Back in October, the Davis City Council opted against a third part review of city actions involving the refinance of DACHA by a 3-2 vote. The majority of council, opted instead to focus city efforts on saving DACHA which was in critical danger of defaulting on the city’s loan that could cause the homes to go into foreclosure.
Since that time the city has taken the additional step of initiating foreclosure proceedings against the residents of DACHA. This action could eventually mean that the residents lose their homes and the property and assets are dissolved in order for them to repay the city’s 4.15 million loan granted in June of 2008. DACHA has not been able to make its payments to the city on the loan due to a judgment against them by Twin Pines Cooperative Foundations who were awarded a nearly $350,000 judgment in June for breech of contract.
The Vanguard believes that city actions have placed this housing cooperative in peril. The Vanguard is baffled that the city has initiated foreclosure procedures that could put affordable housing residents out of their homes. The Vanguard’s investigation that ended in September suggested that it was city staff that put these residents in peril as they initiated and directed the refinance process.
A number of troubling issues were raised during public comment last week by Neighborhood Partners principles David Thompson and Luke Watkins. In particular the possibility that board members of DACHA engaged in self-dealing transactions in closed session seems troubling.
Luke Watkins from Neighborhood Partners read from the following minutes last Tuesday:
“At a subsequent board meeting on August 24, 2006, Sally was chairing the meeting, in her role as president. The meeting was held at the City of Davis Hunt Boyer conference room. The meeting was an “executive session” which means that only board members could be present. The following actions were taken:
1. The board voted to direct the management agent to enter into an agreement with one of the residents, whom we shall call “Alice” for this article, to pay an additional $90 per month toward her delinquent carrying charges in the amount of $4,703.07. Alice, who was the board treasurer at that time, was more than three months behind in her carrying charge payments.
2. The board voted to direct the management agent to enter into an agreement with another one of the residents, whom we shall call “Mary” for this article, to pay an additional $250 per month toward her delinquent carrying charges, plus an immediate payment of $6,000. Mary was not a member of the board.
3. The board voted to direct the management agent to initiate a court eviction action against another resident, whom we shall call Karen for this article. But Karen was going to also be offered an alternative option to voluntarily turn over possession of her share (which essentially means vacating her residence) and enter into a court stipulated payment plan. Karen was also not a member of the board.
4. The board voted to excuse Sally (the board president described above) from making any further payments on the approx. $13,000 share loan, and refund to her the amount of interest already paid.
5. The board voted to have DACHA refund a portion of the share amount to three of its DACHA members. This was done in response to a belief that these members had been charged too much for their shares when they had initially occupied their units. One of these members was a board member.”
Mr. Watkins then suggested that there are rules that govern these type of self dealing transactions.
“State law governing organizations like DACHA considers these to be “self dealing transactions”. The law requires that if a board of directors is engaging in a self dealing transaction, then it must notify each member of that organization that it is considering taking a vote on that self dealing transaction, with a thorough description of the proposed transaction, and that the entire membership be allowed to attend that board meeting. This law is intended to prevent the board of a homeowners association from secretly voting to charge themselves lower assessments than the rest of the association’s members.”
Mr. Watkins then alleged that these measures did not properly take place to deal with self-dealing transactions..
David Thompson raised the issue that the arbitrator had ruled that members of the DACHA board were not eligible to serve on the board due to delinquencies in payments.
Keep in mind the words of Kenneth Malovos, Esq, the Arbitrator approved by DACHA and NP and appointed by the Yolo County Court. This finding was provided to the City of Davis in June of 2009.
Role of the City of Davis
“What is curious is that representatives of the City of Davis were present throughout this entire time when the new board took these untoward actions and they did little to discourage the board.”
Actions by the New Board as to its Members
“Also the new Board forgave obligations to its member and did not pursue delinquencies, all of which worked to the financial detriment of DACHA.” (page 4)
“The new board allowed members of the Board to remain on the Board, even though some of them were delinquent with their payments in direct violation of its own bylaws.” (page 5)
So here we have the Arbitrator in June re-affirming that some board members were in violation of the bylaws. Yet city staff, having read the Yolo County Court document, continued to work with the DACHA board and officers who were illegally seated and in direct violation of the bylaws without taking any enforcement action required by their Regulatory Agreement. Why?
He continued:
“The board of DACHA borrowed $4 million in public funds from the City of Davis. However, the board that borrowed the $4 million money was composed of resident members who were not according to the bylaws eligible to serve and stayed on the board in conflict with California law.
The conduct of the DACHA board begs the question, “Can any board borrow $4 million from the city composed of a board not eligible to serve? City staff appeared to know the board were inappropriately seated but did not seem to mind lending them public funds. Where was the due diligence of the city as a lender?”
Mr. Watkins reading of the minutes makes the fact that board members were behind on their payments far less of a technical complaint. The allegation that they raise suggests that the board was willing to be more lenient on those members on the board than members who were not on the board. We see this in the differential treatment between Sally (the board member) and Mary (not on the board).
These allegations raised during public comment were deemed serious enough for Mayor Asmundson to respond on behalf of staff who accused of being present at the meetings when these decisions were occurring.
Mayor Ruth Asmundson reading from notes responded to public comment:
I would like to clarify some of the comments made during the public comment period. In terms of these DACHA special board meetings held on August 24, 2006, at Hunt-Boyer conference room, I double checked this, our staff, Danielle Foster wasn’t at the meeting. This was an executive session meeting which was supposed to be a closed session. Our Staff Danielle Foster wasn’t at the meeting.
Danielle Foster clarified:
“I was at the meeting, I wasn’t in there when they were discussing those items. I wasn’t in during those items in the executive session.”
The Mayor continued,
“In terms of the loan that was provided by the city to DACHA, the loan was made, I believe when the litigation started… The direction of the council to staff was that council was providing the loan but in no way any part of this loan was going to be used for the litigation or part of that use in the litigation.”
Harriet Steiner:
“My understanding was that the redevelopment agency approved the loan it was specifically done on the provision that it would not be used for litigation or settlement expenses. But rather to refinance both the structure and the outstanding loans of DACHA to attain affordability. That’s what the redevelopment agency did and that’s what staff did to implement that based on the direction that we got from the agency both in public through staff report and through closed session. So the agency’s refinance of the DACHA process went through and included the refinancing of numerous loans that were outstanding as well as the share stabilization which is what was referred to earlier.
The reason I wrote the memo that we wrote, which came to council yesterday, was because my understanding of council’s direction from last month was to answer the question of whether or not there was any risk to the agency’s loans by reason of whether or not DACHA board members were appropriately seated or not. That’s the question that we answered for the council.
Obviously if council wants additional investigation into status of DACHA either four years ago in 2006 or today, either staff or an independent person can undertake that investigation. In large part, the staff does not manage the internal relationships of the different non-profits that run the different affordable housing projects.”
And that begs the question, at least from my perspective, why is council not wanting an investigation here? Three council members determined in October that the council should not look at these charges more closely.
The real question from our perspective again is not what happened between DACHA and the Neighborhood Partners. There was an arbitrator ruling on part, there is a pending court case on another part.
The question for me is what is city staff’s job in terms of oversight particularly when the city has loaned $4 million.
Again, this is not an academic exercise. These actions have in fact put the city’s $4.15 million loan in jeopardy to the point where the city is initiating foreclosure procedures.
The city made this loan around the same time as the litigation began according to Harriet Steiner. A city staffer was attending meetings in the summer of 2006 before any of this began, so there was city involvement even at that time.
In June, Twin Pines won the arbitrator’s judgment of $350,000 and put a levy on DACHA’s assets in order to collect that judgment. At that point, DACHA fell behind on their loan repayments. The city then in December initiated foreclosure proceedings against DACHA in order to recoup the loan.
If city staff knew that the board was inappropriately seated, and on that point we have the arbitrator’s ruling, why are they recommending a loan from the city council?
At the end of the day, to me it seems that the city is not investigating in order to protect itself from possible fallout from this growing scandal. The question will be how long the city can continue to ignore this problem. Even during discussion at the last meeting there seemed to be growing consensus that something ought to be looked into but to this point there is no formal inquiry.
—David M. Greenwald reporting
Dear David:
Thank you for the very factual article.
One change that should be made is that the $331,000 legal award was to Neighbourhood Partners, LLC not Twin Pines Cooperative Foundation.
I have added another element which clarifies the timing of certain activities.
The City lent funds to DACHA first in 2002 and with those funds came a Regulatory Agreement that required DACHA to follow state law and its own bylaws. Most of the violations occurred under that Regulatory Agreement.
The meeting in August 2006 occurred under that Regulatory Agreement. Here is additional information about the role of the City Appointee at that board meeting. It is interesting that in appointing him to the board the Mayor, Ruth Asmundson, on behalf of the City of Davis wrote, ”Mr. Gianola will attend Executive Board sessions and he will actively participate as a member of the DACHA board, reporting information back to the city and staff as appropriate.”
John Gianola, the City Appointee to the board was present for the entire meeting. Mr. Gianolo was then also the Vice President of DACHA. He in fact made or seconded the motion for most of the violations that occurred.
In that same city letter in the next paragraph the city wrote,”Danielle Foster, the city’s Housing Coordinator will continue to play an active role with DACHA and its board, and will also be provided as the direct contact for Mr. Gianola”.
The resident members of DACHA began taking board seats in 2005. By 2006-08 every resident board member was at one point in some cases, always in others, more than 30 days behind in carrying charges making them ineligle to serve. The board that worked with the city staff on the refinance in 2007-2008 was therefore unduly constituted as members were ineligible to serve. From the minutes of the 2006 board meeting, the city staff and City Appointee to the board knew by the board actions taken and from the rent rolls that that board members were ineligible to serve. So for two years before the city made its next loan of over $4 million in public funds available the city staff knew of this information.
The $4 million plus refinance in public funds was completed in fall of 2008. I believe the $25,000 advance from DACHA’s corporate funds to DACHA’s new lawyers was made in summer of 2009.
David and David
how many TOTAL homeowners were on arrears during this time. Was this more common with the DACHA board VS total owners?
What was the role of Gerilyn Cochran and what was the role of Danielle Foster?
And what role did NP have at the beginning, e.f. At the BEGINNING should the project have been designed differently?
Thanks. In watching the CC workshop last wk, congratulating each other on what success ‘we’ have had, I was in disbelief, another case of CC majority/staff disconnect with the people’s view.
Dear SODA:
There appear to be four or five board members in place in June 2008 and most of them appear to have been the officers, President, Vice President, Secretary and Treasurer. (This period was when much of the refinance of $4 million in public funds occurred).
At that time, the board members were delinquent to DACHA almost 40% of the total. The average amount owed by the board members was over twice as much as the non board members.
In March of 2009, even after the generous refinance and costs for a three bedroom DACHA home now lowered to about $1,100 (the average three bedroom apartment in Davis is $1,791 UCD Annual Study) the board members were now 50% of the total delinquencies.
At this time city staff recommended that the City Council approve a loan of public funds. Yet city staff had the evidence that DACHA was breaking state law, the City’s Regulatory Agreement, and their own bylaws; they had the evidence that the board members were illegally seated and that the board in particular, and the 20 or so members in general were woefully delinquent to the tune of $64,000 in June of 2008. Where was the due diligence of city staff in their report to the City Council?
Keep in mind that the DACHA management company had reviewed the finances of every applicant according to the city income requirements and found the applicants meeting the city income eligibility. And that the city staff required that they approve every DACHA member as meeting the income requirements. So everyone that moved in was approved by city staff.
As to the beginnings of DACHA I will post to that later. Suffice to say, if our advice to the city had been listened to in 2003 and 2004 none of us would be in this problem.
Thanks David T
if all moving in were ‘qualified’ by city and NP, why were they in arrears?
Dear SODA:
Good question?
However, clarification. The income qualifying for the DACHA applicants was done first by the John Stewart Company JSCO (one of the largest housing management companies in California. They were hired by the DACHA board to qualify households in conformity with the city established requirements and standards. JSCO then took the applications that met the city requirements to city staff. City staff then reviewed the applications and either approved or did not approve the applications. The city approved applicants were then eligible to move into DACHA.
NP played no role in the income application process.
Gunrock said:
“STOP PRETENDING THIS HAS ANYTHING TO DO WITH HELPING POOR PEOPLE!!!”
Awomen to that Gunrock. You’re absolutely right, it has the veil of helping poor people which satisfies liberal desires, but in all actuality, it’s has EVERYTHING TO DO WITH HELPING RICH PEOPLE — which satisfies right wing republican desires…
so in actuality, the only reason why the affordable housing scam got approved is because republicans know how to disguise something as “good for poor people”.. they are wonderful crafty liars…
republicans are the scourge of society..whether they disguise themselves as liberals or they are outright repubs…they have got to go..