At last night’s Davis City Council meeting, the City Council announced that they had unanimously voted in a closed session meeting to continue to move towards foreclosure. That attempt has been complicated by legal maneuverings as we reported last week by lawyers for Twin Pines Cooperative Foundation who have filed for involuntary bankruptcy of DACHA.
They have also added the city of Davis to their ongoing efforts to litigate against the city. The Vanguard learned last week that Councilmember Stephen Souza attempted to put an end to conflict between DACHA and Neighborhood Partners and Twin Pines.
Mr. Souza met with Cat Huff, the current President of the DACHA board along with David Thompson, President of Twin Pines and Luke Watkins representing Neighborhood Partners. At this point in time, the parties have not agreed to settlement, however, Mr. Souza indicated, “The framework is still on the table as far as I am concerned.”
All parties have agreed to allow this framework to become public.
1. NP agrees to compromise its judgment at $300,000, as a fixed and final sum that will not be increased by interest. The $300,000 judgment would be payable as follows: DACHA agrees to ask city to provide half of the reserve fund not to exceed $143,000 to pay NP up front. DACHA agrees to add between $50 and $100 per unit per month not to exceed the maximum affordable carrying charges to pay NP over time until full payment of the $300,000. (Note NP already obtained $57,000 when it attached DACHA’s bank accounts.) At 20 units and $50 per month, NP would get $1000 per month. And would be paid off in little over 8 years.
2. NP agrees to full waivers and releases against DACHA, the city and the agency.
3. Twin Pines agrees to dismiss its lawsuit with prejudice and agrees to full waivers as set forth above. If necessary, DACHA could agree not to seek a change from the limited equity format for the next 3 years, at a minimum. This, of course, does not mean that DACHA would change its format, that the City would approve a change or that the Attorney General would approve a change.
4. Agency agrees to release the requested reserve money and to work with DACHA to put loan back in good standing. Sale in foreclosure would be canceled upon execution of formal settlement. It would be postponed if there were agreed upon deal points.
5. All parties agree not to disparagement each other (bygones are bygones)
6. Joint statement re settlement.
If DACHA fails to pay NP over time, NP can enforce this settlement.
There would not be any additional investigation into past actions or allegations.
DACHA also signs waivers and releases, as does the city/agency.
DACHA members have a short period of time to get back in good standing (90 days, for example) or DACHA will pursue remedies, including eviction.
Representatives from Twin Pines Cooperative Foundation have rejected this framework on several grounds. On Tuesday, the Vanguard received a statement from Louis Gonzalez, attorney for Twin Pines who said, “The deal was unacceptable to TPCF [Twin Pines Cooperative Foundation] because there was no assurance that the LEHC [Limited Equity Housing Cooperative] would proceed beyond three years and no way for TPCF’s concerns about DACHA’s corporate misconduct to be remedied let alone come to light or TP being re-named the charitable beneficiary. Our goal was to have a viable, properly running LEHC and the City’s offer was to buy off NP at TPCF’s concerns expense.”
According to Cat Huff, President of the Board of DACHA, “In October the membership of DACHA voted in a new Board. This current Board of DACHA recognizes the debt it owes to Neighborhood Partners due to the judgment award. We have attempted several times over the past few months to get an offer onto the table and begin settlement discussions.”
She continued, “Recently Stephen Souza proposed the Framework for Settlement. In several meetings over a recent weekend NP and DACHA were generally able to find some possibilities which would allow DACHA to pay off the judgment over several years.”
Ultimately she said “We were, however, unable to come close to resolution in the Twin Pines matter and discussions ended.”
She concluded, “Mr. Souza’s Framework states in item number 3 that “Twin Pines agrees to dismiss its lawsuit with prejudice…”. Twin Pines is unwilling to dismiss.”
Commentary
From the standpoint of the citizens of Davis, I do think that we need to know what happened and to the extent that this particular deal precludes the public from that knowledge it is problematic. From that stand point the idea that “There would not be any additional investigation into past actions or allegations,” is not only problematic but also potentially unenforceable.
In fact, it would seem to me that a basis for a settlement from Twin Pines standpoint could be the request that an independent party look at what happened and issue a public report. As part of an agreement, Twin Pines and Neighborhood Partners would have to agree not to sue based on the results of the investigation. That would satisfy the public’s need to know while protecting the city litigation.
The second point is more of a question, the lawyers from Twin Pines object to the settlement in part on the grounds that there is no assurance that the LEHC would proceed beyond three years. It is the contention of David Thompson that it would not be legal to shift DACHA from an LEHC to any sort of private ownership. If that is the case, it is unclear what the objection is to #3.
Item #4 concerns me somewhat as it suggests that the threat of foreclosure is being used as leverage against Twin Pines and to some extent Neighborhood Partners to obtain a settlement. Despite the unanimous support by the council, I believe that the city’s loan was not in jeopardy and they could have worked longer to get a settlement. Foreclosure should have been last resort and I’m not sure last resort is there yet.
I do agree there needs to be a settlement, the current path is not a good one and in the end everyone will lose if it plays out. However, I am still concerned that the city is trying to hide from the public what happened. If the city has done nothing wrong, then by all means let us know. This framework could be used to prevent the city from being sued. If that happens, what does the city have to lose?
—David M. Greenwald reporting
“This framework could be used to prevent the city from being sued.”
IMO, there is little benefit to a public, independent investigation. The city manager and Council should be well aware by now of what “corrections” (oversight, procedures and personnel) need to be made and have no interest, if you dismiss nefarious conspiracies, in perpetuating any system failures that may have contributed to this situation . A public investigation opens up a future litigant “pandora’s box” even if Twin Pines Foundation does agree to waive its ability to sue.
DMG: “If the city has done nothing wrong, then by all means let us know.”
The city did let you know via Bill Emlen’s Op-Ed piece “what happened” from its perspective. You and NP just happen to find the answer unsatisfactory. It sounds to me unless the city “fesses up” to some type of wrongdoing, neither you nor NP will be satisfied with any answer they give.
IMHO, where the city went wrong, was in not doing due diligence in the first place, in investigating the original business model proposed by NP – which the city has admitted was not a good business model in hindsight. So in effect, the city has done a mea culpa…
Elaine:
You suddenly believe Emlen? Moreover, I’m not interested in the city’s perspective, I’m interested in the truth.
David: I’m not interested in the city’s perspective, I’m interested in the truth.
I’m much more interested in evidence, which will ultimately be presented in a Court or Courts, and have no use for speculation. Period.
A blog that doesn’t speculate…sounds boring, frankly
An informed blog, maybe. But plain shilling for one side? Um, no.
TPCF is interested more in the information about how this happened.
TPCF does not know the present count on how many lawyers the city has paid but public funds from the City of Davis have paid about 20 different lawyers to work on DACHA. TPCF is a small Davis based non profit trying to get California law upheld. TPCF funds development of cooperatives throughout the US. We’ve never had any of our other borrowers associated with such allegations or so high a public cost.
TPCF’s board supported moving the issues to Federal Court at this time.
TPCF had asked DACHA and the City to not proceed with foreclosure so that all the parties could talk. We were making progress but the Council cut off the efforts.
TPCF has asked DACHA and the City to follow state law on the dissolution of a cooperative. The law as we see it is not being followed. (see post)
Has the City provided notice, held a hearing, and provided a report to the Attorney General’s office as required by law.
817.2. The procedure for the dissolution of a limited-equity housing cooperative or workforce housing cooperative trust that receives or has received a public subsidy shall be as follows:
(a), the city or county shall adopt a resolution approving of the dissolution and make a finding that the dissolution plan meets the requirements of state and federal law, meets the donative intent standards of the United States Internal Revenue Service, and is free of private inurement …
TPCF will be asking the Federal Court to look at the evidence that shows that according to the bylaws the DACHA Board members were ineligible to serve.
TPCF will be asking the Federal Court to look at the fact that TPCF was never notified of the four vacant sponsor sears as it was required to do by the bylaws.
TPCF will be asking the Federal Court to look at a board composed of ineligible board members (according to the DACHA bylaws) borrowing $4 million in public funds from the City of Davis that are governed by California’s State Redevelopment Law.
TPCF will be asking the Federal Court to look at the City Attorney’s response to Council that there were “no encumbrances” when $200,000 in public funds (DAVIS Redevelopment Agency) was distributed to DACHA members. We have asked the City to show us in the documents when it was that there were no encumbrances?
TPCF will be asking the Federal Court to look at the allegations in the suit relating to Corporations Law. Davis Sterling Act, self-dealing transactions, Cooperative Law, DACHA bylaws and Articles, etc.
FIRST AMENDED COMPLAINT FOR:
1). VIOLATION OF CALIFORNIA HEALTH AND SAFETY CODE §33007.5;
2). BREACH OF FIDUCIARY DUTY;
3). DECLARATORY RELIEF; AND
4). UNJUST ENRICHMENT
You can see many of the documents at
http://sites.google.com/site/itsthelawdacha/home
David Thompson, President, Twin Pines Cooperative Foundation
Louis Gonzalez, Attorney for TPCF wrote, “The deal was unacceptable to TPCF [Twin Pines Cooperative Foundation] because there was no assurance that the LEHC [Limited Equity Housing Cooperative] would proceed beyond three years and no way for TPCF’s concerns about DACHA’s corporate misconduct to be remedied let alone come to light or TP being re-named the charitable beneficiary. Our goal was to have a viable, properly running LEHC and the City’s offer was to buy off NP at TPCF’s concerns expense.”
AB 1246
817.2. The procedure for the dissolution of a limited-equity housing cooperative or workforce housing cooperative trust that receives or has received a public subsidy shall be as follows:
(a) The city, or the county for any unincorporated area, in which the limited-equity housing cooperative or workforce housing cooperative trust is located, shall hold a public hearing. The cooperative or trust shall pay for all costs associated with the public hearing.
(b) The city or county shall provide notice to all interested parties. The notice shall be given at least 120 days prior to the date of the hearing. The city or county shall obtain a list of all other limited-equity housing cooperatives and cooperative development organizations in the state from
the California Center for Cooperative Development, if the list exists, and provide notice to all of the entities on the list in an effort to create a merger with an existing limited-equity housing cooperative or workforce housing cooperative trust. The notice shall be mailed first class, postage prepaid, in
the United States mail.
(c) If the dissolving limited-equity housing cooperative or workforce housing cooperative trust merges with an existing cooperative or trust, to the extent possible, the merger shall be with the geographically closest cooperative or trust.
(d) If the dissolving limited-equity housing cooperative or workforce housing cooperative trust does not merge with an existing cooperative or trust, both of the following shall occur:
(1) Upon completion of the public hearing required pursuant to subdivision (a), the city or county shall adopt a resolution approving of the dissolution and make a finding that the dissolution plan meets the
requirements of state and federal law, meets the donative intent standards of the United States Internal Revenue Service, and is free of private inurement, which includes, but is not limited to, a prohibition on any member receiving any payment in excess of the transfer value to which he or she is
entitled pursuant to subdivision (b) of Section 817.
(2) The city or county shall forward all of the information and written testimony from the hearing to the Office of the Attorney General for the Attorney General to consider as part of his or her ruling on the dissolution.
817.3. Each entity named as a sponsor organization of a workforce housing cooperative trust formed pursuant to Section 817 shall have the legal standing of a member unless it revokes, in writing, its sponsorship. 817.4.
(a) In any action instituted on or after January 1, 2010, against a board of directors and its members based upon a breach of corporate or fiduciary duties or a failure to comply with the requirements of this chapter, a prevailing plaintiff may recover reasonable attorney’s fees and costs.
(b) If an organization formed under this chapter uses public funds, it shall not use any corporate funds to avoid compliance with this chapter or to pursue dissolution if the intent or outcome is for some or all of the members to receive any payment in excess of the transfer value to which he or she is entitled pursuant to subdivision (b) of Section 817.
“I’m interested in the truth!(my exclamation point added)
This is NOT the melodramatic finale of “A Few Good Men” where Tom Cruise exposes the truth, clearing his clients of murder. Almost daily repetition of David Thompson’s legal brief could, in all probability be countered by an at least equally legally arguable narrative if the city’s attorneys wished to participate in such an exercise. There is,most likely, no absolute truth here, but rather two parties in a potential civil action about $$$ with one hoping that his blog comments here will inflame public outrage that will improve his negotiating position.
The Dissolution process is a fairly reasonable one that if pursued I believe would end up with good results all round.
When the laws and laws have been broken it is hard for TPCF to look at a settlement that assures TPCF that the law will be followed in the future. Why not follow the law now and if it was followed then there would be much more faith in the law being upheld next time.
TPCF has provided background materials for our side of the story. For example, the City will not confirm what they know, nor answer many of the questions nor show evidence that there were no encumbrances.
We are talking about public funds that belong to all of us.
David Thompson, TPCF
A City of Cooperatives deserves some good faith.
David Thompson, Twin Pines Cooperative Foundation
“IMO, there is little benefit to a public, independent investigation. The city manager and Council should be well aware by now of what “corrections” (oversight, procedures and personnel) need to be made and have no interest, if you dismiss nefarious conspiracies, in perpetuating any system failures that may have contributed to this situation. A public investigation opens up a future litigant “pandora’s box” even if Twin Pines Foundation does agree to waive its ability to sue.”
This is the same sort of logic that that the city used to deflect calls for an investigation into the NewPath situation.
With respect to keeping the investigation behind closed doors in order to help avoid future litigation, how do you square that position with the fact that a sitting CC member (Sue Greenwald) has been publicly debating the DACHA issue on this blog.
Ishmael: There is no “investigation behind closed doors”. The City has had many open session meetings where we have publicly discussed DACHA and explained our actions. Many documents are publicly available. City Staff has published an op-ed piece explaining the background behind the unanimous council decision to foreclose. The only thing going on behind closed doors is discussion pursuant to current litigation and real estate transactions, as is customary.
I am not against a third party investigation because of fear of litigation. Ths is the concern of an anonymous blogger, not of mine.
I have studied this issue exhaustively, and I don’t feel that we need a “third party” investigation of this situation any more than we need a “third party” investigation of the hundreds of other decisions that we make.
Sue: You seem to be projecting your opinion of davisite2’s position on me. I merely asked how that individual could rationalize their public investigation = pandora’s box rhetoric with the fact that you are actively debating the issue on this blog. If there was a legitimate need for the city to go silent to avoid future litigation, then I assume that you would not be undermining this need by repeatedly posting on the topic.[quote]“I have studied this issue exhaustively, and I don’t feel that we need a “third party” investigation of this situation any more than we need a “third party” investigation of the hundreds of other decisions that we make.”[/quote]If the “hundreds of other decisions that we make” were as monumentally bad as this one, then the city would have gone bankrupt years ago.
Your exhaustive study is a little late.
Given the magnitude of the financial damage that occurred on your watch, I think an independent “third party” investigation would be more than appropriate irrespective of your personal assessment.
I’m with David Greenwald on this one … I’d like to know the truth.
[quote]Your exhaustive study is a little late.[/quote]Actually, I am the council member who raised serious concerns to staff about this project when it was proposed. I look forward to further serious public discussions about why this model ran into problems.
Here is a link the the independent auditor’s report, along with the staff report and comments from the interested parties. It’s over 80 pages of public documentation.
http://www.city.davis.ca.us/meetings/councilpackets/20060627/11_DACHA_Audit.pdf
Maybe, after the interested public reads these pages carefully, the Vanguard can host a discussion on whether limited equity cooperatives consisting of scattered site single-family homes can be a viable affordable housing model in a town with expensive housing, and whether it is the best model for our affordable housing progam.
Maybe we can discuss whether the discounts required from the builders can be steep enough to offset the greater costs of the management company services required and the costs of the developer/consultant/middle-men, or whether we can reasonably expect that external grants will be available to cover the shortfall. These are costs that we don’t need to have with a limited equity model.
Maybe we can discuss whether it makes sense to require co-op members to fund significant costs of expanding the co-op.
Maybe we can discuss whether there are problems involved with having a developer/consult-appointed, non-member co-op board make business decisions which the member-residents are stuck with, and whether this is consistent with the spirit of cooperatives.
Maybe we can discuss whether it makes sense to fund such an endeavor with 10 year, interest-only mortgages with balloon payments?
Maybe we can discuss whether a workable organizational budget can be developed if developer-consultants don’t charge on a yearly basis allowing liabilities to be properly listed on the ledger, but rather present the organization with a large bill for a number of years’ service?
We can and should discuss these issues, and many others. The data is public. There is no one “truth” that an independent investigation will reveal. There are only policy issues which need to be explored, and, if there is no settlement on issues concerning the disposition of the property, there are legal issues that will be decided in court.
“I am the council member who raised serious concerns to staff about this project when it was proposed.”
I’ve never been a big fan of the “I TOLD them it was a bad idea” defense.
“I look forward to further serious public discussions about why this model ran into problems.”
I’m frankly more interested in understanding the failure of Emlen and his team to effectively manage the situation, as well as the apparent failure of CC oversight. According to the report you cited, the problems were evident in 2006; and, since then, a $1M liability was allowed to blossom into something potentially much bigger.
All I’m concerned about is taxpayer liability – not taking sides in a complex dispute between DACHA and TP.
I: “All I’m concerned about is taxpayer liability – not taking sides in a complex dispute between DACHA and TP.”
I’m confused about your position here inre taxpayer dollars. Let’s suppose an independent investigation was done (and who would do it and at what cost?), and lets suppose it showed the city did all kinds of illegal things beyond just bad judgment. Now wouldn’t that allow NP/TPCF to file further lawsuits/be more successful in their current lawsuit, and the city potentially liable for forking over huge amounts of taxpayer dollars in recompense for wrongdoing?
Or is it more likely poor judgment was exercised by the city in the first place, in approving this model from NP – who they trusted implicitly without performing due diligence by investigating this project in more depth – and now the city must protect its (the taxpayers’) financial interests? It would seem to me the city staff’s interests and taxpayers interests are in alignment on this one…
Sue, you raise some excellent points that I hope will be questions raised BEFORE any more affordable co-op housing is approved. I would like to raise one question though, if you can answer. If the city forecloses successfully, what will happen to the homeowners in DACHA?
E Roberts Musser: I’m concerned about the dysfunctional process that exposed the taxpayers to unnecessary fiscal liability, not the risk of future legal liability. The city manager and his team have mismanaged this problem and the taxpayers are now potentially facing a very large bill. NewPath is another SNAFU with some disturbing similarities. IMO, the CC’s goal should be to investigate and take corrective action at the management level.
[quote]I’m frankly more interested in understanding the failure of Emlen and his team to effectively manage the situation, as well as the apparent failure of CC oversight. According to the report you cited, the problems were evident in 2006; and, since then, a $1M liability was allowed to blossom into something potentially much bigger.—Ishmael[/quote] Ishmael,I don’t think you understand the situation. We don’t have “mushrooming liabilities”. We loaned the organization money out of our dedicated affordable housing trust fund. The money was secured by the value of the units. When the organization ran into trouble, we loaned the organization more money from our dedicated affordable housing trust fund to refinance the property. This loan is also secured by the value of the units. We spent much a lesser amount of money to equalize the cost of shares and to bring the shares prices to a level that would attract members to fill the vacancies. Until that time, members had been expected to pay about $20,000 for the right to occupy units at a cost which appeared to be approaching market rate rents, bringing the future of the organization into question.
We will never know if this refinance and share equalization would have worked, because shortly thereafter Neighborhood Partners sued DACHA for over $500,000.00 for payment for their work on expanding the coo-op and other “extra-contractual” services. Neighborhood Partners were awarded $331,800 plus interest. Neighborhood Partners then placed a levy on DACHA’s account for this amount, rendering DACHA insolvent.
The City is proceeding toward foreclosure in order to protect our affordable housing fund loans.
Ishmael, I don’t know what you mean by “taxpayer liability.” The funds involved are those of the dedicated affordable housing fund. While we are determined to guard that fund for use for affordable housing, it is not money that will affect our taxes or city services.
The list of “Maybe we can discuss” statements above by Sue Greenwald are amazing. She is trying to point out some “truths” that would support her position on this matter. But to anyone who actually knows the facts, these statements further show that Sue does not really understand the business of developing or operating a limited equity housing cooperative. Unfortunately that is the reason this has deteriorated into such a mess over the past five years.
The city council has refused to allow anyone except city staff to educate them on these issues, and that education has occurred largely in closed session. The other sources of information have largely been shut out by the city council. Sure we can send e-mail to them, which they may or may not actually read. And we can have three minutes each time we wish to discuss these facts at the podium. But any real open “Maybe we can discuss” opportunities have been shut off by the city council over the past five years. Sue has refused to meet with me even once to discuss the DACHA issue. As a result she does not understand very much about the financial issues that she refers to above.
For example, she says above:
“Maybe we can discuss whether it makes sense to fund such an endeavor with 10 year, interest-only mortgages with balloon payments?”
Clearly she is mocking us for utilizing this “risky” type of financing. Unfortunately she is only showing her ignorance about the financing for this type of housing. Multifamily housing is financed using a commercial loan, just like a shopping center or some other type of income producing real estate. These loans always have 10 to 15 year terms, with a longer amortization (like 30 years). Only single family homes have long term fixed rate mortgages, because they are smaller loans, and are sold on the secondary mortgage market that is essentially backed by the federal government. So the 10 year term that First Northern Bank and River City Bank provided on some of DACHA’s loans was not at all unusual for a multifamily loan. And the “balloon payments” that she implies are risky are instead simply what happens when you have a 10 year loan with a 30 year amortization. This is industry standard financing.
The interest-only aspect of her criticism is even more illustrative of her ignorance. In a limited equity housing cooperative, the residents can never refinance the property (like traditional single family homeowners) to take out equity that can be used for other purposes (car purchase, vacation, retirement, etc.), so why should they pay down the principal on the loan? Why make their monthly payments higher than absolutely necessary by adding principal to the interest that they have to pay? In the early years of a cooperative, when the property has recently been developed, the costs of operation make the monthly carrying charges higher (relative to comparable units available in the market) than in later years when similar units in the marketplace have appreciated, while the co-op units monthly costs do not include the cost of servicing the debt created by the organization taking out equity to distribute to the private owner (which occurs every time a property sells, or an owner wants to take profit out of accumulated equity) This description is a bit abreviated, and therefore perhaps awkward, but if we discussed this in detail, few people would agree with Sue’s perception of what makes good business sense (or equitable impact on the co-op’s residents through its life). Perhaps that is why she has fiercely resisted an independent investigation by an experienced real estate professional.
Sue’s “Maybe we can discuss” statements are nothing more than rhetoric, as long as she continues to refuse to have such discussions in a fair forum where all of the information is provided to an experienced third party, whose opinion she will agree to rely on for a resolution to this controversy.
Fortunately for the public, a federal bankruptcy trustee is just such a professional who can render an impartial review. And even if Sue does not like that trustee’s conclusions, it will not be up to her to decide whether to follow them. That will be decided by a federal judge, who has not spent five years in closed session with the city attorney and staff, painting the city further and further into a corner.
Sue: Are you stating that foreclosure will make the city whole? Specifically, will foreclosure allow us to recover all principle and interest plus staff and legal expenses? A clear yes or no would be appreciated.
If the answer is no, is there any liability to the general fund?
Regarding the affordable housing fund, perhaps you could provide us with a breakdown of the source of the money. It is my understanding, perhaps incorrect, that most of the money comes from development fees (which of course are passed on to the home buyers by the developers). If this is true, perhaps you could tell us how much the city exacts per average single family home.
Finally, I am concerned that you still have not addressed the issues of (1) staff performance and (2) CC oversight. Blaming TP doesn’t absolve the city from its responsibility to competently manage the problem and take corrective action to ensure that the city’s affairs are better managed in the future.
“Fortunately for the public, a federal bankruptcy trustee is just such a professional who can render an impartial review. And even if Sue does not like that trustee’s conclusions, it will not be up to her to decide whether to follow them. That will be decided by a federal judge, who has not spent five years in closed session with the city attorney and staff, painting the city further and further into a corner.”
Luke: I get the distinct impression that there may be some sort of long-standing feud between Sue and your partnership. Is there more to this story than meets the eye?
[quote]Clearly she is mocking us for utilizing this “risky” type of financing. Unfortunately she is only showing her ignorance about the financing for this type of housing. Multifamily housing is financed using a commercial loan, just like a shopping center or some other type of income producing real estate. These loans always have 10 to 15 year terms, with a longer amortization (like 30 years). Only single family homes have long term fixed rate mortgages — Luke Watkins[/quote]In 2002, staff submitted a series of questions to Neighborhood Partners. Staff specifically asked about the loan. Below are the questions and answers concerning the 30 year fixed rate mortgage. This answer was actually signed by Luke Watkins.
DACHA Q&A July 19, 2002
Staff: The pro forma assumes a 30-year loan at an 8% interest rate. Given that current market-rate interests are below this rate, please explain your basis for the interest rate. How are the proposed cost affordable when a home could be purchased for a lower rate?
Luke Watkins: Our original rate of 8% has been lowered to 7% in order to respond to your comment. If the interest rate ends up being lower than our revised assumption of 7%, then the cost to each of the seven households will be lower by that amount, just like with any other ownership model.
Staff: A 30 year-fixed mortgage has set payments. Will monthly housing costs (excluding tax and utility increases) for residents remain fixed for 30 years? If so, please provide assumptions for the annualized 4 percent increase projection in monthly costs and payments.
Luke Watkins: The pro forma indicates that the loan is amortized over 30 years. The $97,799 annual loan payment (which is really 12 monthly loan payments of $8,150) is unchanged over the 30 year period, just like with a single family home loan.
To repeat, in 2002, Luke Watkins wrote:[quote]The $97,799 annual loan payment (which is really 12 monthly loan payments of $8,150) is unchanged over the 30 year period, just like with a single family home loan — Luke Watkins[/quote]
I am not just trying to play “Gottcha”, Luke. There is a very substantive reason that this is important to me.
Back when you first proposed this project, we had long conversations about the business model on the phone. I wanted to know what benefits a member would get over and above renting an affordable unit, since the member would have to pay a hefty membership share price (at the time, I had no idea it would be as high $20,000).
With this in mind, I asked you specifically whether the (collective) principle on the DACHA loan would be paid down, so that a long-term member could retire in a home whose mortgage had been paid off (as would be the case with a limited equity affordable house).
You answered “No, the principle will go toward expanding the co-op”. Now, I don’t know how your thinking has evolved subsequent to that conversation, but that is what you told me at the time, and I shared my concerns with Jerilyn Cochrane, who told me that she had the same understanding. (I have already recounted this discussion with you in open meetings from the dais.)
This concerned me for the same reason that I am concerned with the concept of an interest-only loan. There are two contributing factors to a home’s future affordability. One is whether housing prices rise faster than income or pensions, and the other whether the loan gets paid off. Future affordability is important both to a member who plans to stay long-term and to retire in the home, and it is also important to a short term member, because expectations of future affordability affect the ability to sell one’s share.
Excuse me, I meant to say:
You answered “No, the equity will go toward expanding the co-op”.
Luke,
I would like to add that it would be more fruitful to have a public discussion of the pros and cons of various affordable housing models without resorting to argument by authority.
Personally, I think there are major problems with the DACHA expansion model, and perhaps we discuss that in the future. But costs involved in expansion aside, I agree that, in theory, one could pay interest-only loans and shift savings into operations and maintenance, lowering carrying costs.
You are making a point that, all things being equal, interest-only loans make sense because otherwise, early owners pay more. This is one consideration.
I am making two different points. The first is that one of the things that people most appreciate about home ownership is that they can look forward to much lower costs when they retire. The second is that the expectation of much lower costs in the future assures that the membership share maintains its value. This assures that members can find buyers for their shares when they leave, so that they reduce the risk to their investment.
David/Luke: Can you answer my questions? Sue appears to be non-responsive.
Are the loans in question underwater?
Will either the dissolution or foreclosure options have potential impacts on the general fund?
Will the staff time and legal costs to clean up this SNAFU be adsorbed by the general fund or the affordable housing fund?
Can you shed any light on where the money in the affordable housing fund ultimately comes from? Can you estimate the exaction per average single family home constructed in Davis that goes to affordable housing?
I’m sorry if this is ground that has already been covered. I’m coming late to the discussion, and am fascinated by the fact that you seem to be forced to debate this problem on a political blog rather than in face-to-face meetings with the city’s leadership. This, in turn, has sparked my curiosity about the issue to the extent that is seems to be iconic of the dysfunctional management and personalities that plague the city.
I: “E Roberts Musser: I’m concerned about the dysfunctional process that exposed the taxpayers to unnecessary fiscal liability, not the risk of future legal liability.”
But the risk of future legal liability will incur unnecessary fiscal liability to the city/taxpayers, no?
LW: “Sue’s “Maybe we can discuss” statements are nothing more than rhetoric, as long as she continues to refuse to have such discussions in a fair forum where all of the information is provided to an experienced third party, whose opinion she will agree to rely on for a resolution to this controversy.”
This blog is the same forum you have chosen repeatedly to air your perceptions/views of what occurred in relation to the failure of DACHA. What, no one on the CC is permitted to answer your allegations on this blog? Only you and David Thompson can have your say on the subject of DACHA, and CC members are not permitted to express views in opposition, or if they do it is mere “rhetoric” not worthy of consideration? Your logic escapes me…
LW: “These loans always have 10 to 15 year terms, with a longer amortization (like 30 years). Only single family homes have long term fixed rate mortgages…” (stated on this blog today)
LW: “The $97,799 annual loan payment (which is really 12 monthly loan payments of $8,150) is unchanged over the 30 year period, just like with a single family home loan…” (stated before DACHA was approved)
Please explain…
“David/Luke:Can you answer my questions? Sue appears to be non-responsive”
Long term readers of the Vanguard have already concluded that there is a real question as to whether “Ishmael”(a new-comer to Vanguard thread commenting) is not a “shill”, feeding Watkins and Thompson “questions” .
davisite2:
First of all, I have no position on foreclosure vs dissolution. I am “feeding” questions to David Thompson and Luke Watkins because I want answers, and Sue is non-responsive. I am a little surprised that they have not responded, and I suspect the reason is that they don’t want to get into a discussion that touches on how affordable housing is really financed (as far as I can tell, on the backs of new home owners).
Coming back to Sue, I’m not surprised by her behavior. IMO she was just here to grandstand … not to engage in a dialog. Perhaps Jon Li’s “crazy woman” characterization has now sent her underground to rethink her strategy to make herself relevant again (after becoming publicly unglued during the January CC meeting).
The arrogance of your claim to represent the opinion of “long term readers of the Vanguard” is really quite remarkable. Did you and Sue discuss this before you posted, or were you just free-lancing?
You’ve both had your say, let’s leave it there so that the moderators don’t have to start cleaning things up.
David,
You are not even-handed in your censorship policies. Ismael’s last comments are of the order that you censor when they are not in agreement with you own positions.
I think you should either remove that post, or allow other personal, off topic remarks to remain uncensored.
Your objection is noted Councilmember.
Correction: “principal” on the loan, not “principle”, of course.
“[edit — no personal characterizations please. Don]”
Don: In fairness, please delete the post from davisite2 (05/01/10 – 7:44 am) which falsely accuses me of being a shill for TP. Selectively censoring the response while leaving up the initial attack gives the appearance that the Vanguard caved in to intimidation by Sue … something you clearly don’t want to do given the current whisper campaign against your blog. So play fair.
I might also point out that it was David that posted the stories on (1) Sue’s public meltdown in January and (2) Jon Li’s characterization of her as “the crazy woman” on the city council. Since the Vanguard published these stories, they are now fair game. It is also fair game to speculate on the impact of these stories on Sue’s relevance as a political figure in Davis and what she may be doing strategically to try and repair the massive damage to her political career.
I’ve removed several posts, since selective editing made others lose context. Please keep to the topic of DACHA, and avoid personal characterizations. If you have questions about moderation actions, feel free to contact me at donshor@gmail.com.
Thanks.
What a great deal for a developer to set up a housing co-op so that if it fails his “non-profit” becomes the beneficiary —
Did the city think this was a good idea?
NP had the right, the way DACHA was set up, to choose DACHA’s attorney and manager. NP picked David’s long time friends and associates for these positions. Where were these people when the board was holding elections? Did the bylaws written by David’s friend clearly specify all the restrictions that DACHA is now accused of violating?
“Did the city think this was a good idea?”
eagle eye: Apparently so. Sue and her colleagues voted to give them $1M and then subsequently voted to give them another $4M.
Now that the deal has gone south, the City Manager and CC are resisting an independent investigation and David and Luke are being painted as the bad actors.
If this isn’t a giant red flag, I don’t know what is.
Again, the council (actually redevelopment agency) didn’t “give them” $1M and $4. We loaned money, with the property as collateral, and that is why we are foreclosing.
I am all in favor of public discussion, debate and analysis of the problems that arose. Hopefully, the social services commission will study the problem. I believe we have two attorneys on the commission.
Sue: So now you want to quibble over semantics? We all know the transactions were loans … just like we know that the city staff and city council apparently failed miserably in their fiduciary responsibility to effectively manage these loans.
And while we’re busy parsing the posts for precision, let me remind you of your previous statements …
“I have studied this issue exhaustively, and I don’t feel that we need a “third party” investigation of this situation …”
vs
“Hopefully, the social services commission will study the problem. I believe we have two attorneys on the commission.”
Your “exhaustive study” notwithstanding, at least we’re moving in the right direction.
I’ve always assumed that the social services commission would look at the DACHA, and that we would have a council/public discussion. For quite some time, I have been talking with the City Manager about and when to go about this.
I really can’t tell you how comforting it is to hear that you and Bill are still on top of this issue. I can’t. Really.