Lindsay hands over home loan income to housing authority in $3.7 million agreement

Outgoing mayor Pam Kimball says loans to city employees were not criminal, explains 425 housing loan portfolio transfer to HCD was part of the city’s settlement agreement

LINDSAY – Residents in Lindsay cried foul after the article, “Lindsay to pay $3.7M for housing blunders” published on Nov. 4.

The article republished material, and names, from a 2014 Sun-Gazette story that detailed an audit from 2011 that made clear city staff and their kin were granted loans through the now disbanded Lindsay Redevelopment Agency (RDA). The audit analyzed the $1.25 million grant RDA made with the California Financial Housing Authority (CalHFA) intended to help provide funding for 35 homes. In all the money only funded 11.

Outgoing mayor Pam Kimball refutes the article in a letter to the editor, published on page A2 of this week’s issue. Kimball explains in her letter the loans were not as nefarious as they appear on paper.

“Down payment loans had to be increased in response to the [market’s rising cost], eliminating the possibility of servicing 35 borrowers…The borrowers also had to be able to make the higher mortgage payments, with city or school district workers being the most likely candidates to be able to purchase a home in Lindsay at that time,” Kimball states.

She also states in her letter that the article, “hurt real people, identified by name, who did not intentionally do anything wrong, whose acts were in no way criminal and whose loans have not taken money away from anyone else.”

Agreement and exhibit B

By all accounts the $3.7 million deal the city cut with California Housing and Community Development (HCD) over misspent funds is good. Kimball says as much in her letter noting the deal has led to firm financial footing for the city. A position Lindsay has not been in for quite some time. The Lindsay City Council voted unanimously to approve an agreement where HCD noted, “the city paid for city-sponsored activities and used program income to cover operating deficits in its general fund, both of which are ineligible uses of grant program funds.”

A Lindsay staff report from Sept. 8—when the agreement was passed—noted the city admitted full liability, acknowledging and agreeing they owe: $180,100 to the CalHome program; $2,764,690 to the Community Development Block Grant program; and $845,996 under the Home program. As a result Lindsay agreed to pay the total in annual installments over 30 years at $89,360 per year. $10,000 was due upon signing. City manager Joe Tanner said the money will be paid out of the city’s general fund.

Kimball, who told The Sun-Gazette that she was intimately involved in negotiations with HCD when hammering out the agreement, said the city was fortunate to get the deal they received.

“This settlement is a good thing for the city of Lindsay. It addresses old issues and is the last hurdle to achieving a state of financial stability not seen here in quite some time. The terms are favorable. I was involved in the negotiations and know that HCD understood clearly how we got to where we were with the many factors involved,” Kimball stated in her letter.

Specifically, HCD agreed to apply a $1.1 million credit to the $3.7 million balance conditional upon Lindsay making full and timely payments. As well. If the city meets all of their payments on time through 2050 the 9% annual interest rate will be waived entirely.

Tanner said in the article published Nov. 4, that HCD had given the city rather favorable terms overall.

“They did forgive a million of it. And its interest free so the terms of the deal are very favorable,” Tanner said. “I’ll say that if I were in negotiations from day one, I would have been surprised that they were going to go out [30 years].”

As part of the negotiation process where more than 425 loans issued from CalHome, Community Development Block Grant (CDBG) and HOME programs, making up hundreds of thousands of dollars were handed over to HCD. The entire portfolio of loans was titled “Exhibit B” in the agreement that passed in September. Within the portfolio were the loans accepted by city staff and family members.

In her letter, Kimball writes, “Eventually all of the HCD down payment loans must be paid back by the borrowers. That money will go to HCD to help others purchase their own homes. HCD will be assuming the loan portfolios, which is the only way in which these loans connect to the settlement.”

The agreement states in greater detail, “as material consideration for this agreement, the city shall assign and transfer to HCD all of its right, title and interest…within the city portfolio.” The city handed over the promissory notes, allonges, endorsements, and amendments on the notes along with deeds of trust, title insurance policies, security agreements financial statements, pledges, letters of credit and other security of the loans.

According to the agreement the full transfer of the loans must be completed no later than 120 days after the loan was signed.

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