The city of Lompoc is deeply entrenched in a financial quagmire now that affordable-housing nonprofit Lompoc Housing and Community Development Corporation (LHCDC) has gone under.
Last month, the City Council asked staff members to provide a report on the potential liability for repayment of outstanding federal loans made to the now-defunct nonprofit. The city started working with LHCDC in the early 1990s, allocating millions of dollars’ worth of HOME and Community Development Block Grant (CDBG) funds.
On Dec. 6, the council received a report detailing the level of financial risk associated with each property, and whether property managers had complied with loan stimulations—or “affordability covenants”—while the city was providing funds.
According to the staff report, several properties—including the Marks House, properties under private ownership, and a handful of apartment complexes in receivership with Pacific Western Bank—are at “no-risk” for repayment because the loans didn’t have affordability covenants, and low- to moderate-income families have been living there.
The properties determined to have some form of risk of repayment for the city include the Lompoc Theater and the Southern Court Apartments on North E Street.
Overall, the city is responsible for almost $2.7 million in outstanding federal and Lompoc Redevelopment Agency loans. Of that amount, staffers view $857,563 as at “low risk” for repayment, and $300,000 as “high risk.”
However, that report wasn’t sufficient for some of the council members.
“I find the report incomplete,” Councilmember Cecilia Martner said.
Martner said she’d also like to see more information on the covenant requirements for each property and how many properties have been out of compliance with those covenants. LHCDC has failed to file financial audits since 2007, among other things.
“I don’t agree with staff’s assessment of risk. You either have risk or you don’t have risk,” she said, adding that the levels of risk were arbitrary because the city didn’t have enough information to make an assessment.
She also asked why the Portobello and College Park apartments weren’t on the list, and why staffers failed to include information about the City Council’s decision to return $140,000 to U.S. Department of Housing and Urban Development (HUD).
Community development manager Dinah Lockhart informed the council that the money had yet to be returned because of negotiations with HUD.
In contrast, council member Bob Lingl thanked the staff for its work on the report and called it “a good start.” He stressed that his main goals are to protect the people living in the properties in question and the city’s financial interests.
“Once we’ve obtained goals one and two, if there are people that are criminally negligent, I want them to come to the surface, the council wants them to come to the surface, and we will try to [hold them accountable,” Lingl said, addressing residents present at the meeting.
“I’m pleased this happened. I’m pleased that this big pimple has burst. … I’m glad you’re outraged; we’re outraged,” he said. “Remember, we weren’t sitting here when this happened and we’re trying to fix it.”
The council moved to compile a signed list of additional information members would like to receive from the staff. The council is expected to discuss LHCDC loans again at its next meeting on Dec. 20.
This article appears in Dec 15-22, 2011.