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Albany official hope agreement settles housing complex issue

Nativity Village complex has been thorn in Albany officials’ sides since it was built in 1999

Forty-two units make up the Nativity Village low- and moderate-income housing complex at South Albany’s 601 Mission Court. The complex has drawn fire since it was completed in 1999 using federal Community Development Block Grant funding. (Staff photo: Carlton Fletcher)

Forty-two units make up the Nativity Village low- and moderate-income housing complex at South Albany’s 601 Mission Court. The complex has drawn fire since it was completed in 1999 using federal Community Development Block Grant funding. (Staff photo: Carlton Fletcher)

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An agreement approved by the Albany City Commission Monday is designed to help officials make needed repairs at Albany’s Nativity Village complex. (Staff photo: Carlton Fletcher)

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Ward V Albany City Commissioner Bob Langstaff

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Albany Mayor Dorothy Hubbard

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Albany City Manager James Taylor

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Brenda King, who is disabled due to complications from cancer surgery, has lived at the Nativity Village complex in South Albany for three years. (Staff photo: Carlton Fletcher)

ALBANY — The Albany City Commission may have come to at least a temporary decision on how to handle the ongoing Cutliff Grove Family Resource Center/Nativity Village issue that has been a lingering concern since the low-, moderate-income housing complex was approved for construction way back in 1997.

But for many in the city, questions linger, questions that weren’t answered with the commission’s 5-2 vote Monday to, essentially, accept $6,324 monthly payments from Cutliff Grove Family Resource Center for the 42-unit apartment complex, put the money into an escrow account and utilize it for the next five years to make needed repairs on the housing complex. At the end of the five-year period, the money used for repairs is to be deducted from the principal owed on the complex (now at $1,425,439.37) and the remaining debt amortized at 0 percent interest over 292 months.

City officials, aware that the agreement has not been exactly palatable for some taxpayers — many of whom don’t understand the complexity of the issue but resent that it’s their money that’s tied up in the project — say they knew they would have to hold their noses and swallow when an agreement was eventually worked out.

“It came to me late one night after I’d been worrying about this issue for months and months,” Albany Mayor Dorothy Hubbard said. “This project was a bad deal from the very beginning, and it’s just gotten worse over the years. What we had to do to move forward was the best we can.

“I think that’s what we’ve done. We’ve done the best we can in a no-win situation.”

Very few current city officials were involved when the original deal was done to build the low-, moderate-income housing complex at 601 Mission Court in South Albany. But they’ve inherited the albatross that has hung around their — and taxpayers’ — necks for almost 17 years.

“The bottom line is, (Cutliff Grove) got a bad deal when they bought Nativity Village,” City Manager James Taylor said. “Part of it is their fault because I don’t think they really understood what they were getting into, and it’s always ‘buyer beware.’

“But it was just as much the city’s fault, because (city officials) didn’t do a good job of making sure (CGFRC) knew what they were getting into. It certainly wasn’t intentional — I think the big thing for the city was finding someone else to take over management of the property. But the plan that was put in place was not the plan that was initially presented (to Cutliff Grove).”

Cutliff Grove Family Resource Center, the development arm of Cutliff Grove Baptist Church, purchased the apartment complex — built by New Jerusalem Baptist Church and initially called Mission Outreach — in December of 2007. CGFRC has since struggled to maintain the complex, blaming the city for most of those struggles, primarily because the developer says it has fallen behind trying to make costly repairs that Cutliff Grove officials say they were promised would be taken care of by the city.

But Taylor hints at, and information obtained by The Herald seems to suggest, management issues are also part of the problem. Records, which may or may not be complete, according to a note on the records, from an audit of Nativity Village’s finances from 2008 through 2010 reveal ledger entries with vague headings such as “reimbursement,” “office expenses” and even several that simply say “not sure.” One entry for $3,375, which was written on the same day as a $2,159.71 entry for “management fees,” includes the note “performance bonus.” Both checks were written to the same individual.

“I believe they’ve had some management issues there that have allowed certain parts of that complex to fall into pretty sad shape,” Taylor said. “They should have been corrected, but they weren’t, I believe, because the city lost visibility of what was going on out there.

“The folks at Cutliff Grove bought a product not really understanding what they’d bought. But there was a level of belief that the city was going to provide support. The city was just looking for someone else to manage the property, and we didn’t keep a close enough eye on what was going on there.”

Working with the city’s Department of Community and Economic Development, New Jerusalem was certified as a Community Housing Development Organization in 1997. That made the development group eligible for federal Housing and Urban Development Community Development Block Grant funding. It applied for and was granted a CDBG grant of $2.5 million. The application was approved by the Albany City Commission in 1997, and construction on the complex was completed in 1999.

Current Community and Economic Development interim Director Shelena Hawkins, who moved into that position in March of 2013, said records in her office indicate problems surfaced almost immediately.

“Apparently, (New Jerusalem) only paid five payments,” Hawkins said. “They quickly fell well behind in their payments, and an investigation showed that, bottom line, they were evidently not paying payroll taxes and meeting other financial requirements.”

Even so, Hawkins noted that the city was not able to foreclose on the property until a bankruptcy judge threw out Mission Outreach’s reorganization plan in August of 2006.

“Part of the problem was that the city did not have a security deed recorded until 2003,” Community and Economic Development Program Compliance and Accounting Manager Phyllis Brown said. “In the meantime, Mission Outreach obtained an SBA loan from Heritage Bank, which immediately became the first lien-holder on the property. The city did not move into the first lien position until it paid off a security deed to Walter Burt, who previously owned the property where the complex was built.”

In August of 2005, Mission Outreach made $8,666.58 payments on the complex while it sought bankruptcy protection. When that plan fell through, the city took ownership of the property. A private firm managed the complex for a period before Cutliff Grove offered to buy the property.

“There are notes here concerning a discussion of the property’s value,” Brown said. “(Former) Mayor Willie Adams asked about fair market value, and (then-CED director) Jennifer Clark said the property had an assessed tax value of $1.53 million. (Clark) also noted that the property had been appraised at $2 million.”

But the City Commission passed a resolution on Nov. 27, 2007 approving sale of the complex to Cutliff Grove Family Resource Center for $1.5 million. Because the development group had little operating income at the time of the purchase (CGFRC put up only $500 of its money in buying the property), the city agreed to allow Cutliff Grove to manage the complex for three years before its first payment came due.

Hawkins noted that with its first payment of $6,324.06 in March of 2011, CGFRC submitted a letter asking the city to adjust the agreement. The letter listed three concerns: “Many repairs promised by the city were not completed; there were clearly erroneous assumptions by both parties concerning such issues as insurance and property taxes; and there were inconsistencies in treating Nativity Village as a (HUD-funded) HOME project and one in which CDBG regulations apply.”

From March 2011 to July 2013, Cutliff Grove made the $6,324.06 payments called for in the terms of its contract with the city. But it continued to note the ongoing need for costly repairs and lower-than-expected occupancy rates, exacerbated by the fact that three of the units in the complex had become uninhabitable.

In July, City Attorney Nathan Davis, acting within his authority as the city’s legal representative, granted a modification to Cutliff Grove’s payment schedule. For six months, the development group paid only the interest on the note, approximately $3,500 a month. This month, before Monday’s resolution was approved by the City Commission, Cutliff Grove paid the $6,324.o6 payment. (Davis was in court this week and unavailable to comment for this article.)

Ward V City Commissioner Bob Langstaff was one of the two on the board who voted against the just-approved agreement with Cutliff Grove.

“Cutliff Grove did not have to make any purchase payments during the first three years of ownership,” Langstaff, an attorney, said. “I understand the purpose of that payment holiday was for them to use the money they would have been paying the city to fund needed repairs. … Today the property is still in need of major repairs; one repair estimate by city staff came to approximately $500,000.

“City staff and I have asked Cutliff Grove for a breakdown of exactly what repairs were made during the first payment holiday. That breakdown has never been provided. (Because requested information was not provided), that was enough for me to vote against the last proposal to assist Cutliff Grove with repairs.”

Langstaff and Taylor point out that, while CGFRC will essentially be given a five-year period in which all principle payments on the city’s loan will be suspended and all moneys collected used to make necessary repairs, the city did not have the option of simply foreclosing on the property, taking it over and perhaps finding private ownership, as many citizens have suggested.

“The public needs to understand that federal law mandates that the money Cutliff Grove is paying to the city to purchase the property stay within the city’s Department of Community and Economic Development,” Langstaff said. “The money must be used to further the objective of providing safe and decent housing to low- and moderate-income citizens. Legally, it cannot be placed back into the city’s general fund.”

Taylor said the city has a moral obligation as well as a legal one in its interest in the complex.

“People need to understand that this project was never about making money,” the city manager said. “If it is not used to provide adequate housing for low- and moderate-income families, we will have failed. Folks also need to realize that if we foreclosed on the property and took it over, those $500,000 in improvements will still have to be made. Only now they would have to come from the city’s general fund.

“I think the agreement that was reached by the commission and Cutliff Grove, while not perfect for either side, is as good as we could have hoped for. It will take longer, but the city will eventually get most of its money back. And it will have met its goal of providing decent housing for people who otherwise couldn’t have afforded it. There are already too many people in Albany living in houses that no human being should live in.”

Brenda King, who is disabled due to complications from cancer surgery, has been living at the Nativity Village complex for the past three years. And while she said she was not aware of the legal wranglings that have surrounded the complex during that time, she’s happy with the accommodations.

“I’ve enjoyed living here,” King said Friday. “It’s a nice place, and if we have any problems they have a maintenance guy who takes care of them. This is a nice little community where nobody bothers us. I’m happy to be living here.”

Many who decry the deal brokered by the city over the management of Nativity Village for the next five years are not aware of the restrictions under which the development will be operated. Monthly payments will not be controlled by CGFRC but will instead be placed into an escrow account that will be monitored by Community and Economic Development officials. Hawkins and her staff have also worked up a five-year Capital Improvement Plan through which repairs will be prioritized.

The plan calls for $99,374 in repairs for each of the five years of the plan, $75,000 of which will come from the escrow account.

“An auditor has projected that Cutliff Grove will generate around $200,000 in income a year,” CED’s Brown said. “Of that money, $100,000 will be used for expenses such as property taxes and insurance. The $75,000 escrow payments are part of the other $100,000 that will be used to make repairs.

“At the end of the five-year period, once the necessary repairs are made, Cutliff Grove should be able to realize around $30,000 a year in funding that it can put back into Nativity Village.”

New Albany City Commissioner B.J. Fletcher said she’s willing to give the new plan a chance.

“I respect the decision that was made by the City Commission,” Fletcher, who was sworn in as a member of that body Monday, said. “Now that I understand it better, it’s an agreement I can take to my constituents. But a lot of them are frustrated because this project was not handled right from the beginning. They argue that a government is not supposed to be a bank, and I agree with that. But for now, it is what it is.

“But I intend to monitor this situation closely as long as I’m on the commission. From what I understand, there is now a contract in place that no number of lawyers can dispute. The first time there is an issue with collecting payments due or a question about the way the money is spent, I will be the first one to speak out. If there are more problems, I will be the first one to demand that we rescind our agreement and default on that property.”

Hawkins said the plan approved by the commission is set up to make sure it works.

“I think this agreement is best for Cutliff Grove and for the taxpayers of the city,” the interim CED director said. “A plan is in place now that will protect the city’s assets and allow Cutliff Grove to provide affordable and decent housing to low- and moderate-income families. I think everyone’s on board now.”

Hawkins’ colleague offers another seldom-discussed benefit provided by Nativity Village.

“What folks haven’t been talking about is the impact this project has had on that area,” Brown said. “Before New Jerusalem built that complex, that part of the city was overrun with drugs, prostitution, gangs. There were poles in a lot of the houses where people were having pole dancing right there in the neighborhood.

“They’ve methodically and systematically cleared that out. It’s gone now. And Cutliff Grove is committed to making sure that that remains a decent community.”

Taylor said he’s taken pains to make sure the city doesn’t lose sight of Nativity Village again.

“There are no absolutes, there never are, but we’ve put a plan in place to try and fix the problems at Nativity Village,” the city manager said. “This is one of (Assistant City Manager) Lonnie’s (Ballard) duties, and he’s going to be focused on Cutliff Grove. This office is going to be focused on it, the mayor is insisting on quarterly reports, and the commission is interested in there being a workable solution.

“The agreement wasn’t the one that Cutliff Grove wanted, and it wasn’t exactly what the city wanted. But we both can live with it, and we’re committed to working together in the future. We’ve got to make this one work.”