Last night, the Davis City Council opted against a third party review of city actions involving the refinance of DACHA by a 3-2 vote along rather unusual lines. The majority of council, opted instead to focus city efforts on saving DACHA which is critical danger of defaulting on the city’s loan that could cause the homes to go into foreclosure. While it is unclear that the two goals were mutually exclusive, the council majority urged DACHA and Twin Pines to sit down and figure out a repayment schedule that might allow DACHA to continue to make payments on the city’s loan.
Following lengthy discussion, Councilmember Lamar Heystek moved that the council opt for third party review into the actions of the city and a determination of the legality of the refinance and other issues. Councilmember Don Saylor seconded the motion, and argued forcefully that there were enough competing claims and the situation was complex enough warrant a third party, not involved the process, to examine the legality and other issues surrounding the city’s loan of more than $4.15 million.
Nearly three weeks ago, the Vanguard brought to light serious problems of potential misuse of approximately $4.15 million in public funds that were used to loan the Davis Area Cooperative Housing Association. In particular the organization is accused of illegally redistributing cooperative funds to its members.
In July of 2008, the city of Davis and the Davis City Council responding to complaints from DACHA members of high monthly carrying charges and unaffordable share costs as well as an audit that showed that DACHA was in financial distress and not sustainable in the long run, provided a loan to help DACHA refinance their debts, reduce their share costs from $22,000 to $6250 and reduce their monthly carrying charges that ran as high as $1800 per month.
Vanguard investigative efforts however, determined that documents conclusively show that the share stabilization was used to refund the DACHA residents the difference between their initial payment of $22,000 and the reduced share investment of $6,250. At issue here is whether the council knew it was authorizing such refunds. From our investigation there appears there is considerable disagreement on this point and there is no explicit mention in the staff report from June 24, 2008 (action taken on July 15, 2008).
Moreover, the legality of this action is also in question. A memo from the City Attorney argues that the action is legal. Lawyers for Twin Pines Cooperative Foundation, who are Plaintiffs in a lawsuit against DACHA argue that the action represents a violation of Safety Code Section 33007.5.
The victims in this are the affordable housing residents of DACHA, who now face considerable additional legal action above and beyond the nearly $350,000 arbitration judgment by Twin Pines Cooperative Foundation due to what from the Vanguard’s research is a city staff designed and council approved refinance.
During the staff’s report, City Attorney Harriet Steiner argued forcefully that the conditions warranted a refinance, and that among the other allegations presented by David Thompson and Luke Watkins of Twin Pines, the issue of being behind on payments was due primarily to the very high carrying charges. Without the refinance, the cooperative would fail. She argued that she did not believe the law to be so restrictive as to preclude any attempts to stabilize the cooperative by reducing the share costs. She spent a great deal of time discussing the fact that the cooperative was not sustainable.
David Thompson acting as President of Twin Pines Cooperative gave a lengthy presentation to council where he told them in part:
We have reviewed the staff report which contains extensive information. However, the staff report does not appropriately address the key legal and financial issues that have been raised by the Davis Enterprise, the Arbitrator’s Report, the Vanguard, the Twin Pines Cooperative Foundation and Neighborhood Partners.
If staff had obtained the financial documents and rent rolls we suggested, then we believe a very different report would be being made to you.
In some cases, we believe the staff report continues to withhold key information from the City Council, and in other cases does not adequately address the issues.
The Vanguard continues to believe as well that the staff report inadequately addressed the issue of legality. Ms. Steiner continues to the argue that this is not simply a transfer and distribution of funds, but the refund of an overpayment. However, she could not address the portion of the Health and Safety Code that authorized the city to do as it had and instead she reversed the question, arguing that the city had not done what was precluded by the code or more to the point, that the code did not preclude DACHA under all circumstances from distributing the share cost refunds to its members.
The council majority ultimately argued and voted against third party review, citing a variety of reasons for doing so. From our understanding of the issues, it may be inevitable that the issue comes back to the surface. The issue of the repayment of share costs to the residents and the issue of being behind on the carrying charges are two of the issues brought force in a second lawsuit against DACHA, this one by Twin Pines Cooperative.
From the Vanguard’s perspective, though the council is concerned about DACHA, they seemed to have missed the point that if DACHA loses the second lawsuit, it will be primarily because DACHA was following the city’s lead and the policies set forth by the City Council. Therefore from my standpoint, the city has some obligation to figure out if they broke the law and then how they can best help DACHA.
What we learned now on Tuesday night is a much more dire situation that was believed on September 29, 2009 when the issue was brought to council by the Vanguard. In June of 2009, an arbitrator ruled against DACHA in a lawsuit by Neighborhood Partners. The resulting judgment was just under $350,000. In order to collect, Neighborhood Partners attached a levy to DACHA’s assets which means that every month when the association collects its carrying charges, those go to Neighborhood Partners.
The problem is that means that DACHA cannot make its other payments including its loan payments to the city. It was announced that during closed session they determined that the loan payments were five days late and now DACHA is in danger of defaulting on the loan to the city. There is a very real and urgent danger that DACHA will not survive this and that the homes will go into foreclosure.
The council urged the DACHA board to work out a deal with Twin Pines. However, attorneys for DACHA told the council that such talks would have to involve all issues including the pending lawsuit, that it makes little sense to make payment arrangements when there are other outstanding issues.
To me it is unconscionable that the city council not look into the actions of the city here. It is clear that from the start, the council and city have looked into ways to make the arrangement work. The city has acted in good faith here, but the question is whether or not they have acted legally and whether their actions have not in fact made the situation worse.
The victims in this process are the residents of this affordable housing project. The city owes it to them to figure out their own mistakes and it seems clear that there is a conflict of interest by having the same staff that created the policies, review their legality. Unfortunately the council majority did not believe this step was necessary and that may become a huge mistake. At some point, the legality of city actions will indeed be determined, and we will see if the inaction by council places the city in legal liability.
—David M. Greenwald reporting
Come on Sherlock , start smoking your pipe. . Vote no on “. P. “
Good coverage David
you asked good questions to try to raise the altitude of the issue to be more broad, etc.
We taxpayers are also the victims here and nothing I heard last night acknowledged that nor any culpability from any staff person. Sue was the only one to hold herself accountable. If Ruth thinks “just work it out, we are fine and I made all the right decisions” will get her elected again…..This goes beyond the current issue between NP and DACHA.
It was an embarassing night. As often has been the case, Lemar in his reasonable, civil yet pointed way was the most inciteful. We will miss you Lemar.
I urge you to keep hammering on this one. There are more questions to ask.
SODA’ite: I was surprised to see the vote turn out the way it did. Sue should have voted for a review. She did not hold herself accountable from my perspective. Sue, Ruth and Souza voted it down.
Like you I hope that Lamar continues to hammer them on this. There are many more questions to be asked.
What I saw last night was a gaggle of parties to an extremely complex action trying to resolve the unresolvable in open Council session. So much anger and righteous indignation based on so much heresay and misunderstanding. This dispute will be resolved in court, where there is at least the appearance of neutrality, not on the Tuesday Night Follies.
In listening to Lamar’s questioning of Harriet Steiner, he pressed her to publicly state if the city was “responsible”. While exposing staff incompetence and valid voter indignation does feel good, attempting to have the city publicly acknowledge “responsibility” potentially places them in significantly greater future legal jeopardy . In this case, I believe that Greenwald, Souza and Asmundson acted prudently. It is interesting to note that Saylor, who now hopefully looks to be a “short-timer” on the Council as he runs for Supervisor, not surprisingly, is now shifting to take on a more voter-friendly populist tone.
Loi-yas-The problem with the court route is that will drag on two years and cost more money that DACHA does not have. If the city is responsible for the direction and actions DACHA took, shouldn’t the city have responsibility not to sit back and wait?
ol’ timer: I very much disagree with you. In fact, the action taken by the majority is likely going to cause DACHA to fold. They are being hung out for liability on policies that the city directed them to take.
Here’s an additional point I regret not having made at the council meeting: The repayment was for $200,000, had they not taken that money from corporate assets, they would have had that money to pay a good chunk of the judgment against them by NP. That probably would have been enough to avoid the levy and they would not be in default on their loan. So that city policy has caused DACHA to be in danger of foreclosure. This is a complex issue, it’s not going to be resolved in the way Souza believs it will be, it’s gone too far and it’s too complex. The city needs an outside agency to look at what happened. This was a huge mistake.
David…. From what I could surmise from the Council meeting, the city will, in all probability, make a serious effort to get the parties to agree to some compromise in terms of payment of debt in addition to the Agency doing its best to keep DACHA afloat. Admitting city responsibility at this time would most likely send a message to abandon attempts at compromise resolution and go immediately to court with an admission of city “responsibility” in hand. This does seem to be a situation where demands for public accountability and the city’s interests need to be balanced.
Thank you for continuing to shine light on this mess. Basically, I believe that the city staff conspired with the DACHA president and treasurer to try to dissolve the cooperative and turn the units over to each occupant so that each household could gain more than $200,000 in windfall equity over about a 7 year period.
Why did the staff do this? My experience over the past dozen years has lead me to feel that they greatly resent my business partner, David Thompson, because he has repeatedly overridden their staff recommendations and secured city council support for our projects. They have tried to kill project after project, and because he works effectively with the neighbors near our project sites, the staff has consistently lost these fights.
In addition, a number of times David has “blown the whistle” on what I believe were instances of staff mismanagement of the affordable housing programs – like when there were no windfall recapture re-sale controls on 52 affordable units in Wildhorse.
Why did the majority of the city council go along the staff last night and refuse to simply seek an independent third party legal opinion on the issues? My experience leads me to conclude that Sue Greenwald is still so full of hate for us for developing affordable housing on Olive Drive (could it be that those units were too close to her own home?) that includes housing for formerly homeless individuals. As to the other two, its hard to figure out.
ol’ timer said: “While exposing staff incompetence and valid voter indignation does feel good…”
No one wants to ask questions for a “feel good” experience — this is all about finding out the truth. Anyone who seeks the truth — whether we want to hear it or not — has my full support.
Ol’ Timer: the point was to get the city to have a third party review the legality. As the lawyer for DACHA acknowledged, until the second suit is settled, paying down the debt is not a likely occurrence. A good portion of the second suit involves actions that were directed by staff and even council action. Unless we determine the legality and then find a way to rectify the situation, I have very little reason to believe there can be a settlement.
This entire fiasco, from its inception, including the terribly conflicted role that Neighborhood Partners has played* in it on both sides, exemplies to me a prime reason why the city should not ever be involved in the low-income housing business or in the housing business in any direct way. These programs NEVER help poor people as a class. They can, when run perfectly and when there are not conflicted parties serving multiple roles, help a small group of residents, but still leave the rest of the class of low-income residents out in the cold.
Far superior is a Section 8 model in which all people who need assistance to pay rent qualify for a voucher subsidy, which landlords can accept (or reject) as cash; and those payments ought to come without restrictions, much the way cash is spent without restrictions. That serves the entire class, and it does not enrich conflicted parties, as in the DACHA mess; and it keeps the City out of such problems.
*I thought Sue’s questions of David Thompson’s terribly strange role as banker and advisor were spot on.
Rich: I’m definitely moving your direction here, especially as I continue to unravel the multilayers of problems created by a decade or more’s worth of incompetence and malfeasance of the city in terms of low income housing. That said, Section 8 has its own problems.
What I liked about this particular program is that it got people into houses, the houses were spread throughout the city, and it was expandable to be able to provide for an expanding number of residents.
The downside is that there is an inherent problem with limit equity housing ownership (and of course a problem with low income non-limited equity housing), the costs were way too high, there was no tapering of costs as one pays into the project over time. I understand the premise was that these people would are people that would never be able to buy a house in the Davis housing market, but the model ensures that they will never be able to buy a house in the Davis housing market.
My biggest concern here is for the city’s role in this and we are no closer to getting to the bottom of that than we were last month. Staff was strangely defensive last night as though they had something to hide.
It should also be pointed out these are not *poor people* per se, I think it was supposed to be for people making $50 to $70K.
“Unless we determine the legality and then find a way to rectify the situation, I have very little reason to believe there can be a settlement.”
If and when “legality” is the issue at hand, it will be determined in court. An independent third party opinion is just that , another opinion.
I couldn’t possibly disagree with you more. The determination of the issue of legality is a formality here. In the short term, DACHA is going to expend resources that it doesn’t have on a legal battle that will drag out several years. If the city bears responsibility for this predicament they could take many steps now to alleviate that. But right now, the city staff is playing a cya protecting themselves while the people who really need protection, dacha, are not being served by this.
[quote]That said, Section 8 has its own problems. [/quote]It does; and I don’t know all the answers to those problems. It is my understanding that the biggest problems with Section 8 vouchers is the vast majority of landlords* refuse to accept them, which (I suppose) is their right; and by way of that refusal, there is a shortage of available housing even for those who hold the vouchers. (I also understand that in some metropolitan areas, where rents are quite high, the vouchers are simply insufficient.)
What I wonder — though haven’t thought through — is if property owners who otherwise receive federal subsidies or other tax benefits — for example, they deduct the mortgage interest payments from the income generated by their rental properties — could not have those subsidies or benefits made dependant on agreeing to a non-discrimination policy with regard to housing vouchers, much the way civil rights laws prohibit housing discrimination on the basis of race and so on.
But even if we had that, it might not change anything, because the problem likely revolves around the perception or reality of credit-worthiness. Almost all poor people, by definition, have troubled credit or no credit history. And it is on that basis — and not on the basis of vouchers themselves — that landlords will reject prospective renters, because they don’t want to get stuck with a tenant who won’t pay his rent. Thus, a landlord could then reject almost anyone with housing vouchers on the basis of credit-worthiness and be compliant with a policy of non-discrimination.
And to that, I don’t know what can be done. However, it might help if we modified our landlord-tenant laws, so that it is quicker, easier and far less costly for a landlord to evict a tenant who fails to pay his rent (as long as the rent increases have been modest). As things now stand, all of the weight of the system is on the side of tenants who don’t pay.
*I was incorrectly under the impression for some time that not all landlords could accept Section 8 vouchers. That is not the case. My misimpression came from a West Sac landlord** (who is an El Macero resident and a former neighbor of mine) who told me he would have taken vouchers but he did not qualify. He told me “you have to be rated for qualification to accept vouchers.” What I didn’t know was that he didn’t qualify only because he had been in trouble with HUD for committing some sort of fraud (taking vouchers from non-renters and giving the renters half their value back in cash).
**He owned a few of those cheap-looking West Capitol Avenue motels which have been converted into low-rent apartments. I don’t know if he still owns them.
Interesting discussion. I tend to agree with Rich (which, with all due respect, for me is unusual) – “This entire fiasco, from its inception, including the terribly conflicted role that Neighborhood Partners has played* in it on both sides, exemplies to me a prime reason why the city should not ever be involved in the low-income housing business or in the housing business in any direct way. These programs NEVER help poor people as a class. They can, when run perfectly and when there are not conflicted parties serving multiple roles, help a small group of residents, but still leave the rest of the class of low-income residents out in the cold.
Far superior is a Section 8 model in which all people who need assistance to pay rent qualify for a voucher subsidy, which landlords can accept (or reject) as cash; and those payments ought to come without restrictions, much the way cash is spent without restrictions. That serves the entire class, and it does not enrich conflicted parties, as in the DACHA mess; and it keeps the City out of such problems.
*I thought Sue’s questions of David Thompson’s terribly strange role as banker and advisor were spot on.”
Why does the city continue to allow NP to be both banker and advisor, a clear conflict of interest? At this point, much as I don’t like to defend the city staff, I think what needs to happen here is to get the two parties to work out an agreement so that DACHA does not fold, no matter what the legalities are. City Council members are not in a position to be judge and jury in this particular case – they don’t have the legal expertise or the objectivity. I would fault NP for not being willing to work out a compromise that will ultimately be to their own benefit. Unless I am missing something here, if DACHA folds, NP stands to lose money as well as DACHA. Frankly, I don’t find NP’s role in this all that innocent. IMHO, NP tends to suck the city and citizens into these schemes 1) without full disclosure; 2) acting in the capacity of both banker and advisor, which is a direct conflict of interest. The city had to step in and clean up ERC for just these same reasons. From what I hear, many DACHA members did not know what they were getting themselves into.
Dear All:
Neighborhood Partners wanted to settle this fairly from the beginning but DACHA refused to meet with us and city staff refused our request to get DACHA to the table very early. The process got stretched about by the DACHA Board and the City hoping we would go away.
The law is very clear about distributions to members. The city attorney told us there were no distributions when in fact there were. The city attorney’s explanation that it was done when DACHA had no encumbrances holds no water. The encumbrances DACHA had were exchanged in a simultaneous transaction. There was never even a millisecond when there were no encumbrances. Even so, the distribution/refund/ call it what you want was made to DACHA members about two weeks after the loan closing.
I agree with David Greenwald, it is a pity that the city plan appears to have ensnared the DACHA members in an unlawful action.
All these lovely single family homes were done meeting the city standards, every home’s budget, financing plan, affordable level was approved by city staff and met the city standards. Every occupant was vetted by the management company (not NP) and each of these occupants were approved by city staff as meeting the city standards.
NP did argue that the format required by the city did not work and that DACHA was overpaying for the homes. Staff would not change the formula but did accept all of our recommendations and make those changes after the first 20 homes joined DACHA.
We asked the city to help us develop a better share plan. We suggested using city funds to create a share loan pool, we asked the city to let us use the $500,000 in HOME funds they had sitting there (still hardly used after five years). We asked the city to let the members use a financial institution, the city would not authorise that option. I can tell you we tried.
After having blown the whistle on $145 million dollars of community equity seconds being lost I have never felt the city staff wanted to lift much of a finger to make DACHA work.
What else was missing last night:
For example, the issue of the refunding of share capital to the members is not adequately addressed and does not touch on the issue of private gain. That is a matter of state cooperative law.
The issue of the legal status of board members and the board itself is not dealt with, although it is a core problem and should be of grave concern to the City Council.
The issue of upholding the Davis-Stirling Act has not been looked into by city staff. There appear to be a number of “self-dealing” transactions.
The staff report does not deal with the allegations about the breaking of the bylaws.
Was city staff aware that by June 30 2008, (as city staff was recommending the loan of $4 million) the 20 members were delinquent $64,713 in payments to DACHA?
Shouldn’t that type of information have been shared with the City Council as part of due diligence? Proportionate to any other project in Davis that $64,713 delinquency is huge.
Almost the entire board was delinquent over the past three years and the by laws require that they be automatically removed. So the board is unduly constituted.
City staff seeem to have done nothing to deal with the delinquencies and nothing to deal with an illegally seated board composed of ineligible board members.
We have asked the Council and the staff to report on this and nothing has been done or appears to have been done.
And to this board they loaned $4 million of our public funds.
Were is the due diligence?
Even after the refinance and the lowering of costs for a single family home to an average of $1100 the President and the Treasurer as of September 30 were delinquent to DACHA to the tune of $7,442. And the the board officers rents for their two single family homes are $953 and $1,028. Would’nt you like this deal?
The average 3 bedroom apartment in Davis according to the UCD study is $1,714. Why are DACHA members allowed to be so behind in their payments when everyone else in Davis is paying so much for their apartments.
The City should be looking closer at these “sweetheart deals” because we are all paying for this problem.
Again to me the current crisis is not the whole issue. Once that is worked out we still have unresolved issues unless we look at the entire process. I vote NO MORE tax $ for new housing in the program until we review and revise if necessary the process. It was very difficult last night to know which end was up/down between NP and the city. DACHA seemed the easiest to figure out.
A ‘humerous’ point last might was while Bill Emlen and Harriet stated the city only has one person assigned and therefore could not be expected to monitor financials, etc, Bill Emlen states when asked by Don, no I think we have it under control and don’t need a third party. Sounds like a good project for the grand jury if no one is going to directly review.
And question, freeway sign: Ruth wants to revisit which means it will pass, yes?
What a cheapening of Davis….and rewarding Jim Kidd who has been so recalcitrant with the Anderson building. A few extra bucks is not worth the tawdriness this brings to our town, no CITY.
Part 1
David Greenwald:
I don’t really agree with your analysis.
I don’t have the time to give a comprehensive review of this issue. It would take a minimum of 50 pages to do so. Although I have an open mind, the following is my current take on the issue.
I initially voted to allow David Thompson and Luke Watkins, who are for-profit affordable housing developers, to establish DACHA, with City help, in spite of deep reservations that the system they described did not offer sufficient benefits to the members.
In particular, I was concerned when I learned that, although the members had to pay a substantial share for their membership, they would not be afforded the collective economic benefits of the equity that would accrue as the mortgage was paid off. Instead, the equity was going to go into expanding the co-op with the purchase of more units.
David Thompson and Luke Watkins were to receive a payment every time a new unit was added. The members still had to pay the costs of the mortgage, maintenance and repairs, any secondary mortgage that they took out to cover their membership share price, and, as it turned out, and consulting fees to David Thompson and Luke Watkins that they were required, by contract, to provide on an annual basis.
It concerned me that long-term members, as they faced retirement, would not have the benefits lower monthly payments due to a mostly paid-off mortgage. Dos Pinos, the comparison constantly referred to by Thompson and Watkins, did not similarly rely on what appeared to me to be somewhat of a Ponzi scheme of perpetual growth.
When members left the coop, they would only get interest on their membership share, not on the sale price of the unit, as is standard in our limited equity affordable housing. With a substantial buy-in cost, without prospect of reduced payments over time, and without prospects of significant equity on leaving the coop, the carrying costs would have to be very substantially below market for this model to be of benefit to the members.
Nevertheless, Luke Watkins and David Thompson lobbied me incredibly hard. They presented themselves as experts in cooperative housing, and argued that I should trust that they knew exactly what they were doing, and that this was innovative project that would work to the benefit of the low-income members.
I had long talks with staff, who told me that they shared my concerns, but nevertheless recommended that we go forward.
At that time, I was not aware that the membership costs would be running over $20,000 per unit – higher than the down payment made by many of our low-income limited equity houses.
Part 2
It didn’t come to me as a huge surprise when, a few years later, two DACHA board members asked to meet with me. They were quite distressed. They handed me a piece of paper listing the carrying costs of the various houses. It immediately appeared to me that these carrying costs seemed to be as high or higher than market rate rents at the time.
They explained that when members left, DACHA had to pay the departing members their shares plus interest, but that DACHA was having trouble finding new members when houses became vacant, i.e., it was hard to find people who were willing to put up $20,000 or more in order to pay what was close to market rent, with no prospect of appreciation.
Also, they were concerned because David Thompson and Luke Watkins refused to let them out of their contract to provide them with ongoing consulting, even though they couldn’t afford to pay it, and didn’t feel that the advice was of benefit to them. They felt that the unwanted consulting contract was hurting the bottom line and hence the viability of the already marginal enterprise.
A subsequent independent audit ordered by staff confirmed the essence of the claims of distress and the lack of viability of DACHA.
Since the City/ redevelopment agency affordable housing program had invested in the project, the City/redevelopment agency needed to take action to save its investment, since it appeared that the coop was not viable as constituted.
We were also obviously concerned that the DACHA members, who had trusted that a city affordable housing program would work, would lose their investment in their share value, which was often their life savings. So we decided to help with a restructuring and refinancing.
I don’t have time to go into all of the complexities and problems with DACHA. DACHA had to deal with a lawsuit by Neighborhood Partners (David Thompson and Luke Watkins), who sued to collect contractual consulting and new unit acquisition fees that were charged by Thompson and Watkins even though the cooperative didn’t want to continue with the consulting contract and didn’t want to continue to expand the troubled coop.
They also had to deal with lawsuits by the Twin Pines Cooperative (of which David Thompson is President). To give just one example of the problems DACHA faced, Twin Pines (of which David Thompson is president) gave second mortgages which contained prepayment penalties.
I found it difficult to understand why, if David Thompson set up DACHA and wanted it to succeed, he would be party to issuing loans with prepayment penalties. Why wouldn’t he want DACHA and/or its members to be able to pursue financing on the best terms possible, without penalty?
[quote]Luke Watkins and David Thompson lobbied me incredibly hard. [/quote]I don’t know if either of these men ever gave a financial contribution to Sue. (I doubt it.) I do know one current member of the City Council, at least, received at least one small ($50) contribution from Luke. I doubt that contribution was corrupting or affected how that member of the council voted on any issues related to Nieghborhood Partners. However, I bring it up because I find it bad form, if not unethical for both the giver and receiver, that anyone who does business with the City of Davis should be giving money to the campaigns of candidates for City Council. It creates the appearance of a conflict of interest, if not an actual conflict.
If we cannot proscribe such gifts, then perhaps it would be wise policy of the City Council to require every one of its members to publicly make mention of such gifts every time the Council so much as discusses any business with any group or individuals, including employees of the City, who have contributed any amounts of money or in-kind gifts to a member of the Council’s campaign. If we needed a visual reminder, perhaps the members of the council who took such funding could wear some large red devil horns during the discussion, so they would not have to take up time making a full disclosure.
Typo: “any issues related to [s]Nieghborhood[/s] [u]Neighborhood[/u] Partners.”
Sue, I helped set up Dos Pinos in 1985. I am proud of how well the model has worked. Contrary to your assertions DACHA was set up to be the same model. None of the differences you mention are valid. Look at the DACHA bylaws and while you are looking at the bylaws look at 5.6b.
.
(b)Any Director who is more than thirty (30) days delinquent in the payment of such Director’s Carrying Charges (as defined in Section 5.3) shall automatically be removed. The remaining Directors shall appoint a successor as provided in Section 5.5(a).
It appears that only one director was eligible to serve and the remainder were all behind in their carrying charges more than 30 days. However, none were removed. The board is therefore unduly constituted and that ought to be of concern to you as a council member. Or is it ok for any group to borrow money from the city and not be legally seated.
We also pointed out that there are examples of self dealing transactions at DACHA which is governed by state law under the Davis Stirling Act. This breaking of the state law by a borrower from the city seems to of no interest to you.
Section 5.4Self-Dealing Transactions.
Except as provided below, the Board shall not approve a self-dealing transaction. A self-dealing transaction is one in which the Corporation is a party and in which one or more of the Directors has a material financial interest.
Are there not bigger fish here?
Why does the city continue to allow NP to be both banker and advisor, a clear conflict of interest?
The above comment was made by one of the above anonymous individuals. It is NOT correct. Neighborhood Partners, since its formation in 1998, has NEVER served as a banker for any of its projects. For DACHA, we asked the city for funds to provide share loans to the potential members (who could not come up with the $18,000 to $22,000 share price). City staff denied our requests. In order to help some of the DACHA households buy their share, David Thompson loaned his own personal funds to DACHA so that it could offer share loans. For example, a DACHA member might have contributed $5,000 of their own money and borrowed $15,000 from DACHA. David charged DACHA the exact same interest rate that DACHA charged the members. And the members earned that exact same rate on those funds when they left the cooperative. In other words, the funds cost the members 0% interest. Despite this fact, some of the residents accused David of charging exorbitant rates of interest on his loans. These same people would never have been able to move in to the cooperative without this share loan financing.
hmmmm, twin pines used to be run by yolo mutual housing association, now taken over by sacramento mutual housing association. jon berkely manages the complex and is the same “affordable” complex that will be bringing ‘New Harmony” to Davis. these guys are corrupt to the chore. just another reason to stop these so called affordable housing complexes from propping up all over the place. they say it will stop homelessness…it does nothing for the homeless and makes corrupt landlords and management companies rich. these guys often take grant money that’s supposed to be spent towards ‘resident services” and squander it for other things. nothing ever goes to the residents and the money is just “lost”. resident managers take it and spend it on clothes and makeup…
Hopefully, they know exactly what they’re doing and they also give considerations to the consequences of their actions. Thanks for sharing this and keep up the good work here. By the way, I know a real estate coach who could also help many in the real estate industry make money despite the current crisis.
As to Sue Greenwald’s comments above, where do I begin? I don’t have the time to give a comprehensive review of each time that I feel she has gotten the facts wrong, forgets that she was given specific facts before she voted, or gets some of the facts right but fails to mention other important facts that would explain the situation fully.
For example, above she says “… and consulting fees to David Thompson and Luke Watkins that they were required, by contract, to provide on an annual basis.”
The truth is that DACHA was never required to pay NP consulting fees, by contract on an annual basis. The DACHA board did agree to pay NP for administrative services that we provided to DACHA, but there was no contract to provide fees “on an annual basis”. They asked us to do work, and agreed to pay for that work, and so we did it. When the “new” board took over in late 2005, they felt that they could simply refuse to pay for work that the previous board had asked us to do, and that we carried out. Part of the arbitrator’s ruling was the statement that the new board had the “novel notion” that they could simply ignore the financial obligations that the organization agreed to before their time. When I read Sue’s comment, it seems to me that she was trying to imply that DACHA was required to pay NP unearned fees each year, for a number of years in to the future – which would be a gross distortion of the facts.
Another example from her comments above: She says “At that time, I was not aware that the membership costs would be running over $20,000 per unit.”
Well, there were three major clusters of DACHA homes (Tufts – 7 units, Albany – 5 units and Glacier – 6 units) approved by the city council. So in total there were three staff reports and three city council votes that were made. We provided specific budgets, including the share prices, for each of these clusters of homes. If Sue read the materials, how could she have missed the share price on three separate dates?
I believe that Sue was deeply involved in the effort to dissolve DACHA, because she wanted to make David and I look incompetent and/or corrupt. It seems to me that we have crossed her one time too many, and she appears to hold a serious grudge. Her comments last night were focused on disparaging our character, in a forum where we could not immediately respond. As you can imagine, the amount of respect that I previously had for her has significantly dissipated.
Was a loan of $4 million in taxpayer funds made to an entity with an unduly constituted board?
Was money borrowed from the city by an unduly constituted board which then turned around and refunded about $180,000 to themselves in contravention of state law?
Has there been a gift of public funds in the restructuring of the loan by providing housing at a cost of 80% of median income when most members earn 100-110%?
What about the lost income to the city of Davis of $5.1 million by setting the limit at a lower rate than before on behalf of people who do not qualify?
Now deserving community members will have to go without the help that $5.1 million can build.
And Sue Greenwald wants to pillory me about an interest free loan.
Sue you need to get answers to my questions.
I look forward to your answers to these questions to you as a Council member by this time next week.
[quote]I believe that Sue was deeply involved in the effort to dissolve DACHA[/quote]This is unadulterated nonsense. My most significant involvement with DACHA was during its inception, when Luke Watkins was lobbying me. At that point, I asked a lot of questions of both Luke and staff, and had reservations about the structure of the program. I ultimately voted to proceed with the project. I had very little involvement after that.
I believe that I met with DACHA board representatives once, at their request. I have not talked with DACHA since. When the issue of DACHA was brought before the council by staff, I read the material and voted. My involvement was limited to our noticed closed sessions and open sessions, and some questions of staff in preparation for the meetings. I have felt very concerned that the members of DACHA could be in danger of losing their member shares — equivalent to a down payment.
Aside from that, my major involvement with this project has been as a passive recipient of a truly massive number of e-mails from David Thompson complaining about the DACHA board.
My only concern is to resolve the DACHA issue successfully and fairly. Protection of the city’s affordable housing and fairness to the low-income tenants that it was established to serve, are very important to me.
David: After reading through the last few comments, do you still believe these issues can – or *should* – be resolved outside the courtroom? These guys make the Zax look reasonable.
My concern is the city’s involvement in this, and that will not likely be determined in a courtroom.
David Greenwald said: “Unless we determine the legality and then find a way to rectify the situation, I have very little reason to believe there can be a settlement.” …..and….”I couldn’t possibly disagree with you more. The determination of the issue of legality is a formality here. In the short term….”
….can’t have it both ways!!
David Thompson made an effective spokesperson for NP. His forceful certainty can be convincing, especially to those Council members who did not take the time and/or had little capacity and/or patience to understand the complexities of the affordale housing proposals that NP was pitching.
Hopefully,a worthwhile result of this DACHA fiasco as well as the Roosevelt affordable housing project fiasco,whose occupancy plan had to be changed in midstream, will be that Council will bring a greater degree of healthy skepticism and probing analysis to Neighborhood Partner’s future proposals.
Sue Greenwald: “Nevertheless, Luke Watkins and David Thompson lobbied me incredibly hard. They presented themselves as experts in cooperative housing, and argued that I should trust that they knew exactly what they were doing, and that this was innovative project that would work to the benefit of the low-income members.
I had long talks with staff, who told me that they shared my concerns, but nevertheless recommended that we go forward.
At that time, I was not aware that the membership costs would be running over $20,000 per unit – higher than the down payment made by many of our low-income limited equity houses.”
I agree with every reservation you had, so why in hell did you vote for it? Obviously hindsight is better than foresight, but the same thing is happening w Rancho Yolo – the city is continuing to hand over money to a very questionable project. Yet the CC keeps repeating their mistakes.
Sue Greenwald is overstating the number of emails she received from me. They are emails that she has received as one of the five council members. My emails have been about actions taken by the DACHA board that appear to break the law.
I have asked Sue to meet with me to go over the different charges. She has refused to meet. I have sent her materials about the allegations. I have sent her questions about what city staff should collect from DACHA that would show what has been going on. She has not apparently followed up. She has not replied to questions.
Was a loan of $4 million in taxpayer funds made to an entity with an unduly constituted board?
Was money borrowed from the city by an unduly constituted board which then turned around and refunded about $180,000 to themselves in contravention of state law?
Has there been a gift of public funds in the restructuring of the loan by providing housing at a cost of 80% of median income when most members earn 100-110%?
What about the lost income to the city of Davis of $5.1 million by setting the limit at a lower rate than before on behalf of people who do not qualify?
Now deserving community members will have to go without the help that $5.1 million can build.
So, I ask you as a council member, please get answers to the above questions?
David Thompson:
I have followed up with staff. I have asked detailed questions of staff, and have gotten detailed answers.
I have hesitated to meet with either you or with DACHA outside of formal channels, because of the ferocity of the ongoing litigation.
You have been a party two lawsuits which have been launched against this co-op that you set up — one through Neighborhood Partners of which you are a principle, and one through Twin Pines, of which you are the president.
Hence, I want any future discussions to be in the open and part of the public record, in order to avoid further he said/she said scenarios.
Again, I join council member Steve Souza in urging you and DACHA to come to a settlement.
Sue:
With all due respect, I don’t think discussions are going to get what you want. We need to find out the truth and the only way that is going to happen is if a neutral party looks at them. As far as I can tell, there are no neutral parties, except for perhaps the council and the council is not well equipped to perform this sort of task. That’s why I had urged the council to call for a third party investigation and I was disappointed that we fell one vote short of doing so. I believe that is the only way we will learn the truth. As I understand the issues involved, I think a settlement is unlikely and also will not get us to where we need to be in terms of sorting out the actions of the city.
So Sue to get things in the open please answer the questions I have asked you on this blog. I am happy to put all the information out there.
For over four years DACHA’s board refused to provide any information to TPCF and the city have refused to answer these questions.
Was a loan of $4 million in taxpayer funds made to an entity with an unduly constituted board?
Was money borrowed from the city by an unduly constituted board which then turned around and refunded about $180,000 to themselves in contravention of state law?
Has there been a gift of public funds in the restructuring of the loan by providing housing at a cost of 80% of median income when most members earn 100-110%?
Allow me to add another couple,
Were the corporate officers of DACHA who signed the loan documents with the city eligible to be board members under the by laws?
Were the officers who signed (under penalty of perjury) the changes to the Articles with the Secretary of State’s office eligible to be board members under the bylaws??
Sue, let’s get the important legal issues in the open?
I await replies in the open to my questions.
The arbitration was agreed to by both parties.
The arbitration hearing concluded on June 2nd. The arbitration award became official on June 21st.
We heard nothing from DACHA, we asked for and received no proposal.
On August 6th we attended on the matter in the Courtroom in Woodland. DACHA’s lawyer promised us that he would send us a written proposal.
He was one of three different lawyers who have represented DACHA but then the legal firm stopped representing DACHA.
We have asked DACHA’s new lawyer to send us a proposal.
We have been waiting (more than patiently) since June 21 (four months)for a proposal and we are still waiting.
[i]Hence, I want any future discussions to be in the open and part of the public record, in order to avoid further he said/she said scenarios.[/i]
But that is swinging between extremes. You can have meetings with a stenographer, or if you insist recorded meetings, without making them “in the open”.
Guys. The pissing contest needs to *stop*. Basically what’s going to happen is that 20+ working families are going to be tossed out on their collective ears if it continues any longer. If that happens, everyone — which is to say both the city of Davis, Neighborhood Partners, David, Luke, Sue — EVERYONE — is going to look like a bunch of elitist assholes conspiring to drive out folks who “aren’t good enough” for Davis. City will point fingers at NP, NP will point fingers at City, but at the end of the day nobody is going to care who’s really to blame, because it will have meant a bunch of middle-income folks were driven out of their homes. Davis is already the laughingstock of the region when it comes to a climate where the working class can actually live. Rental prices are practically equivalent to the Bay Area by this point, so unless you’re either a yuppie or a student with a rich mommy or daddy, you can’t afford to rent a house (god forbid buy!) and raise a family in this city.
Frankly, I think both parties have some blame. People are messy. There are probably some shady dealings on either side of this particular equation. WAKE UP. THAT’S LIFE. Let’s engage in a little harm reduction here and work out a solution in which Thompson can get his award and these folks who would not otherwise be able to afford to live in Davis can stay, work, pay taxes & participate in the city economy. I encourage Mr Thompson & Mr Watkins to bury the hatchet: engage in dialogue with DACHA. It sounds like DACHA wants to enter negotiation – what do you have to lose by talking? I mean, SERIOUSLY, what do guys you have to lose?
It’s amusing to watch the contortions that result when childlike socialist
ideology, common here in Davis, meets market forces
If I was an optimist I would hope that we would learn from this lesson.
Not likely however.
“We need to find out the truth and the only way that is going to happen is if a neutral party looks at them.”
The “truth” would reveal that ALL parties are culpable. The Agency will probably go with DACHA filing for bankruptcy and, as the first-in-line creditor, will revive DACHA in a restructuring. NP and Twin Pines will be well in the back of the creditor line in a DACHA bankruptcy proceeding. We will most likely see NP and Twin Pines negotiating to cut the best deal that they can to prevent a DACHA bankruptcy proceeding.
This matter is being handled through proper channels. I can give my personal view on a number of background issues, but in no way can I “negotiate” with anyone. I do not agree with the allegations embedded in David Thompson’s questions, but since he is party to two lawsuits which have been launched against DACHA, which is the co-op which he was instrumental in setting up and which the city subsidized, I cannot engage in detailed legal arguments. That is up the the attorneys.
I hope that DACHA does not go bankrupt. That is why we financed the restructuring that David Thompson and David Greenwald are questioning. If DACHA does end up bankrupt, there will be a line of creditors, and there are fiduciary responsibilities involved.
As to a “third party review”, I just don’t agree with David Greenwald. I have seen a number of “third party” reviews since I have been on the council, and I have found them to be no less biased and no more thorough or insightful than the first and second party reviews. Time is of the essence, since debts are piling up daily. A third party review would stall the process, but not stall the debt accumulation.
As to Mekkis’s comments: I care very much about the fate of the 20 families involved in DACHA, and that is why I voted for the debt restructuring.
Anon: I agree, all parties share blame here.
Sue: The idea that the same people who devised the plans would review them strikes at the very core of the issue of conflict of interest. Also, the purpose of the view would be to look into the city’s actions, I do not see how that impacts or delays the ongoing discussions between DACHA and TP.
We have been attempting to negotiate a resolution to this since late 2005 – nearly four years. After a year of being stiffed by DACHA, who refused to pay us even one dollar for services that we clearly provided, we were forced to unnecessarily spend funds on legal fees to file a law suit.
We had a right to demand immediate binding arbitration in early 2007. Instead we again tried to mediate with DACHA. Our attorney, Steve Boutin, whose office was in the same building as Harriet Steiner, and who actually had a parking space right near hers, made numerous efforts to enlist the city in solving the conflict. The city took the position that it was not their job to force a solution, even though they clearly had power as a lender to apply pressure.
In our formal mediation, I think in late 2007, at the end of a full day sitting in separate rooms, with the mediator going back and forth between the two parties, DACHA offered us $38,000 to settle. This was less than our legal fees paid at that point. Of course we were not going to accept what was a bad faith offer. Harriet Steiner, Danielle Foster and Jerilyn Cochran spent the day in that room with DACHA members; it’s hard to believe that they had nothing to do with the result.
We patiently waited about another year, asking for a real offer from them, at the end of which they offered $50,000 to settle. We subsequently counteroffered to settle for $120,000. Their next offer was to settle for $30,000. So we finally lost patience and moved to demand binding arbitration.
Sadly by the end of the arbitration process, we had been forced to spend more than $250,000 in legal fees, and they appear to have spent more than $100,000. The city council had a number of closed sessions with Harriet, so I suspect that they probably spent a great deal on legal fees as well.
Why did DACHA not settle for $120,000? It’s their own fault that they now face a $331,000 judgment, accruing 10% interest a year.
As to the relative lien positions of the city’s $4.15 million loan and our now $350,000 judgment (that 10% interest adds $91 each day, and then compounds at year end), we are not worried. The city executed loan documents with DACHA board officers who were not legally empowered to serve in their positions (since they were delinquent in their monthy charges). And the city staff attended DACHA board meetings,received financial reports and were familiar with the bylaws that required board members to immediately be disqualified from their positions when they fell behind in their month charges. In either bankruptcy court or foreclosure, we expect to invalidate the city’s deed of trust.
Since the arbitration award on 6/21, we have been waiting for a proposal from DACHA. On Tuesday, their attorney said that they want to negotiate with us, but its now Friday and we are still waiting.
Except for Lamar and Don, the city officials continue to say that they bear no responsibility for creating this mess. It will only be solved when they participate in good faith to undo the damage that they caused by fomenting this whole conflict. It’s a sad tale of the power of government bureaucrats to pursue a vendetta with relative immunity, financed by the public trough.
Unless I am mistaken, it is the Davis City Council that approves Neighborhood Partners affordable housing projects. Arguing that city staff is incompetent and that the Council was complicit in not doing due diligence will not be looked upon kindly.Neighborhood Partners role in Davis’ future affordable housing plans and David Thompson as Davis’ affordable housing guru is most likely about to change.
“….familiar with the bylaws that required board members to immediately be disqualified from their positions when they fell behind in their month charges.”
Do the bylaws explicitly state that they are immediately disqualified if they fall behind in a month’s charges or does it talk of having to be in “good standing”? If the latter, it will be up to a judge to decide what “good standing” means and whether he wants to rule in favor of the developers with the DACHA residents most likely losing most their meager financial resources.
Luke,
I read your post. I understand your position but I’m still going to ask you the question Mekkis posed a bit earlier: what do you have to lose by entering negotiation? Can you tell me?
Sure, you’ve waited. I understand that you’re getting impatient. I’m sure you’re aware that litigation takes time. But I think nobody’s going to win if you keep pushing so hard. DACHA wants to pay you your settlement. The problem is as I said to you personally on Tuesday: we’re just regular folks, unfamiliar with this kind of process and as such our members are pretty shell-shocked. We are having a hard time coming up with solutions as to how to pay you back. It would go a long, long way toward mending fences with everyone if you & David (and the relevant attorneys, of course) could meet with us and pitch some suggestions for repayment solutions to get us started. Please. We, especially the newcomers really, really want to hear them.
It’s either that or continue the acrimonious wrangling here, in the Enterprise and at City Hall. That’s only going to result in a loss for *everyone*.
There’s been no mention of the inherent conflict in Gail Madsen managing
DACHA: She and David Thompson have been friends for decades. She manages
the Leisureville co-op David set up. David wrote her a contract to work at city expense in Rancho Yolo to assess operating costs if Rancho Yolo became a co-op. She was paid, but the board said the report was not to be relied upon.
To Anon who asked about the bylaw language;
Section 5.6
(b)Any Director who is more than thirty (30) days delinquent in the payment of such Director’s Carrying Charges (as defined in Section 5.3) shall automatically be removed. The remaining Directors shall appoint a successor as provided in Section 5.5(a).
On June 30, 2008 the members were delinquent $64,000.
On June 30th, 2009 the members were still delinquent $22,000.
This after, a complete refinance, after having illegally refunded $180,000 of taxpayer funds to themselves, after lowering carrying charges to a rate that that most members are not eligible for, and bringing down the carrying charges to about an average of $1,100 for a single family home in Davis.
What is going on here?
“We have been waiting (more than patiently) since June 21 (four months)for a proposal and we are still waiting.”
DACHA is threatened with bankruptcy and is NOT the appropriate party to make the initial negotiating offer.. The appropriate start for opening the negotiations is what Neighborhood Partners, after taking into consideration many factors ($$ amount, its future in Davis as affordable housing developer, mounting legal costs, personal and professional reputations) is willing to settle for. The degree of “political” culpability that Neighborhood Partners can divert from themselves with this public attack on DACHA. city staff and Council will
play a large part in determining what their opening negotiating position will be.
The only one threatening DACHA with bankruptcy is the City. Why, I do not know?
Doesn’t this sound very much like the national real estate/financial crisis in microcosm with the Neighborhood Partners’ bringing DACHA to the brink of collapse to extract a “bail-out” from the city(Davis voters) for David Thompson’s failed financial “advice” as their mandatory consultant and then creating DACHA’s unsustainable loans??
Anon:
You’re such a caustic person, whose descriptions of the situation twist the facts to paint a picture that is not accurate, but allows you to make your adversaries look really bad. Are you Sue Greenwald’s less well known twin sister?
If you really believe what you are saying, then why not have the courage to use your real name?
“caustic”??? I thought that I was being quite measured in not directly impuning the character of the players here in what appears to me to be a likely narrative when one peels away the complicated tangle of legalisms and real estate/financial dealings.