An item appears on the consent calendar that would authorize the Successor Agency to the Redevelopment Agency to allocate an additional 275,000 dollars for legal expenses over the fiscal year 2012-13.
This amount apparently covers expenses from the fiscal year 2011-12. According to the staff report, “The requested adjustment budgets funding for project legal expenses of the Successor Agency related to an ongoing enforceable obligation due to continuing litigation regarding the Davis Area Cooperative Housing Association (DACHA). This activity was approved as an enforceable obligation by the Department of Finance (DOF) as part of the Recognized Obligation Payment Scheduled (ROPS) III.”
The staff report argues, “This expense qualifies as an enforceable obligation because without legal representation, the Successor Agency could become legally vulnerable and/or could default on pending litigation that remains from the now dissolved Redevelopment Agency.”
The item comes as the plaintiffs in the lawsuit against the city have made a new offering, hoping to put to rest the lengthy legal dispute between the city and principals for Neighborhood Partners and Twin Pines Cooperative Foundation over DACHA.
John Higginbotham, of Best, Best & Krieger located in Riverside, is now representing the city on this matter. He told the Vanguard on Monday that the plaintiffs have recently offered to settle for $875,000. The matter is scheduled for city council consideration in closed session at the November 27 meeting.
The Vanguard was unable to reach David Thompson, representing Twin Pines, for comment. The Vanguard reached Luke Watkins who told the Vanguard that it was their opinion that the Vanguard covered the issues sufficiently in this article and that they had no need for additional comment.
The current cost to the city is subject to dispute. David Thompson has long maintained that the city has spent over $800,000 defending itself on the DACHA issue. The city, using somewhat different metrics – looking mainly at direct expenses only – argued that from 2007-2011 they had spent about $430,000 and most of that from April 2010 to December 2011.
In March of 2012, the city responded to a Public Records Request by the Vanguard to account for city legal expenses to DACHA.
“The City and Agency were sued by Twin Pines in April 2010 and by Neighborhood Partners in March 2011. In 2007, the City voluntarily participated in mediation with DACHA and Neighborhood Partners that, unfortunately, did not result in a settlement of the DACHA/Neighborhood Partners dispute,” the city attorney reports.
She continues, “In 2008, the Agency refinanced all of the DACHA secured debts culminating in a $4 million secured loan to DACHA.”
In 2009, Neighborhood Partners was awarded $331,000 against DACHA. DACHA went into default on its loan after Neighborhood Partners levied on and emptied DACHA’s bank accounts.
On July 1, 2010, the RDA foreclosed on the DACHA units to safeguard the public funds loaned to DACHA.
“2011 costs include litigation expenses and other legal services related to DACHA. No other legal fees were expended by the City and the Agency,” Harriet Steiner told the Vanguard back in March 2012.
David Thompson now places the figure at over one million, counting a number of other expenses as related to DACHA.
The $275,000 on the consent calendar represents the fiscal year 2011-12 figure and it appears about $110,000 of that was spent in the first part of the fiscal year ending December 2011. That would appear to put direct legal expenses at $600,000 by June 30, 2012.
On March 8, 2012 all five councilmembers at that time, including Sue Greenwald and Stephen Souza who are no longer on the council, wrote an op-ed in the Vanguard and Davis Enterprise presenting another settlement offer.
They noted in April 2010, “Prior to the City foreclosing on the DACHA units due to delinquency on mortgage payments due the City, Councilmember Stephen Souza, on behalf of the City Council, conveyed a settlement offer to Neighborhood Partners and Twin Pines of $300,000.”
They argued, “This settlement offer would have enabled DACHA to pay off the remaining amount due on Neighborhood Partners’ $331,000 arbitration judgment against DACHA along with some interest.”
However, as the Vanguard reported at the time, regarding the offer as presented by Stephen Souza on the Vanguard, “Councilmember Stephen Souza made clear in an email that this was his doing, not the City of Davis or the Redevelopment Agency.”
“In the interest of looking forward not backward and everyone buys their peace and then walks away, I, not the City or Agency, put forward a framework for settlement,” Mr. Souza wrote.
“On January 27, 2012, the City again offered a settlement, this time for $280,000. The City feels that this offer is more than reasonable, since nearly two years of additional attorney’s fees have been accumulated to the detriment of the City’s Affordable Housing program and, unlike the April 2010 offer, this offer cannot preserve DACHA because the City now owns the DACHA units and the DACHA Board is pursuing full dissolution of the co‐op,” the council wrote earlier this year.
They continue, “Neighborhood Partners and Twin Pines have turned down this settlement offer as well, but the City has re‐extended the offer in hopes of reaching a reasonable settlement. This is a critical time in the legal disputes, as significant expenses will be incurred by all parties in upcoming months if Neighborhood Partners and Twin Pines continue to press their cases via litigation.”
David Thompson and Luke Watkins turned down the offer, in part because it did not include a settlement to Twin Pines. Some on the council objected that Twin Pines had no discernible damages, but David Thompson told the Vanguard that it would naïve of them to expect Twin Pines to drop their contentions and illegal of him to convince the non-profit to do so because he received a personal settlement offer (as a principal of Neighborhood Partners).
There is no doubt that the $875,000 price tag is steep. However, the newer councilmembers seem more willing to cut a deal with Twin Pines and Neighborhood Partners than the previous council was.
Moreover, if this case continues to drag out, legal expenses will continue to mount for the city. As noted above, it appears well over $600,000 is probably the current price tag. We would estimate this will drag out at least another two to three years.
The Vanguard is not necessarily recommending the city settle at the current offer, but rather that the legal teams from both sides sit down with the intention of coming to a mutually acceptable settlement range. We believe that will save both sides money in the long run.
—David M. Greenwald reporting
This version was updated to reflect the fact that Luke Watkin of Neighborhood Partners declined to comment citing the sufficiency of the article.
This is a bit off topic, but to the wider issue of the city’s role in affordable housing. I biked to campus earlier this week, past the coop housing on the bike path in S Davis, ? Pacifico, and it looked very empty-maybe only a few units occupied.
Although I would be happy to get DACHA behind us, the larger issues are what the city (and taxpayer’s) role is AND what went wrong in the DACHA mess. I think we could learn from the latter to help the former. I liked Steve Souza’s idea of helping with loans but not being in the builder, development lender or landlord business.
…….wonder if someone will take it off consent??
Over the years I’ve seen the books on multiple “affordable” housing projects and they are never “affordable” to the taxpayer. Most are just schemes to funnel taxpayer money to politically connected managers, developers, attorneys etc. and end up costing FAR more than just giving poor people the money to rent nice apartments or nice home available from private landlords in a town.
If the city really wanted to help make housing affordable they could just subsidize poor people every month who could then use the subsidy to rent a home or apartment rather than paying millions to build fancy new buildings, paying millions in legal fees and management fees to manage the fancy new buildings (or set up complex “co-op” agreements that rarely work very well).
The Davis Enterprise wrote earlier this year that about half of the 20 DACHA homes were vacant and that at least one home was vacant since 2009. The Pacifico Co-Op that SODA mentions had been over half empty at many times over the past 10 years and I’m pretty sure it has not been over 70% full in at least a decade. Doing the math on DACHA at half empty for the past couple years that is about $375K in lost rent and Pacifico had had at least $1.5 Million in lost rent due to vacancy over the last decade.
It will be interesting to see if David can find out how much the city actually spends (and loses to vacancy when the inept management can’t fill a units at below market rates in a town with a vacancy factor that has averaged under 2%) per unit per month on “affordable” housing (maybe he can ask the advertiser on this site who I’m told gets paid to “manage” some of the units).
The units were filled in August and the city is making between $1100 and $1200 per month, per unit.
Affordable housing is not.
[quote]Most are just schemes to funnel taxpayer money to politically connected managers, developers, attorneys etc. and end up costing FAR more than just giving poor people the money to rent nice apartments or nice home available from private landlords in a town. [/quote]Ya think? Look towards those who have/will make ‘livings’ and/or ‘windfalls’ from this. Sorry, Luke and David.
David wrote:
> The units were filled in August and the city is making
> between $1100 and $1200 per month, per unit.
It makes sense that the city is “charging” $1,100-$1,200 per month, but they are probably not “making” $1,100 to $1,200 per month when just the “most recent” legal “allocation” of $275K is more than the total gross rents of all the DACHA homes over a full YEAR…
P.S. Any idea how many million had been spent so far to build the new “affordable housing taj mahal” on Cowell Blvd. in South Davis?
SouthofDavis…. I have some familiarity (not ‘intimate’) with the New Harmony project (your referent?), and it seems to be very “legit”, particularly compared to other AH projects… I will say that I live reasonably near to “for sale” and rental AH projects… in my opinion, they are well run, clean, and a welcome part of the neighborhood.
I wonder whether Lucas F. will recuse himself. He was intimately involved helping David Thompson at the time all this DACHA stuff was
going on.
David has suggested that he tells the Board of Twin Pines how to vote.
This doesn’t sound like a legitimate non-profit board.