his loans: http://tinyurl.com/24saroj As this is the closest car note loan center to the proposed low income housing building, they’re likely to be supportive because of the potential uptick in business from the residents.
Last year we as a city swallowed hard on a tremendous tax increase and enormous cuts to key city services. How can the council put us on such a shaky financial foundation going forward by making this risky investment? The chances of Young and the FCHC not completing this project are high and we as a community can not take the risk. If the council gets this wrong they will subject we the tax payers to a fiscal crises that will make the last few years look like a cake walk. I hope those who feel comfortable taking that risk for all of us will think twice before doing so and review all the facts and the long sordid history of this project. We will be watching.
I just suffered through perhaps the most ridiculous spectacle of a city council meeting ever held in the city — an emergency-must-do-it-now-to-save-the-Wilden Council meeting called, I believe, by 2 members that rapidly got less urgent and resulted in a postponement of action for 2 weeks after 3 Council members who are pushing for a project that the majority of people in the city don’t want and can’t afford couldn’t manage to get the 4th vote to fund the FCHC’s latest gimme . (Please pardon the very long sentence — I’m still wound up from the experience.) That’s a huge win for hypocrisy, even if it was only a draw for the Wilden-at-any-costers.
There was the tired, old, beside-the-point argument that that its really not much money and so very economical per public housing unit — the point is that we can’t afford the risk or the cost, at the expense of critical government programs like schools.
Then there was the spectacle of the assistant city manager opposing the recommendations of the city manager and the city attorney to disapprove the FCHC’s gimme because it is too risky and fiscally unsupportable and, by the way, not in compliance with the conditions in the Wilden financing agreement, itself a model failure of governmental fiduciary responsibility. She apparently sees her duty as running to the FCHC rather than to those of us who are asked to take unreasonable risk and foot the bill. Is that in her job description? Even if she was appearing on her own behalf, rather than in her official capacity, isn’t she still compromised by conflict of interest, given that she was heavily involved in the development of the Wilden financing agreement?
But watching the Council circus for hours wasn’t a complete waste of time. As I listened to the impassioned pleas of the Wilden-at-any-costers, an obvious solution to this entire matter presented itself. The Council Gang of Three and the FCHC Special Interest Group clearly are of the firm conviction that the financial risk is worth taking and the price is worth paying. They should put their money where their loyalties are by ponying up the needed funding from own personal pocketbooks. Mere money appears to mean nothing to them — they must have a lot more money than the rest of us, and nothing better to spend it on, to have developed such strong convictions about the value of the Wilden. And there appears to be a large enough number of at-any-costers so that their per capita share of the cost might be as little as a quarter-million dollars apiece.
Thanks go out to Mayor Baroukh and Council members Kaylin and Barry for your good common sense and commitment to the best interests of the families and taxpayers of Falls Church. And may the gods and goddesses gather poor, conflicted Council member Webb into their loving arms and give him peace and an extra dose of courage. His discomfort was palpable; his obvious instinct to do right by us shows promise.
The mayor and Council members who pointed out that a vote against the FCHC’s latest escalation of the Wilden mess is NOT a stance against assisted housing got it very right. The arrogance of those who equated a vote against the Wilden Gang’s latest gimme with outright hostility to housing assistance was regrettable.
Will smarter, cooler, fairer heads prevail on August 9, the new Wilden emergency-must-do-it-now drop-dead date? Stay tuned. But don’t hold your breath.