|| May 14, 2009
|| Nancy Buonanno Grennan
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
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
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.