Action Puts in Jeopardy the Homes of Affordable Housing Residents for Little Good Reason
Action Puts in Jeopardy the Homes of Affordable Housing Residents for Little Good Reason According to the notice which was filed on November 19, 2009, they have three months to pay $59,427.28 or face the sale of the property without court action. In addition, they must make other normal payments as well.
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.
This information was brought before council on October 20, 2009, however by a 3-2, they opted against third party review. Instead, 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. 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.
From the start there was a strange nexus on this issue, because during the course of the meeting, the focus seemed to be on recouping the city’s loan rather than get to the bottom of what went wrong or even insuring that the residents of DACHA–affordable housing residents–did not lose their homes. in short, the priorities of council seemed odd.
What had happened was simple, DACHA had been taken to court by Twin Pines Cooperative Foundation. In binding arbitration, they were awarded nearly a $350,000 judgment. Twin Pines was able to levy against the cooperative meaning the cooperative fell behind the city in terms of their repayment of the loan.
According to the city staff report, DACHA was current in its payments on the loan up until September. However the nearly $350,000 arbitration ruling against the organization and subsequent levy on their assets by Neighborhood Partners has put the organization at risk. They missed their October payment.
One of the key issued the Vanguard has raised is the matter of the repayment to the members of the share payment. Each member upon entry was required to pay over $21,000 into the organization. Many could not afford the share payment and therefore borrowed the money. The refinance worked to reduce both the share payment from $21,000 to $6,000 as well as the monthly carrying charge.
One of the reasons for the California Health and Safety Code is to protect the corporate assets. The record shows that more than $200,000 was transferred from DACHA back to its members, had that money stayed with DACHA, DACHA might not be in danger of foreclosure now and they could have paid off a majority of the judgment against it.
The action taken by the city does not make any sense unless their goal is to rid themselves of DACHA altogether without regard to the welfare of the residents.
At the time of the council meeting, the council had urged the two parties to sit down and work out a payment arrangement on the judgment against DACHA. There seems no logical reason that the city would need to foreclose on this property when payment plans and deferrals would make far more sense and would not mean people having to leave these homes.
In an angry letter from David Thompson, a principle at both Neighborhood Partners and Twin Pines Cooperative, he asked the city to “rescission of the foreclosure on the December 8th Council meeting and we ask you the Council members to rescind this staff action at the meeting of December 8.”
He writes:
“Neither NP nor TPCF has threatened foreclosure. We both believe there are other options that do not mean people leaving these houses. It seems city staff is the only one who brings up foreclosure. We cannot understand why the city would take this action against the members of DACHA when other options have not been reasonably explored.
In August, DACHA’s lawyers said they would have a proposal to NP about how to pay our judgment. Our lawyer has repeatedly asked DACHA’s lawyer for a proposal. Last week Marty Steiner did say he was working with the board and would get a proposal to us soon.
It seems a lack of good faith for city staff’s action to be taking place when we are awaiting a proposal upon which both DACHA and NP can begin discussions.”
He also questioned as to why Neighborhood Partners was not informed of this action until December 8, 2009.
The entire event sounds a bit odd. The city council from the start was largely unwilling to examine the role in city staff played in this and more importantly took questionable legal advice from City Attorney Harriet Steiner.
The latter is not unsurprising, what is unsurprising is that the city would initiate foreclosure procedures here when the city’s loan was not in jeopardy. Why has the city taken the position that protecting that loan is more important that preserving the project and these people’s homes. That makes no sense at all.
—David M. Greenwald reporting
“Why has the city taken the position that protecting that loan is more important that preserving the project and these people’s homes. That makes no sense at all.”
while admittedly not knowledgeable in the intricacies of the law in these matters, my guess is that this is to “encourage” NP and TPCF to negotiate a change in the payment schedule(and amount?) that was awarded to them. The city IS NOT going to turn the DACHA residents out onto the street! DACHA may very well end with the foreclosures and a new entity created which will not have the debt obligations of DACHA to NP and TPCF. The courts have the power to order awards but foreclosure(DACHA bankcruptcy?) may make the award meaningless.
What makes no sense at all is the failure of the parties – DACHA and NP/Twin Pines – to come to some sort of payment agreement that allows the co-op to stay intact. The more I read about this, the more it looks like the City made a concerted attempt to clean up someone else’s mess and got slammed for the effort. It’s all here in this [url]Council Packet (.pdf)[/url].
I’ve watched the October 20th Council Meeting, and I think that your angle is a bit off here, Mr. Greenwald.
To say that “the focus seemed to be on recouping the city’s loan rather than get to the bottom of what went wrong or even ensuring that the residents of DACHA–affordable housing residents–did not lose their homes” seems off the mark to me…rather, I think that the City’s choice not to spend City money and time nit-picking the problems with DACHA was part-and-parcel of a commitment to move forward in helping DACHA residents.
An independent investigation wasn’t suggested, it was put forward as a DEMAND by David Thompson…who to my understanding is currently suing DACHA doubly: on behalf of Neighborhood Partners, his private business, AND as president of the Twin Pines Cooperative Foundation. This lawsuit (which furthermore is the second lawsuit carried out by Thompson against DACHA) makes no sense from what I can tell, other than to police DACHA and possibly drive them into the ground.
Watch the minutes: the Council considers Thompson’s demand for an independent investigation (which would benefit him as plaintiff in his lawsuits); Lamar responds by asking how much such an investigation would cost…answer: $25-30k. I’m sure that we can all think of much better places to put that money. We know that mistakes were made, or DACHA wouldn’t be in this mess. If the City were in danger of some kind of legal liability then I’d say: by all means go for it. The City attorney has responded on this, however, and the conclusion is that liability is a non-issue.
So I’m with the Staff and Council (and DACHA!): revisit the problems with DACHA as part of Affordable Housing’s planned review, and in the meantime focus on the solutions!
To say that “the focus seemed to be on recouping the city’s loan rather than get to the bottom of what went wrong or even ensuring that the residents of DACHA–affordable housing residents–did not lose their homes” seems off the mark to me…rather, I think that the City’s choice not to spend City money and time nit-picking the problems with DACHA was part-and-parcel of a commitment to focus on the path ahead and move forward in helping DACHA residents.
An independent investigation wasn’t suggested, it was demanded by David Thompson…who not only created DACHA, but to my understanding is now suing DACHA doubly on behalf of Neighborhood Partners, his private business, AND as president of the Foundation he controls. This lawsuit (which to clarify is the second lawsuit carried out by Thompson against DACHA) makes no sense from what I can tell, other than to police DACHA and possibly drive them into the ground.
Watch the minutes: the Council considers Thompson’s demand for an independent investigation; Lamar responds by asking staff how much such an investigation would cost…staff’s answer: $25-30k. The Council then votes 3-2 against an independent investigation, and to focus on the future.
I’m sure that we can all think of much better places to put $25,000. We know that mistakes were made, or DACHA wouldn’t be in this mess. If the City were in danger of some kind of legal liability then I’d say by all means go for it. The City attorney has responded on this count, however, and the determination is that liability is a non-issue.
So I’m with the Staff and Council (and DACHA!): revisit the problems with DACHA as part of Affordable Housing’s planned review, and in the meantime focus on the solutions!
This is the recent letter NP sent to Council. By the way David, you interchanged TPCF for NP in the later part of your article about the judgement.
December 8, 2009
Dear Mayor Ruth and Council Members:
Yesterday we received notification through the mail that the City initiated “Foreclosure” on DACHA on November 19, 2009.
We cannot understand why city staff would be initiating “foreclosure” and we raise a number of questions.
Why did city staff initiate foreclosure when payment plans and deferrals would be more appropriate?
There were we believe, numerous occasions previously when DACHA has been behind and no foreclosure action was taken. Why this time and not before?
Why was Neighborhood Partners LLC not informed until December 8th of this action?
Neither NP nor TPCF has threatened foreclosure. We both believe there are other options that do not mean people leaving these houses. It seems city staff is the only one who brings up foreclosure. We cannot understand why the city would take this action against the members of DACHA when other options have not been reasonably explored.
In August, DACHA’s lawyers said they would have a proposal to NP about how to pay our judgment. Our lawyer has repeatedly asked DACHA’s lawyer for a proposal. Last week Marty Steiner did say he was working with the board and would get a proposal to us soon.
It seems a lack of good faith for city staff’s action to be taking place when we are awaiting a proposal upon which both DACHA and NP can begin discussions.
We are astounded that neither the City nor DACHA informed us of this action while we are waiting in good faith for a proposal.
We request the City Council to put rescission of the foreclosure on the December 8th Council meeting and we ask you the Council members to rescind this staff action at the meeting of December 8.
Let us remove this unneeded and unwarranted action and the concomitant fear from the minds of the DACHA members.
Allow DACHA to make its proposal and let the two parties work toward a solution.
David Thompson for
Neighborhood Partners, LLC.
The Twin Pines Cooperative Foundation (TPCF) is a Davis based nonprofit tax exempt entity that hosts programs for over 30 co-ops throughout the USA. We are the largest investor in cooperative development organizations in the country. We take seriously any effort by our program partners or our borrowers to break the law or to take the corporate assets of TPCF and turn them into private gain.
TPCF is participating in developing a program to ensure that we can take legal action to have organic farmland remain organic just as we are pursuing DACHA upholding the law on cooperatives, nonprofit law and the Davis Stirling Act in California.
The former DACHA board took various actions which were a breach of the agreements that DACHA had with TPCF and a breach of cooperative law, the Davis Sterling Act and nonprofit law in California. The original intent was to remove TPCF as the recipient of value were DACHA to be dissolved. That attempt if successful would take $4 million dollars of value away from a nonprofit and turn it into private gain for the DACHA members. As a first step the DACHA board has removed TPCF as the recipient. It’s the age old question, “follow the money”.
DACHA tried to get the TPCF case kicked out but the Judge ruled that our claims had merit. DACHA was supposed to have legal documents back to us with board verification by last August and still have not done so.
Discovery recently obtained shows that over the past four years only one board member was eligible to be legally seated. The DACHA bylaws require that a board member must be automatically removed if they are behind in their carrying charges more than 30 days. In June of 2008, the DACHA members were behind $64,000 in carrying charges.
So you have an unduly constituted board composed of ineligible board members signing documents (some under penalty of perjury) with the City of Davis and the State of California to obtain over $4 million dollars of taxpayer/public funds.
The city staff has this information or should have the information and has not divulged these facts in public to the City Council.
However, the documents signed with the City of Davis require DACHA to uphold state law and their own bylaws. And the City of Davis has a right and a duty to enforce California law. Though provided with the information, the city staff has not taken any action.
Having helped win passage of the law creating limited equity housing cooperatives in 1979 I have an interest in the law being upheld. The actions taken by DACHA are the first attempt in 30 years by a co-op to evade the law. TPCF has a strong interest in rectifying the situation.
I think every tax paying citizen in Davis has the right to have their City Council uphold the law especially when it comes to the use of over $4 million in public funds.
Do we have an illegal board committing illegal acts? And if so should the public not know and should the City not act?