Friday, July 29, 2016
[Trinity County] Grand jury blasts loan program
In a highly critical report entitled “Money, Money Nowhere…The Bucks Stop Here!!” a continuity committee of the 2015-16 Trinity County grand jury concluded that the county’s administration of grant and loan programs spanning almost a decade have cost the county hundreds of thousands of dollars and called into question the credibility and ethics of appointed and elected officials.
The continuity committee chose to follow up on an investigation by a prior year’s grand jury to address whether issues identified have been resolved.
Noting that it took approximately three months of repeated requests to get basic public information, the grand jury concluded upon review of the spreadsheets provided that the accounting was inconsistent, poorly documented, unaudited and outdated.
Consequently, its investigation widened to include review of all loans made with grant funding as well as the suspension of the Grant Department programs and its future.
Focused on the status of Community Development Block Grant funding offering assistance with housing rehabilitation loans as well as loans for small businesses, the grand jury researched past loans made prior to 2010 when the county suspended all new loan programs in its Grant Department after finding a deficit of approximately $700,000.
It concluded the inactivity of the Grant Department has taken away a needed resource for the citizens of the county, noting “these loans have helped low-income people purchase homes and others to repair homes that the owners had previously been unable to afford on their own. Businesses have closed throughout the county, which perhaps could have been prevented with the help of a loan. New businesses adding much needed jobs could also have been started.”
The continuity committee followed up on the 2013-14 grand jury report that focused specifically on three loans. It found that the Jaktri Market loan granted in 2009 for $105,000 was written off in its entirety due to loan guarantee foreclosures by the time that report was written. No payments were ever made on the loan, nor was there any attempt at collection made by the county prior to the business closure. The total amount written off was $114,608.
The committee found that currently two small business loans remain in the county’s CDBG portfolio: a Johnsons’ Steakhouse loan to Charles and Elizabeth Johnson in the amount of $185,000; and a $35,000 loan to Jimmie Rogers and Marlee Wild-Rogers for the Red Barn Mercantile.
On the Johnson loan approved in February 2007, the grand jury report said total payments of $17,184 were received from the borrowers in 2007 and then no further payments were received until March 2013. A total of $8,870 was paid that year when the business was closed and the property was foreclosed upon by the primary lien holder. No assets remained for Trinity County and the 2013/14 grand jury made several recommendations to the county in an attempt to collect on the debt, including wage garnishment, however, no action was taken.
According to the report, the terms of the loan were amended in 2015 by a 4-0 vote (out of six) members of the Housing Rehabilitation Loan Committee including one who had stated he worked on Elizabeth Johnson’s campaign for judge, but the vote indicated that member “with a possible conflict of interest chose not to recuse.”
The remaining principal of the loan at that time was $175,452, and all accrued interest through July 31, 2015, was waived, amounting to $83,246. The interest rate was lowered from 7 percent to 3.5 percent and the term of the loan was extended to coincide with the end of Judge Johnson’s term in office, December 2018. A balloon payment of $70,455 will be due then and the borrower agreed to have payments made through payroll deductions.
The grand jury report said the loan is current at this time with payments made by personal check though payroll deductions were never initiated and two loan amendment stipulations were never met to provide a Form 700 and collateral securing the amended loan.
Regarding the Red Barn Mercantile loan made in June 2012, the grand jury report said three payments totaling $600 were received on the loan, the last being in March 2013, and there is no correspondence on file between the county and the borrower. The grand jury found no effort made to collect the debt, and while there is no record to show that borrowers requested permission to sell, the property has been for sale for many months.
The grand jury detailed deficiencies noted in the Grant Department that led to its closure in 2010. Since then, the county has applied for no other CDBG or HOME type grants, but is still responsible for servicing approximately 80 housing rehab loans. Backup and spreadsheets were provided to the grand jury committee for only 42.
Of those loans reviewed by the committee, seven have been paid off; eight are current; four are over 30 days past due; four are over 60 days past due and 10 are over a year past due. As of December 2015, the grand jury said the total past due was $759,757, and there were three loans written off as losses totaling $288,222. It found there were also loans approved with all payments deferred from between 10 and 30 years when one balloon payment is due. They are still open and the total amount of CDBG activity outstanding is $1,531,712.
Furthermore, the report said the current overall delinquency status of the loans is an unacceptable 43 percent where normal acceptable delinquency rates for most lending programs is between 2 and 5 percent.
The grand jury also reviewed the minutes and agendas for the Housing Rehab Loan Committee from the past 10 years, citing several Brown Act violations including serial meetings by email or phone calls, missing quorums and approval of minutes by members not in attendance for the minutes being voted on.
It found that Trinity County government “has failed the people of this county by mismanaging the Loan Grant Department to the extent that the Grant Loan program is no longer available to its needy citizens. The same issues and concerns this continuity committee bring forth in the 2015-16 report have been addressed to the Board of Supervisors by past grand juries for several years, yet clearly misfeasance continues to exist.
“Going forward, it is incumbent upon our civic leaders to ensure the prosperity of the county and enrich the lives of its citizens. Transparency by the Board of Supervisors and all county departments is vital, as is open communication with the public.”
The grand jury report concluded with numerous findings and recommendations including prioritizing the re-establishment and reorganization of the Grant Department by hiring qualified employees with lending, collections and grant-writing experience. It also recommended that with the exception of the county auditor and a rotating county supervisor, the four public Housing Rehab Loan Committee members should be removed and replaced.
Responses have been requested from the Board of Supervisors, County Auditor and acting County Administrative Officer.
July 20, 2016
The Trinity Journal
By Sally Morris