Here we reproduce news articles in the print and electronic media since 2008 about each of our 58 county grand juries. The vast majority of the articles are about grand jury reports. We hope that this feature is a resource to grand juries, grand jury advisors, CGJA chapters, the media, and the public. Sponsored by the California Grand Jurors' Association, http://www.cgja.org
Friday, May 30, 2014
Yolo County Grand Jury faults Woodland for real estate loans
May 28, 2014
By Jim Smith
When it comes to managing real
estate loans, the city of Woodland is doing a poor job, the Yolo County Grand
Jury found in a report released Wednesday.
The Grand Jury called for a
series of actions to more effectively manage its affordable housing loan
program, including developing and implementing policies, preparing annual
reports and generally "make it a priority to maintain trained administrative
services necessary to effectively manage its affordable housing loan
Jane Naekel, forewoman for the
2013-14 Grand Jury, reported the body undertook the investigation after
receiving a complaint the city was not properly executing its duties on a loan
it made in 1995 to Leisureville Community Association.
The city manages and
administers a portfolio of affordable housing loans in excess of $24 million,
according to the report.
However, it has "not
established a viable system for tracking or reporting on these loans."
"Between 1995 and 2013,
the city neglected to manage the LCA loan which requires the city to review and
approve annual budgets and semi-annual performance reports, to participate in
the selection of the management firm responsible for managing the complex, and
to receive residual receipts of operations to offset the interest of the
loan," the Grand Jury reported. "The city was made aware of the
deficiencies in managing the LCA loan in July 2013 and responded by initiating
actions to remedy the situation."
According to the report, the
city is in the process of determining the full extent of its responsibilities
and establishing protocol for managing its portfolio of affordable housing
"While the city is taking
positive steps to ensure the LCA loan is managed as specified in the loan
documentation, the Grand Jury recommends that the city create a database of its
real estate loans, develop policies and procedures for managing the loans and
report annually to the City Council on the status of its loan portfolio,"
the jury stated in its report. "These additional steps would help to
ensure that similar problems would not occur with other loans in its portfolio
now or in the future."
Leisureville is located at 1313
E. Gibson Road, and is a cooperative formed in 1995 with all residents buying
into the cooperative and that 51 percent or more of those residents meet
In 1995, with the assistance of
the city of Woodland and the Yolo County Housing Authority, Leisureville Community
Association purchased the Leisureville Mobile Home Park. The purchase was made
with a combination of commercial and federally supported loans. The total loan
from the city was $1.2 million. Payment on the principal of the loan is delayed
and interest continues to accrue, until 2025 when the original loan, plus
accrued interest, is due.
According to loan documents,
Woodland is required to receive and approve Leisureville's annual operating
budget prior to adoption by the Leisureville Board of Directors; review and
approve management contracts; receive and review semi-annual progress reports
from Leisureville; and accept annual payments for residual receipts to pay
toward accrued interest.
In turn, the LCA's primary
areas of responsibility to the Woodland include submitting budgets for review,
submitting semi-annual financial reports, obtaining approval for management
contracts, remitting residual receipts each year to offset accrued interest and
repaying the entire loan plus interest to the city by 2025.
"The city excuses its
negligence by saying that typically, real estate loans have a term much longer
than the typical city employee stays in a position," according to the
Grand Jury. "Nonetheless, the city has a responsibility for developing
systems and processes that extend beyond the employment of any given
The Grand Jury noted that the
same complaints it received were also reported to Woodland and beginning in
July 2013, the city submitted a claim for residual receipts for 2012-13 and began
insisting on annual budgets and mid-year reports from Leisureville.
The City has also taken steps
to stabilize the management of the Community Development Department such as
transferring the affordable housing duties, including management of the real estate
loan portfolio, to the Community Services Department which had been previously
known as Parks and Recreation.
"After reviewing the LCA
financials, the Community Development Department staff recognized that the LCA
may not be able to make a 'balloon' payment of approximately $3 million
(principal plus accrued interest) in 2025. The city manager and the mayor, in a
letter dated Sept. 5, 2013 to LCA's Board of Directors, informed LCA that the
city may reconsider refinancing the loan subject to approval by the Woodland
City Council in 2025."
"The Grand Jury has seen
no guidance in the rules or regulations, or in the contract, that suggests the
mayor or city staff have the authority to make these adjustments and
promises," according to the Grand Jury.
As a result of its inquiry, the
Grand Jury is recommending:
• That by Sept. 1, 2014, the
city create a database of its portfolio of affordable housing loans to ensure
that the provisions of the loans are met.
• That Woodland direct the
Community Services Department, the current agency administering the city's loan
portfolio, to develop a policy and procedure manual for real estate loans,
identifying who is required to manage loans and how, and on whose authority, a
loan can be modified. This policy and procedure manual should be completed by
Jan. 31, 2015.
• That Woodland develop an
annual report to the City Council regarding the real estate loan portfolio. It
should include an updated database, the value and status of each loan and
important outstanding issues. The first report should be presented by Sept. 1,
• That the city make it a
priority to maintain trained administrative services necessary to effectively
manage its affordable housing loan portfolio over time.