City Council Shuts Down GEORGE Bus Service

By GEORGE BROMLEY
Falls Church Times Staff

August 10, 2010

Yesterday evening the Falls Church City Council voted 6-1 to terminate the GEORGE bus service.  Vice Mayor Dave Snyder cast the sole dissenting vote.  The service, which has struggled for years, barely survived last spring’s budget cuts and was funded only through the first quarter of FY 2011.

Mr. Snyder called the vote ”short-sighted, in both the short and long term, and much more damaging than you can ever imagine.”   The vice mayor, who termed the decision “anti-environment and anti-worker”, saw no possibility of establishing another service in the foreseeable future.   Other members felt that they could no longer support GEORGE, given Falls Church’s financial situation, but hoped that the City would eventually revisit the issue.

Councilman Ira Kaylin viewed the vote against the service as only the first of a series of difficult budget decisions facing the Council over the next two years.  Councilwoman Robin Gardner offered that the bus was “a wonderful idea but one not utilized as we thought it would be or as effective as we hoped it would be.”  She suggested that once the City’s economic development was “in motion” that it could establish a trolley similar to Alexandria’s.

Mayor Nader Baroukh acknowledged that Mr. Snyder had raised a good point, but joined in the vote to end the service.  He noted that the system’s expected service life was now only 2.5 years, “and then we’d be back to where we are [today] as to what to do about buses.”

The other alternatives before the Council were to terminate the 26W route, while maintaining the 26E, or to eliminate 26W and reduce service on the 26E.  Mr. Snyder moved to bring both options to the floor but no one offered to second them.  Ms. Gardner’s subsequent motion to terminate the service was seconded by Councilman Ron Peppe.

The bus will cease operations on Monday, September 27.  As there is no weekend service, the last runs will be on Friday, September 24.

In other business the Council voted unanimously to authorize purchase of land behind Sherrow Avenue that would facilitate the subsequent “daylighting” of a stream running through Hamlett-Rees Park to Tripps Run.  This process will ease flooding in adjacent back yards and along the trail through the park.  Currently the trail from Broad Street to Thomas Jefferson school is impassable after heavy rains.  The 2,900 square feet parcel will be obtained for $43,500.

The Council voted 7-0 to establish the Pedestrian, Bicycle, and Traffic Calming Group. The new board will help develop a plan which will inventory every City street and will outline policies, design criteria, and specific improvements that will further enhance safety, comfort, and access for walkers, cyclists, wheel chair users, and transit riders.

The Council authorized a one year extension of the City’s information technology support services contract and amended the contract to include additional IT project management services on a month to month basis through December 15, 2011. The contract is in the amount of $470,698. The additional services are not to exceed $10,100 monthly. Mr. Snyder voted to abstain on the measure.

Planning Commission chairman John Lawrence was re-appointed to the Library Board of Trustees. Ms. Gardner, citing a tradition that residents can only serve on one City board appointed by the Council, voted against the appointment on the grounds that Mr. Lawrence’s “library hat has made its way into his Planning Commission decisions.”

Assistant city manager Cindy Mester reported that the community center rooms will be closed for maintenance during the last week of August but that the front desk would be open to accept registration activity.  Ms. Mester also noted that according to an ongoing survey the local farmers’ market was ranked No. 1 in the nation for markets of its size.  Effective August 13, Ms. Mester will serve as the acting General Manager of Development Services, following the departure of Suzanne Cotellessa.

The Council’s next scheduled meeting will be a September 7 work session.

Wilden Affordable Housing Project Reported Dead

By FALLS CHURCH TIMES STAFF

August 5, 2010

The Falls Church News-Press reported Wednesday evening that the Falls Church Housing Corporation (FCHC) has announced an end to its efforts to build a senior affordable housing project, “The Wilden,” on South Washington Street.

According to the News-Press story, FCHC Board President Steve Rogers issued a statement blaming the project’s demise on the Falls Church City Council’s failure to accelerate half of a $2 million loan agreed to in March. Under the terms of the loan agreement, the money was to be provided after funding from other sources was secured, but the parties involved in The Wilden were unable to secure all required funding.

In a four hour session last Thursday night, it became clear that three members of the Council, Mayor Nader Baroukh and Council members Ira Kaylin and Johannah Barry, opposed providing the early money, while three others, Vice Mayor David Snyder and Council members Robin Gardner and Ron Peppe, favored it.  The swing vote, Council member Lawrence Webb, decided to neither approve nor reject the FCHC request, instead sponsoring a motion to delay consideration of the early loan request until August 9.  With Snyder, Gardner and Peppe siding with him, Webb’s motion passed, putting the decision on hold for a week and a half.  Kaylin’s earlier motion to deny the FCHC request, which Webb initially said he would support, failed 3-4 when Webb changed his mind in favor of a delay.  Baroukh and Barry voted for Kaylin’s motion, and Webb, Snyder, Gardner and Peppe opposed it.

The decision to delay, however, seemed too much for the project’s fragile health.  A few days after the vote, City Manager Wyatt Shields told the Falls Church Times that the Virginia Housing Development Authority had recommitted $4 million in federal funding originally dedicated to The Wilden.  Some hope existed that the $4 million could be made up with additional tax credits, but the FCHC’s decision to end the project moots that possibility.

The “dagger” to the project, according to the News-Press, was Councilman Lawrence Webb’s comment on the Falls Church Times web site stating that he had “made it clear to [FCHC] that if they are unable to come up with their own funding source that I would not support moving funding earlier than previously agreed to.”

According to the News-Press article, Rogers said that finding other funding source was not an option, and specifically rejected the idea of  using the Winter Hill Senior Apartments, another FCHC property, as collateral.

The FCHC could face difficult financial circumstances as a result of the project’s failure. According to a document Rogers shared with City officials prior to last week’s vote, the organization has significant bills coming due, with little cash remaining after significant pre-development expenses for The Wilden.

The FCHC did not respond to the Falls Church Times’ request for comment on the loss of the $4 million federal funding.

UPDATE: See our story, ‘FULL TEXT: Why Housing Corporation Gave Up on Wilden.’

Council Session Focuses on ‘The Gateway’ and GEORGE

By GEORGE BROMLEY
Falls Church Times Staff

August 5, 2010

The Falls Church City Council conducted a lengthy work session Monday evening, focusing primarily on The Gateway development and options for the GEORGE bus service.  The Planning Commission participated in the first two topics under discussion.

The Gateway, is an Akridge project proposed for the 500 block of N. Washington Street.  Three office buildings constructed in the mid-1980s occupy the site, just inside the City line.

Under Akridge’s proposal, an office building and an apartment house/condominium would be constructed, with overall proportions of 30% commercial space and 70% residential.   As a mixed use development, the project would require rezoning and special exceptions.

One of the special exceptions would be for height, as the proposed office building would be 73 feet, though commissioners Melissa Teates and Lindy Hockenberry said they could accept even higher structures, given the proximity to the East Falls Church metro station.  The development is expected to generate from $561,000 to $881,000 in tax revenue.  Councilman Ira Kaylin stated that this depended upon whether the units were apartments or condos.

Vice Mayor Dave Snyder advised that the Council’s Economic Development Committee had twice discussed The Gateway with Akridge.  Although stating he was very excited about the project, he noted that the ratio of commercial to residential was generally 50-50 in the Rosslyn/Ballston corridor.  He added that the City’s Economic Development Authority supported that proportion and that he saw “the gap” between 30% and 50% of commercial space as an issue.

However, commissioner Michael Kearney characterized the corridor as actually five sub-markets and said that it was “misguided” to see the 50-50 ratio as typical in all sections.  Commissioner Rob Meeks concurred and described the City’s environment as “more Columbia Pike than Rosslyn/Ballston.”

Ms. Hockenberry asked if there was any possibility that the project could “die in [the Economic Development] Committee.”  Mr. Snyder stated that the EDC did not have that authority.   The development, first proposed in 2006 but delayed due to the recession, will involve further negotiations with Akridge before the site plan process begins.

Following The Gateway discussion the Council and the Commission were briefed by Parks Director Howard Herman and City Engineer Bill Hicks on plans to improve the Coe Branch stream flowing through the Hamlett/Rees Park to Tripps Run.  Much of the stream now flows underground through pipes.  In order to reduce downstream flooding and improve the aesthetics of the park, the City first must approve the purchase of 2,900 square feet of land behind Sherrow Avenue before beginning the process of “daylighting” the stream.  The cost of the project is expected to be $590,000, funded primarily through state and federal grants.

The Council alone then reviewed options for GEORGE.  Gary LaPorta of the Greater Falls Church Chamber of Commerce briefed the Council on a survey of Chamber members.  Most of those who responded did not see GEORGE service as having a significant impact on their business.  He felt that the service probably was initiated “too early, before Falls Church reached [its economic] potential.”

There was no support for continuing the present level of two loop service, but most members still seemed reluctant to terminate GEORGE.   The most likely options, if service is retained, would be to discontinue the 26W route while retaining 26E (an annual cost of $63,490) or to discontinue 26W and reduce the hours of 26E ($49,560).   The final decision will be made at the next Council session on August 9.

Acting Chief Financial Officer Melissa Ryman reported on City finances.   Real estate tax receipts are expected to be less than previously projected.  The end of year fund balance now is projected at $4,150,081, or $29,000 below the projection made on July 1.

City manager Wyatt Shields advised that an appeal had been filed against a decision of the Historic Architecture Review Board concerning the tearing down of a house on Grove Avenue.  As a result the Council might have to hold a special meeting before September, although it is scheduled to be in recess until after Labor Day.

A Council retreat was tentatively scheduled for the weekend of September 24-26.

$4 Million in Federal Funds Withdrawn From Affordable Housing Project

By FALLS CHURCH TIMES STAFF

August 3, 2010

Last Friday, July 31, the Virginia Housing Development Authority (VHDA) informed Falls Church city manager Wyatt Shields that $4 million in Treasury Credit Assistance Program (TCAP) funds were being taken away from The Wilden affordable housing project at 350 S. Washington and assigned to a different development.  The reallocation was consistent with the VHDA’s prior advice to the City.  The VHDA notified Mr. Shields that they would defer re-assignment of any of the low income tax credits for the moment and would continue to work with The Wilden Partnership to determine if any other tax credits could be assigned to the project to replace the TCAP funds.

The TCAP funds were an integral part of the development’s financing.  On Thursday, July 29, the City Council met in special session to consider a request from The Wilden Partners to change the terms of a $2 million City loan for the project.  The Partners, the Falls Church Housing Corporation (FCHC) and The Community Builders, asked for the immediate release of  half of these funds in order to finance construction of a garage at an adjacent office building intended for 360 S. Washington, which would provide the required parking for The Wilden.  Approval of the revised loan was necessary by the end of July to assure retention of the TCAP funds.  However, the Council could not reach a decision on the matter and deferred action until Monday, August 9, its final session prior to a recess until after Labor Day.  

TCAP funds were authorized to states in 2009 as part of the American Recovery and Reinvestment Act (ARRA).  Originally enacted under the 1987 Tax Reform Act, the program provides a means to leverage private capital into construction or rehabilitation of affordable housing.  The 2009 Act provided for $2.25 billion in TCAP assistance, $44.25 million of which was allocated to VHDA.

TCAP funds must be used for capital investment.  State agencies (e.g., VHDA) may sub-grant the funds, but the agencies remain primarily liable for compliance with the TCAP requirements.  The funds cannot be disbursed until after there is a written agreement with the project owner and cannot be placed in escrow.

Council Defers Vote on Affordable Housing Project Financing

By GEORGE BROMLEY
Falls Church Times Staff

July 30, 2010

Thursday evening the Falls Church City Council voted 4-3 to defer a final decision on a resolution which would change the terms of  the City’s financial commitment to the Wilden affordable housing project.   Vice Mayor Dave Snyder, former mayor Robin Gardner and councilmen Ron Peppe and Lawrence Webb voted in favor of the motion to postpone a vote until August 9.  Mayor Nader Baroukh and new Council members Johannah Barry and Ira Kaylin were opposed.

The vote came after over four hours of debate and discussion during which City Manager Wyatt Shields and City Attorney John Foster both recommended against the proposal to immediately loan $1 million to the Falls Church Housing Corporation (FCHC) and its partner in the project, The Community Builders (TCB).  These entities, collectively now part of what FCHC representative Carol Jackson referred to as the Wilden Partnership, have requested that half of the previously approved $2 million City loan be extended now, lest essential tax credits from the Virginia Housing Development Authority (VHDA) be lost.

Prior to the vote to postpone, the Council voted down a motion by Mr. Kaylin to deny the resolution to accelerate the payment.  Here the mayor, Ms. Barry, and Mr. Kaylin approved, but the other four members were opposed.

After that vote, Mr. Webb stated that although he had not supported Mr. Kaylin’s motion, he would not vote for the resolution to approve the revised financing.   He then moved to postpone the vote on the measure to the Council’s next scheduled meeting.  This motion was seconded by Ms. Gardner and subsequently approved.

The final effect of the deliberations is that the loan agreement originally approved by the Council on March 22 remains in place, but the City has not consented to the quick release of the funds as requested by FCHC and TCB.  Between now and August 9 those parties will endeavor to obtain additional financing for the complex project, which involves both construction of the 66 unit senior affordable housing project (The Wilden at 350 S. Washington) and an adjacent office building (The McKeever at 360 S. Washington), which will provide garage parking for residents of the apartments.

TCB vice president Rob Fossey began the meeting with a presentation which argued that the requested revisions to the loan agreement were minor and represented only a limited risk to the City.   The funds are needed to allow purchase of the building currently at 360 S. Washington from the estate of Thomas Sawner.  The Wilden partners must close on this purchase in order to assure receipt of the VHDA tax credits.

Mr. Shields stated that when the project was approved he believed that FCHC and TCB would be able to obtain the necessary private financing to allow this transaction.  The anticipation then was that Falls Church would not have to release any funds until after the start of construction.

He expressed concern that the City might have to reduce its fund balance at a time when it is under significant financial stress.  He noted that if the Virginia Supreme Court turns down Falls Church’s appeal of the water litigation decision it will have three days to move $2.2 million from its general fund to the water fund.  [Note: Mr. Shields informed us subsequently that he meant to say 30 days, not three days.] Mr. Shields warned that if  this were to happen when the fund balance is already low the City will have a cashflow problem.

Mr. Foster did not detail his reasons for recommending against passage of the resolution but noted he had submitted a memo to the Council Wednesday which set forth his reasoning.

Following extensive comments from City residents and a brief recess, Mr. Snyder suggested that the Council go into a closed session to discuss “financially sensitive information”  and “contract negotiations” withFCHC, but Mr. Foster advised against the move on FOIA grounds.   Ms. Gardner suggested members meet with Ms. Jackson and Mr. Fossey “two by two”, but the mayor vetoed the idea.

Council recessed again to enable Ms. Jackson and Mr. Fossey to briefly explain their interests to Mr. Foster, but he concluded there were insufficient grounds under Virginia code to allow a closed session.  The Council then engaged in questions and debate.

Ms. Gardner suggested two changes to the resolution, but Ms. Barry was opposed “to anything written on the dias.”  Mr. Webb stated the decision was one of the most difficult he had faced and expressed concern about the possible impact on the fund balance.

Mr. Peppe, recalling his experience as a bond lawyer, saw the arrangement as “pretty clean as these deals go” and considered the proposal ‘the best chance we have to get the commercial development we need and affordable housing.”  Vice Mayor Snyder, who spoke most passionately in support of the resolution, felt that the proposal still served the long-term best interests of the City.

Mr. Kaylin saw the City “in very dire financial condition” and not in a position to assume the additional risk.  Mayor Baroukh regarded dipping into the fund balance as “imprudent financial management.”

Prior to the debate nineteen people addressed the Council.  Eleven spoke against the resolution and eight in favor.  A number of past and present City officials expressed their views, the active members stressing they were speaking as private citizens, not as representatives of their commissions or boards.

Planning Commission chairman John Lawrence stated that he was shocked that the request had been made and saw no reason to believe that other outside financing would be forthcoming.   Richard Sommerfield, a member of the Long Range Financial Working Group, reiterated comments published in the Falls Church Times and questioned FCHC’s solvency.   Former Economic Development Authority member Bruce Swenson saw approval as an abandonment of the Council’s fiduciary responsibility.

Eric Hoffman, a former chairman of the Falls Church Housing Commission felt that the request to advance the funds was not significant and only reflected a change in timing.  Former mayor Dan Gardner saw the project as a unique opportunity and argued that “community values” were at risk if it were not approved.  Former councilman Dan Maller, calling some of the recent rhetoric “overheated”, urged the Council to take a long term view and support a “reasonable risk.”   Bob Loftus-Thun, chairman of the Environmental Services Council called the project “a defining moment for our community and a good investment.”  School Board member Kieran Sharpe stated that the City’s record of supporting affordable housing was not as good as Fairfax’s or Arlington’s and that the financial commitment to the project would not jeopardize local schools.

The Council will hold a work session next Monday, August 2.  The August 9th meeting is the Council’s last scheduled session until September.  The fate of the GEORGE bus system is among the items scheduled for a discussion and vote that evening.

COMMUNITY COMMENT: Taken Aback by FCHC Request

By RICHARD SOMMERFELD

July 29, 2010

This comment is my personal view as a taxpayer and a voter, not as Chairman of the Long-Range Financial Planning Working Group.

I was more than taken aback by the request from the Falls Church Housing Corporation (FCHC) for the City of Falls Church to bail it out of its current financial predicament.  In no way is this a “minor modification” of the terms set forth by the City Council for the Wilden Project.  It is a major change to the terms and to the project risks.  Anybody who understands real estate development would understand that fact and Mr. Young confirmed it in his interview with the FCT.  What we now have here is an admission by the FCHC that it is financially insolvent because it cannot make payment of its $2.7 million note due on August 7.  To be clear, the definition of financial insolvency is when a borrower cannot meet its financial obligations as and when they come due.  It also admitted that it may have to sell assets at a loss to make good on the note.

The FCHC also admits that it is attempting to help the Sawner estate settle its debt to the City.  It goes on to admit that whoever the other “partners” are who invested $750,000 in pre-development work will lose their funds.  The FCHC, for reasons that defy logic, spent $1.2 million on pre-development work when it had neither complied with the very soft terms set forth by the City Council nor had it lined up all of its equity and bank financing.  By way of clarification, a loan from the City does not qualify as equity by normal accounting principles, even for a non-profit.  Now, the FCHC has the audacity to ask the taxpayers of Falls Church for a bailout caused by financial mismanagement and overly optimistic forecasting for the entire Project.  The City would not just be bailing out the FCHC, but all of the parties associated with this project, according to the FCHC memo.

Any assertion that this project ever made financial sense for the City is distinctly contrary to a thorough and well-reasoned analysis prepared by Mr. Mike Novotny of the EDA and comments made by Mr. John Lawrence, Chairman of the Planning Commission, who voted against the project.  It would cost the City at least $100,000 in lost tax revenue–when every penny counts.  If this project made that much sense, perhaps Mr. Young should advance the FCHC $1 million, inasmuch as he would be a benefactor of the total project.

To put the $1 million request into the context of the Schools’ budget, that would be the equivalent of 12 teaching positions plus 2 or 3 support staff.  Down the road, the subsidized cost of at least $100,000 per annum would be the annual equivalent of 1.5 teaching positions.  If we go through the math of the project, it is expected by the FCHC that in 15 or 16 years the City would essentially forgive the $2 million loan.  How many teachers or policemen or firemen does that equate to?

In terms of the financial gimmickry of the FCHC request, if I understand Mr. Rogers’ memo to the City Manager, taxpayer funds will flow from the City to the FCHC and then back and forth between the FCHC and the Sawner estate, with a some portion of the funding maybe returning to the City in some guise to make it appear this is nothing more than a usual and customary fiscal arrangement.  It would also allow Mr. Young to proceed with his development and then recoup $25,000 per parking space from the City.

I think that the City Council would be making a huge mistake taking taxpayer funds that were meant to restore the depleted fund balance and finance operations such as public safety and the schools and redirect funds for 66 subsidized housing units.  The City Manager even stripped the CIP of all but $385,000 of capital expenditure to fund the operating budget.  We just heard from the City Manager that he had approached Davenport & Co., the City’s investment bankers, about going to the debt markets to fund the depleted CIP.  The Assistant Director of Finance has confirmed that tax collections are running $3.5 million behind last year.

After we listened to City employees pleading for their jobs in the Council Chambers (and on the City’s TV station) just 3 months ago, this is a major insult to them and their families.  At the end of the day, the real issue is not whether the City Council would be voting on 66 subsidized housing units in the middle of the commercial district to be funded by depleting the fund balance again, but whether this Council wants to bail out the financial mismanagement of the FCHC and place further strain on the City’s operating budget.

Even if the City borrows the money from a bank, it would be sending the wrong signal to every household in the City that had to accept a 16% hike in real estate taxes to support the City’s operating budget, not bail out an entity that is admitting insolvency.  It is an audacious argument on the part of Ms. Jackson and Mr. Rogers to say that the Virginia Development Housing Authority would turn its back on Falls Church for not funding this $1 million request for an admittedly insolvent FCHC.  The Council needs to call in an independent auditor to examine the finances of the FCHA and its financial controls and not bail out the FCHC.  The City should not the “bailout banker” of last resort for a non-profit that speculates in land development.

Mr. Sommerfeld is a businessman who lives in Falls Church City

Editors’ Note:  The Falls Church Times has invited the Falls Church Housing Corporation to submit a Community Comment making the case for its request in this matter, and we invite others to share their views on this topic or others of importance to the City.  Our comment policy appears in our “About” section.  Please send your submissions to contact@fallschurchtimes.com.

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.

City Releases Documents on Housing Corp $1 Million Request

By FALLS CHURCH TIMES STAFF

July 27, 2010

Today the City of Falls Church released a number of documents relating to the Falls Church Housing Corporation’s emergency request for release of $1 million of the $2 million loan the City Council agreed to in March.

Among the documents released is a draft resolution prepared by City staff for approval of the Falls Church Housing Corporation’s (FCHC) request.  The resolution will be considered Thursday night when the City Council meets in special session for the sole purpose of considering the request.  The draft resolution provides confirmation that the FCHC and its partner plan to use the $1 million “as a part of the funding necessary to acquire 360 S. Washington Street (360) from Mr. [Thomas] Sawner’s estate.”

The FCHC’s purchase of the property at 360 S. Washington Street would represent a significant change in its earlier plan.  Under the earlier plan, “Flower Building” owner Bob Young would acquire the 360 S. Washington property and construct the “McKeever” office building and parking garage there, while FCHC and its partner would develop “The Wilden” affordable housing project at the adjacent property at 350 S. Washington Street.  Young and the Wilden partners would build the two projects under a unified site plan, according to the proposal approved in March.

Another document released by the City is a letter from FCHC partner, Boston-based The Community Builders, asking the City Council “to very modestly amend City Loan Terms of Agreement . . . modifying the timing of the release of one half of the City funds, $1 million, to facilitate construction start for The Wilden, specifically related to acquisition/construction start for the project’s structured parking at the attached McKeever 360 site.”

A third document consists of talking points used by FCHC President Steve Rogers in conversations with City officials last week.  Rogers’ document states that FCHC is using $2 million in existing cash to purchase the 360 S. Washington property, thereby creating a need for an additional $1 million to purchase parking spaces for The Wilden in the adjacent “McKeever” parking garage.  Rogers goes on to say that FCHC will recoup its investment in the 360 S. Washington property” when the McKeever office building is fully developed and sold out.

Rogers also provides a long list of “Consequences of Saying No,” including that the 350 and 360 S. Washington properties will revert to existing use, that $8.2 million in federal monies will be returned, that FCHC likely will have to sell 350 S. Washington at a loss, and that FCHC will have to merge with a larger entity “If yet attractive enough after huge assets loss.”

None of the documents appear to answer the question of how FCHC will fully fund The Wilden project after $1 million currently dedicated for that projected is diverted for another use.  [Ed.  See comment below from Carol Jackson, FCHC Executive Director, on this point, stating that the use of  the initial $1 million would not be a diversion of funds away from The Wilden.]

In total, the following documents have been released regarding the FCHC request.

1)      Draft resolution to approve the FCHC request, to be considered by the Falls Church City Council on Thursday, July 29 – Thursday July 29 agenda, TR 10-30

2)      Letter from The Community Builders to Falls Church City Council dated July 26, 2010 – Thursday July 29 agenda, TR 10-30 attachment 1

3)      Previous City Council resolution from March 2010, approving $2 million City loan for The Wilden affordable housing project – Thursday July 29 agenda, TR 10-30 attachment 2

4)      March 2010 pro-forma financial showing projected financial impact and community benefit of The Wilden affordable housing and The McKeever office building projects – Thursday July 29 agenda, TR 10-30 attachment 2a

5)      FCHC President Steve Rogers talking points presented to City officials last week – document appears below.

6)      An undated FCHC financial statement presented to public officials last week showing The Wilden TW Total Development Sources and Assets: Wilden Assets

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FCHC Chairman Steve Rogers talking points presented to Falls Church City Officials July 21-23, 2010

7-21-10: Critical Path Background and Issues for 350-360 Deals:

1. All Sources for The Wilden (TW) and McKeever (360) groundbreaking are at the ready; including financing for constructing the McKeever garage

2. Cash flow timing for both projects is critical to accomplish 350-360 intertwined demolition and construction phases

3. Mr. Sawner’s widow has made it clear from her accountant and attorney that she is interested and will do all possible to complete the sale of 360 property on timetable suitable for TW settlement on all sources of funding

4. The McKeever garage has commitment for commercial bank construction loan.  Subsequently the bank requires that 360 land be free and clear to be used as collateral for the construction financing the City requires as a condition of its $2 mil Loan Signing Settlement

5. FCHC cash has been used for costly Wilden pre-development, @$1.2 mil

6. the remainder of all FCHC cash assets now must be used to invest, @$2 mil, in 360 land purchase.  There is no other way to get 360 garage financed.

7.  The other source of cash for 360 property purchase is TW Parking Spaces purchase, $1 mil

8. The only eligible Sources (according to federal govt regs) for TW Parking Purchase are FCHC and City Loan $$.

9. Since FCHC’s cash is NOW going to 360 property purchase instead of TW parking, City must release one half of the City’s loan at closing, $1 mil

10. If release occurs all will proceed as planned to break ground on both 350 and 360 properties in early September.

11. FCHC will recoup its investment in 360 property when McKeever Office is fully developed and sold out

Needed from Council Leadership by July 23

1. Agree $1 million of Council-approved Loan funds can be used for TW Parking purchase available at settlement August 2010 to get 360 garage construction underway

2. Stated and demonstrated support to City Manager and Staff to finish all legal and permitting work timely to meet The Wilden Settlement and construction deadlines.

Consequences of Saying No

• Contract Developers of both properties will stop and let go their land purchase deals; 350 and 360 will revert to existing use (both now vacant office needing investment to attract tenants). Existing Site Plans and boundaries in conflict with denser redevelopment by any single owner of each property.
• Wilden partners will return to VHDA $4 mil Federal Tax Credit Assistance Program (TCAP) “Stimulus” funding and $4.2 tax credit investments
• Partners will lose unrecoverable fees, $750,000 pre-development expenses currently advanced 100% by FCHC + addt’l $400,000 in 350 carrying costs/legal fees which will be permanently written off on FCHC balance sheet
• VHDA will write off City of Falls Church for all future deals and potentially for soft funds for homeowner programs
• 350 Short Term Note Payoff, $2.7 mil, is due August 5.  FCHC will need to sell 350, very likely at a loss, to pay off debt 
• Tom Sawner’s estate will probably do the same
• City’s reputation will be harmed, making it politically more difficult to get favorable hearings for City issues. Congressman Moran will be incensed by our failure to perform. Regardless of who is responsible the City will face the consequences
• Opportunities for the addition and possibly preservation of affordable housing units will be lost for foreseeable future
• If yet attractive enough after huge assets loss, FCHC will merge with a larger entity
• After 10 years of failure to provide additional affordable housing, and faced with the loss of existing affordable housing stock, the City’s Vision will need to be truthfully amended to remove diversity as a stated priority

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