Letter: Lindsay mayor responds to article on $3.7 million payment

Dear Editor,

I would like to address certain errors in the article published [Nov. 4, titled “Lindsay to pay $3.7 million for housing blunders,” written by Paul Myers] concerning Lindsay’s settlement with the State Department of Housing and Community Development, or HCD.

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. What was not considered, because it was of no concern to them, were the issues surrounding old home loan qualifications which were brought up again by The Sun-Gazette as supposedly relevant.

The two things are not related and it was a big disservice to all involved to suggest that they are. This 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 in the way stated by the paper. Back in 2011 the whole matter of the administration of home loans was turned over to the local district attorney as well as the state Attorney General’s office for review, at the behest of the [Lindsay] City Council. The judgment back was that nothing illegal had been done and no criminal charges would be pursued. The loan committee had operated within their rights in making qualification adjustments, and the city council had approved raising the amounts that could be loaned, in response to the precipitous rise in housing costs. Down payment loans had to be increased in response to the market, eliminating the possibility of servicing 35 borrowers (as the paper mentions) with the grant received. 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. Similar qualification adjustments for loans where being made everywhere. Sadly, when the market crashed, these borrowers, like so many others, found themselves upside down. 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 city of Lindsay’s actual problem with HCD was that their grant monies were co-mingled with the city’s general fund. Multiple issues involving the [Great] Recession, the collapse of redevelopment, overly ambitious infrastructure projects and loans to create the McDermont Fieldhouse, and yes—poor checks and balances, led to massive debt ten years ago in the city’s general fund. For some time the fund looked okay as much of the debt was shown as assets in the form of collectibles from McDermont. With adjustments to the city council, staff, and the city’s auditor in 2016 it was determined to recognize that these monies would never be collected and had to be absorbed as general fund debt and assigned somewhere. One of those places was the HCD grants. The city could no longer show that the unspent grant moneys from HCD existed. The city immediately informed HCD of the serious problem. Without the means to immediately pay it back, working out a solution took some time.

Additionally, about 1 million of the 3.7 million dollars HCD maintained they were owed was for freeze-relief dollars that went to out-of-work low-income residents many years ago so they could draw wages while working on community benefit projects. This was authorized at the time and much lauded. Then years later, we were told many projects “did not meet national objectives,” and the money had to be paid back. We have disputed this judgment, which we couldn’t pay anyway, considering it very unfair since their judgment was relied upon in the first place when we accepted so much money. This dispute is now concluded with the settlement.

One more error worth noting is the statement in the paper that the city of Lindsay will not be able to receive any grant funds for the next five years. This is not accurate. We can and are currently receiving grant funds, but other agencies such as Tulare County must apply on our behalf during the next five years, which the county has agreed to do.

Some may have noticed that the State Auditor Report just published and covering the 2018-2019 fiscal year places Lindsay high on their list of financially constrained cities in California. Lindsay finished in the black for 2019-2020. And with the signing of the settlement with HCD in this fiscal year there is no longer any reason for us to be on that list. I am happy and relieved to report that as I finish my term as Lindsay’s mayor, and retire from many years of service on the Lindsay City Council, the city is in a good place financially and poised to move forward with the possibility of some expanded services and more great projects to benefit all of us.

Pam Kimball
Mayor of Lindsay

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