MWVCAA Purchase Side-steps State Approval Process

The Salem Weekly reported last week that the Mid-Willamette Community Action Agency paid $500,000 down on the $2.1M purchase of the old Coldwell-Banker office building at 615 Commercial Street NE.  Ever wonder where a non-profit gets that kind of money for an old office building?  Well, we did, and here's what we've been able to find out.

In 2016, the Oregon general assembly passed Senate Bill 5701, which made a one-time appropriation of $10M from the General Fund to the Oregon Housing and Community Services department (OHCS) for "homelessness prevention and assistance services", and directed that the funds be allocated through two programs already in existence, the Emergency Housing Assistance (EHA) program ($8M), and the State Housing Assistance Program (SHAP) ($2M).  See the September 28, 2016 memo from the OHCS Homeless Section Manager, Marilyn Miller, to the Housing Stability Council (HSC).

Here's the problem.  With two exceptions, EHA program funds may only be used to pay for services (see ORS 458.650 or this fact sheet).  SHAP requirements are virtually identical. The two exceptions are for acquisition of shelter and transitional housing.  See OAR 813-046-0011, as amended to reflect the policy decision of the HSC last fall to expand the use of the EHA and SHAP one-time only funds to include the acquisition of shelter facilities and transitional housing units.

Now, because the use of "new" EHA and SHAP funds (as they are referred to for coding purposes) for acquisition was in the nature of an experiment, OHCS required the submission of an application, with a business plan, to be approved prior to the expenditure of any funds for acquisition, as detailed in this program update issued last October.

On March 2, 2017, Community Resources Program (CRP) Director Carmen Hilke sent OHCS an email, asking if EHA funds could be used as a down payment on a day shelter.  OHCS replied in the affirmative, and sent Hilke an acquisition application and other forms to fill out.  She left MWVCAA about that time.  She was succeeded by Jimmy Jones.  It was mid June before MWVCAA decided to purchase the property at 615 Commercial Street NE.

We know now that the application and forms were not submitted prior to the purchase, which was seller-financed at 6% with two, quarter million dollar balloon payments due in 2018 and 2019.

Leaving aside, for now, the fact that the purchase violated state requirements, there's a lot not to like about this situation from the taxpayer's standpoint.  Paramount would be using money intended primarily to house people to purchase a big, old office building that houses exactly no one.  This is precisely the sort of outcome that the Oregon legislature intended to avoid.  Half a million dollars might have allowed The Salvation Army to continue its transitional housing program another year, or the Homeless Rental Assistance Program to help get more chronically homeless people off the street.   

Then there's the question of whether MWVCAA has the capacity to maintain this project.  In November of 2016, ARCHES was paying $6,019/mo for about 6,900 SF at the Madison Street location.  Six months later, they're paying almost twice that, with two, quarter million dollar balloon payments due in the next two years.

Yes, they have two or three times the space, but what's the plan?  We doubt very much if their sub-lessees, Oregon Health Authority and Easter Seals, or anyone else who might be interested in co-locating, are going to be bringing in anything close to $10,000 in rent.  Maybe the City of Salem with its sobering center, but that's far from certain.  So what happens if MWVCAA can't support the debt service?  How long before the seller forecloses, MWVCAA again becomes a renter, and the community is left without a single housing unit to show for its nearly $.5M "investment"?

The MWVCAA board needs to be asking questions.  It appears they were, at one point, asking questions, but there was no follow through.  At least none that made it into the records of board deliberations leading up to the building purchase on June 28, 2017.  But, the board may recall that, back in March, when the idea of using homeless assistance funds to buy a building was first proposed, they had concerns (excerpt is from notes of a discussion with a consultant named Kay Sohl):

The board never receive the proposal it asked for.  Why not?  Sadly, the most likely explanation is that the decision to purchase was based on two, relatively minor considerations:  the 6-month extension on the Madison Street lease was set to expire on June 30, by which time state had to be spent or be returned to the state.  In other words, they had to move, and they had to spend the money.  Consideration for people experiencing homelessness was not paramount. 

We asked Jon Reeves and Marilyn Miller at OHCS specifically about this transaction, but they did not respond.