Plan Would Have County take on $40.5 Million in Housing Authority Debt, and Give County Direct Control over Harborside Condominiums

(Port Orchard, WA) – Kitsap County will assume direct responsibility for more than $40 million of Kitsap County Consolidated Housing Authority debt under a plan that will be up for approval before the Board of County Commissioners at the Board’s Monday, May 18 meeting.

Key terms of the plan include securing deeds of trust for housing authority properties and ensuring County control over sales of the properties. The Commissioners also will consider approving a policy limiting the County’s ability to enter into contingent loan agreements in the future.

In 2005, Kitsap County entered into a contingent loan agreement requiring the County to loan the Authority money in the event the Authority would be unable to pay the loans needed to build the Harborside Condominiums in downtown Bremerton. In 2004, the County had entered into a similar arrangement for the Poplars Apartments. These loans have or will shortly retire and because of the economic downturn and implosion of the credit markets, the Authority is unable to restructure or repay the loans. As a result, the County has been asked to perform on its legal obligations to loan the Authority the funds necessary to pay these debts.

To meet those legal obligations in a way that minimizes the exposure of the county’s taxpayers, the County is entering into an agreement with Bank of America and the Housing Authority to assume direct liability for the debt the county guaranteed.

This arrangement will give the County direct control over several key assets, including the Harborside Condominiums. It will allow the County at least four years to sell the assets; during that time the County is free from making payments on the loan, a key term to the County at a time when it has had to make cuts across the government because of its own revenue shortfalls.
The four year term means the County has a good chance of selling during more favorable market conditions, and thus reducing any balance it may ultimately need to pay by April 30, 2013. It also gives the County control over timing, pricing and marketing of the assets.

Some of the conditions of the financing arrangement in which the County will assume $40.5 million of debt, include:

• The County will assume $31.09 million worth of the Authority’s Harborside Condominium debt, including the $22.2 million due to bondholders August 1, 2009, ensuring bondholders will be paid in full and $8.89 million in bank loans or lines of credit. The County is borrowing an additional $4.32 million to ensure it can absorb the carrying costs of the condominiums for up to 4 years – including homeowner association fees, interest payments for the loan and other transaction costs.

• The final $5.09 million represents the debt the Authority incurred in its acquisition of the Poplars Apartments. The apartments have provided safe housing opportunities for seniors aged 62 and older with extremely low incomes. The Authority acquired this property as part of the replacement housing strategy for residents at Westpark Public Housing, owned and managed by the Bremerton Housing Authority.

• The County will have the right to direct and manage the sale of specific properties, including the Harborside Condominiums, the Sinclair Lot and Tree Tops Apartments. Additionally, the County will retain a property manager with full authority to act on behalf of and direction of the Board of County Commissioners and will benefit from any and all rental agreements.

In taking on the Authority’s debt directly, in addition to minimizing the impact to its own core county functions, the County Board of Commissioners ensured the continued viability of the Authority within its core mission of providing affordable housing opportunities. To that end, it reached a separate agreement with the Authority that ensured the Authority would prepare and provide the County with a balanced 2009-2010 operating budget, focusing on its core mission, no later than July 31, 2009. Finally, the County Board of Commissioners is considering a resolution limiting the county ability to enter into contingent loan agreements in the future.

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To contact the Public Information Officer, 
call Doug Bear at 360-337-4598 or email: dbear@co.kitsap.wa.us