Friday, October 13, 2017

More Questions About the Golden ARCHES Project

ARCHES Madison Street - 6,900 SF for $6,016/mo
Late last month, the CAA Board of Directors was asked to approve the minutes of two "Special Email Meetings", said to have been  conducted on May 16 and June 27, 2017.  The meetings' purpose was to approve the terms of purchase of the property at 615 Commercial Street.

The May 16 minutes indicate CAA CEO Jon Reeves asked the board to approve an offer of $2.1M (up from the maximum of $2M approved in March), with $.5M down (up from the $.4M approved in March), $.5M in contributions from unnamed partners, and the remaining $1.1M financed by the seller at 5% over 25 years.  The reason given for the email meeting was that the offer had to be made by May 18.  The board approved the arrangement  unanimously.  The action was not ratified at the May 22 Board of Directors meeting, or its June 22 meeting, or its August 24 meeting.

The minutes of the June 27 email meeting indicate that Reeves asked the board to approve financing the entire $1.6M at 6%, also over 25 years.  The reason given for the email meeting was that CAA needed to close on the property by COB June 30th (even though the board had known since March that closing had to occur by June 30th).  The board approved the arrangement unanimously.  The action was not ratified at the next meeting of the Board of Directors, August 24, 2017.

10-Yr Note
According to the deed of trust filed on June 29 to secure the seller's $1.6M interest, the debt was not financed over 25 years, but 10 years.  There are no records indicating that the Board of Directors was informed that the debt was financed for a term of 10, as opposed to 25, years, although it is a matter of public record and was reported by the Salem Weekly over the summer.  

25-Yr Note
The building, which has been empty for years, was constructed in 1949, according to property tax records, and upgraded in the 1980s.  No  investor is going to give a 25-year mortgage on a building that's already 70 years old.  Certainly not seller Duane Young, who's older than that himself.  So, why didn't Reeves just ask his board to agree to a 10-year term?  Was it because he didn't think they'd go for the increased monthly debt service?  Almost eighteen thousand a month is heavy lift for any small business.

In the end, by a process unknown, Reeves agreed to pay the seller two, quarter-million balloon payments, one by the end of next year, the other by the end of 2019.  In that way, Reeves kept the monthly debt service at around $10K/mo, just what it would have been under a 25-year term.  If the board agreed to this arrangement (which you'd think they'd have had to), the action doesn't appear in the published record of CAA meetings.  

"Unavailable" at CAA
We'd like to tell you how CAA's process for email meetings works, but after several requests for a copy of CAA's bylaws, Jon Reeves told us they were "unavailable."  When we asked him what that meant, he refused to answer.  When we asked for the bylaws as a public record, he said they weren't a public record.

Now what would make a CEO of a non-profit that's funded almost entirely by state and federal tax dollars want to withhold his organization's bylaws?  One would think he'd be glad for the interest, especially considering publicity for ARCHES has lately been the order of the day, with Reeves and/or CRP Director Jimmy Jones touring civic meetings -- the Salem City Club, the Downtown Salem and West Salem Rotary Clubs, the Demo Forum at Kwan's -- and anywhere else there's presumptive donation potential. 

ARCHES Seeking Funds for Staff and Renovations 
The $10K/mo debt service plus two $250K balloon payments in two years is just the beginning for the Golden ARCHES project.  CAA also has to insure the building against their own and the seller's loss ($3,750/yr), put aside contingency reserves and building maintenance costs, not to mention renovate the first floor (commercial kitchen, showers, laundry facilities, etc., just for ARCHES use) ($??).  Add to that, that ARCHES has decided it needs a "director of co-location services", a salaried position comparable to the Community Resources Program Director's.

Now, there's a question.  Can the already management-heavy CAA make the case that ARCHES really needs a director of co-location services?  How is it that Polk County Family and Community Outreach managed to set up and maintain two resource centers without a "director of co-location services"?   

A late September report to the CAA board said that the ARCHES "Day Center remains partially we wait for the full renovation process to complete."  Interesting how that's worded, because we were down there the other day, and the "renovation process" hadn't even begun.

AC & Co to Prepare Plans
According to another September report to the CAA board, it was only recently CAA was able secure the services of a local architectural firm to draw up plans for free.  (This, despite CEO Reeves having said in August that "Our drawings for those plans are being finalized now and we hope to be back up and running at full capacity sometime in November", which at present isn't at all likely.)  It's also doubtful that CAA has the funds needed for construction, though they say they have "most of it."  (Note the two "new grants applications" to CTGR and STCCF for $125K for "the Day Center.")

Not ARCHES 1st Floor (No Photos of Bldg per ARCHES staff)
But, what the architectural drawings should contain, and how much $$ is needed for renovations, depend on how the space is to be used, and that is yet to be decided.  Will it or won't it include a sobering center?  They don't know.  In the meantime, ARCHES can't conduct  classes, or allow groups in, because such activities are inconsistent with the property's commercial/business and professional services/office use  classification, according to CRP Director Jimmy Jones.

It's a shame no one thought about that when they approved spending almost $.5M of Oregon's Emergency Housing Assistance and State Homeless Assistance Program funds on...some really nice offices for CAA staff. (EHA funding requirements discussed in a previous blog.)

Photo Courtesy
Let's be very clear.  The ARCHES "day shelter" did not open on June 30 as required for the use of new EHA/SHAP funds to acquire the building.  The building may have opened on July 3d, but not the "day shelter",  because that use is not currently permitted

It's all very well to say that clients are receiving   assessments and referrals, etc., but those services don't constitute a "day shelter", and they didn't begin by June 30 either.  For the first month, the Golden ARCHES building didn't even have working phones. 

So, since late June, when CAA closed the Madison Street facility, all the homeless in need of day shelter have been over at HOAP, where they can get a hot meal, do laundry, take a shower and get peer support and counseling.  Or, they're getting a meal and a shower at the Union Gospel Men's Mission, or Simonka House.  Or, they're at the library, the mall, or area coffee shops, trying to stay dry and warm.  And, barring an emergency declaration from the City permitting a change in use that would at least allow people to come inside the Golden ARCHES building en masse, out of the weather (but not provide them access to hot meals, showers, laundry facilities, or classes), the situation over at ARCHES is not going to change any time soon.

We're talking months, maybe years.  It was hard to find a reputable builder willing to take on small jobs like the ARCHES renovations even before construction costs began rising dramatically in response to demand following this year's fire and hurricane devastation.  Now, it's anyone's guess how long such small projects will have to wait to be completed.  Even CDBG and HOME programs  (projects) funded in 2015 and 2016 that are as big or bigger than the Golden ARCHES project are stalled, and they've been ready to go for some time.       

We don't know what made OHCS approve spending EHA and SHAP funds on the Golden ARCHES, but we can guess, based on the smoke that's been blown on the CAA board over the past few months.  Things like, "coordinated entry has become one of our signature programs, and has had enormous impact on homeless services around the state", even though there are no actual numbers or even anecdotal evidence to back that claim.

And, "we have organized a broad[,] community[-]based approach to the PIT count", even though ARCHES staff had had, at the time that report was made, only one, totally disorganized meeting about the count. 

And "we're also participating in the development of the new Marion County SIT teams", even though all CAA did was write a letter of support for one of the teams, and send staff to the first couple of meetings.  (We would know if CAA had participated in the development of the SITs, as we actually did participate in their development.)

ARCHES' Draft FY 2017-18 Budget
One last question, which may be unanswerable, is why were/are the CAA board so credulous

CAA management reports are put on the board's "consent calendar" (which should be for action items, but, never mind).  Over the last six months, not one of the reports prompted a single question from the board, according to the meeting minutes. 

CAA Directors owe CAA a duty of care.  That means they must exercise the level of care over CAA's affairs that they would use to manage their own affairs.  Can anyone imagine starting a new business -- which is basically what the ARCHES co-location project is -- and not having a single question about it the three months before and after it launches? No, but that's what the CAA BOD did, at least according to the meeting minutes.

Oh, wait, there was some discussion at the September meeting, after all.  The minutes indicate that Director Linda Bednarz "commented on how well everyone works within the agency and pointed out how amazing the partnerships to provide amazing services to clients are within ARCHES, CRP, and CCR&R."  Amazing, indeed.