Led by Cecilia Martner and Ashley Costa, City Council members Tuesday night probed the depths of the city’s failure to monitor the defunct Lompoc Housing and Community Development Corp. and its low-income housing operations, and discovered a deep well.
Presented with an independent consulting firm’s comprehensive report on all LHCDC loans and properties, council members were confronted with a glaring lack of documentation of oversight by the city’s Community Development Department on nearly all LHCDC housing properties, going back more than
10 years in some cases.
The council took no specific action on the report but urged staff to use the mistakes and deficiencies identified by the consultants to prepare a city policy on
“A lot of the exercise that we’re going through here is so we can learn how to write a policy so we can prevent this fiasco from happening again,” Martner said. “I would like to ask the legal counsel and staff to pay close attention to what is happening here.”
Not revealed during the discussion was the total amount of funds the city will lose through unpaid loans or loans “extinguished” through foreclosure on properties where private lenders held the primary lien.
The consultants’ report identified nearly $30 million in financing given to LHCDC over the years. Operational grants and homeless services funds were not included in the total. Of the $4.9 million in city funds awarded to LHCDC, the nonprofit has repaid only $1.7 million, the report noted.
During the three-hour discussion, two representatives from Urban Futures, Inc., the consulting firm hired to produce a record of loans and oversight from the city’s own files, presented details of LHCDC’s failure to either respond to requests for data or to comply with mandatory regulations for each of the nonprofit’s 16 housing developments included in the report. The report also noted there was no documentation that mandatory site visits were performed at many of LHCDC’s federally-funded low-income housing units.
The consultants praised the work of the city’s Redevelopment Agency staff to monitor and attempt to enforce mandatory regulations governing rent limits, tenant eligibility and property standards, noting the stark difference between monitoring by staff of RDA and the Community Development Department.
Martner asked City Administrator Laurel Barcelona to comment on the missing documentation and reminded Barcelona that she had assured Martner two years ago that city staff were performing all required oversight and monitoring. Barcelona replied that she did not know why there was no monitoring documentation in the city’s files.
“There is a responsibility here for staff to do the job. If they don’t do it, they should be fired,” Martner said.
The report also detailed the loan history of the properties, including several properties that were refinanced to either pay off earlier loans or to pull cash out of the property by adding new debt. Terms for the refinanced loans were not included in the city’s files.
Martner referred to the loan refinancings as “shady,” questioning why housing properties under covenant rent limits would be refinanced at market values.
Costa urged city staff to “find out where the ball was dropped” with the loan refinancings.
“It seems as though LHCDC was taking from one pot to give to another which doesn’t seem like a sustainable model,” Costa said. “Maybe we weren’t aware that was not proper management of these funds. I’m just encouraging staff to make sure we have something written into contracts in the future.”
The report was presented by the consultants as a draft in order to incorporate changes or errors identified by staff during the report presentation. No errors were identified during the council discussion. The report was amended Monday afternoon to add eight loan refinancings not noted in the original draft.
The consultants told council members that the adoption of clear policies and procedures, and the use of consistent contract language could prevent repetition of the city’s mistakes in the future, and offered to provide sample materials and contracts to use as boilerplates in the future.
The council’s discussion on joining forces with the county to include city funds in the county’s forensic audit of LHCDC requested by county supervisors last February was not resolved by the end of evening. Martner and Costa made the original request in March but no public report has even been given on the request.
After hearing a report by City Attorney Joe Pannone recommending that the Council take no action on a forensic audit of LHCDC, Martner castigated Pannone for his “non-cooperative and offensive language” by referring to wanting an audit of LHCDC’s use of public funds as a recent “concerted clamor.”
“I looked up the definition of clamor in the dictionary,” Martner said. “It is a ‘loud and confused noise, that of people shouting.’ So we’re saying that the concern that the community has over LHCDC is a loud and confusing noise? I find that offensive.”
At Martner’s request, the council voted to contact the county, the auditor/controller and the district attorney in writing to offer the city’s “full support, assistance and documentation” to aid their investigation into LHCDC’s use of public funds and agreed that Martner and Mayor John Linn would review the letter before it was sent. The letter will also state the city’s desire to have city funds included in the forensic audit.
“I would like to walk away from here with restoring at least a little tiny bit of public trust,” Martner said, requesting that the word “clamor” be removed from the city attorney’s report.