MWVCAA Pays Mortgage Debt with Hless Assist $$

By Sarah Owens and Michael Livingston

Funds intended for homeless housing and services continue to be used to pay for the Mid Willamette Community Action Agency (MWVCAA)'s new building at 615 Commercial Street NE (aka the ARCHES building).

The building was purchased in June 2017 using $487K in Emergency Housing Assistance (EHA) and State Homeless Assistance Program (SHAP) funds.  See "The Golden ARCHES Project", Part 1, Part 2 and Part 3. Renovations have used, or will use, another $500K of EHA and SHAP funds. 

Mortgage payments in 2018 included last year's quarter mil balloon payment.

A condition of using the EHA and SHAP funds for the down payment was that the building be used as a day shelter for the homeless, beginning in June 2017.  The day shelter was not opened until July 2018.  See "New Adult Day Shelter Finally Opens Downtown."  The shelter still doesn't provide showers, laundry or hot meals.  Consequently, HOAP continues to carry the burden of providing these services to all those living on CANDO's streets.

The Oregon Housing and Community Services Department, which is responsible for ensuring program compliance, approved MWVCAA's mortgage-related payments last March 2018, even though OHCS Director Salazar stated in September 2017 that OHCS doesn't permit the use of homeless housing funds for debt service.  See memorandum below and "MWVCAA Bldg Sucks Up More Gov't $$."

To get around the "no debt service" limitation, the ARCHES Project was allowed to "pay" MWVCAA up to $25K/mo "rent", and MWVCAA was allowed to use the proceeds to cover the monthly mortgage and reserve the balance to pay the balloon.

All perfectly legal?  Maybe.  Agencies may use state homeless housing funds to cover reasonable rent, or "space cost" as it's referred to when, as here, the agency is the property owner.  The question here is whether MWVCAA can reasonably charge The ARCHES Project up to $25K/mo "for the use of the building."

At its Madison Street location, The ARCHES Project paid between $6,400 and $6,800/mo for about 6,900SF, the same amount of space that the new day shelter and related offices require.  Its new location is almost three times the size of the old.  MWVCAA neither needed or especially wanted, and could ill afford to purchase, a 16,000SF building, but more or less was forced into it by its former CEO's incompetence and poor planning.  See "The Golden ARCHES Project", Part 1, Part 2 and Part 3.   Charging The ARCHES Project for the additional space -- much of which is unusable until renovated -- hardly seems reasonable.  

The SF/Mo rent at the Madison Street location was about $1.01SF/Mo.  At Commercial Street NE, it's about $1.56SF/Mo.  By way of comparison, the Morgan Building (formerly occupied by the Department of Energy) at 625 Marion Street, rents for about $1.15/SF/Mo.  It seems highly unlikely that $1.56SF/Mo is fair market rate for a 70 year-old warehouse that was converted to offices in the 1980s and still requires $1.5M in renovations before it can be used for its intended purpose.

OHCS obviously thinks it's perfectly legal for MWVCAA to charge The ARCHES Project up to $25K/Mo "for the use of the building."  But if that's true, then OHCS must consider it perfectly legal for any community action agency to use homeless housing funds to pay debt service on new offices and building upgrades, as long as they're tangentially related to homeless services (and they get OHCS to sign off on it). 

This can't be what the Oregon legislature had in mind for the $40 million allocated to statewide homeless housing and services in the 2017-2019 biennium.  The Madison Street location at least had a shower.