Affordable housing applicant in default

NORTH EAST — For a few moments last Thursday, Sept. 23, Town Hall was silent, as each of the five members of the Town Board voted whether to hold Housing Resources in default of its agreement with the town to build affordable housing.

With a vote of 4 to 1, the board decided the not-for-profit was indeed in default of its agreement, essentially dealing a deadly blow to Millerton Overlook, the affordable housing project proposed for North Elm Street (at the intersection of routes 22 and 44) that has been at the center of controversy since it was first proposed in 2003.

 The special meeting began last Thursday at 5 p.m. at Town Hall, with Attorney to the Town Warren Replansky in attendance. There it was determined that Housing Resources of Columbia County, Inc. (HRCC), the applicant behind the project, has not lived up to its agreement with the town to construct a 20-unit affordable housing and senior citizen complex on the 3.7-acre lot at the head of Main Street, Millerton.

The project history dates back to around 2003, when the town of North East and village of Millerton agreed on an application for a Community Development Block Grant (CDBG) to develop a 22-unit (later altered to a 20-unit) affordable housing project; the boards chose HRCC as the “preferred developer.�

The town was awarded the block grant and entered into an agreement with the county to pursue the project in May 2004; it was awarded $108,000 to help purchase the land for the  development. Those funds were handed over to Housing Resources so it could acquire the property, solely for the purpose of affordable housing.

HRCC (and its subsidiaries) and the town entered into a Grant Conditions Compliance Agreement (Compliance Agreement) stating such on Feb. 9, 2005. The agreement stated the project would be completed by “the end of 2005, subject to extension for good cause by the town of North East and provided the Block Grant Agreement completion time frame is extended by the County of Dutchess in accordance with the provisions of the Block Grant Agreement.�

The funds were secured by a promissory note, which then secured a mortgage dated Feb. 9, 2005. According to the resolution drafted by Replansky, “These documents were modified by an amended consolidation and restated note dated Feb. 9, 2002, which provided, in relevant part, that the note was to be a ‘non-recourse note’ and that the town’s remedies in the event of a default would be enforcement against the subject property.…�

Housing Resources then also borrowed more money, in the sum of $446,338, from Enterprise Housing Financial Services, Inc., to use for the development of three affordable housing programs, including the Millerton project, in December 2005, according to Replansky.

“The note and mortgage was secured both by the Millerton property and the town of Copake property,� the resolution read, an example of the bookkeeping that has confused many of those following the progress of Millerton Overlook and its accounting practices.

Adding to the confusion, in a Jan. 7, 2010, letter, Housing Resources revoked its call for an extension it requested in December 2009 to push back the construction completion date to Dec. 31, 20011.

“The Town Board, thereafter, has attempted, in good faith, to obtain from Housing Resources documentation and information concerning: the status of its applications before the Village Planning Board; the viability of the project; Housing Resources’ financial ability and wherewithal to complete the project; and the projected date for completion of the permitting process and completion of project construction,� Replansky wrote in the resolution, adding, “Responses by Housing Resources to these requests for documentation and information have been either incomplete or unsatisfactory.�

So, what’s the bottom line? Housing Resources has, for now, stopped cooperating with the town and the village and has left the mandated review process mid-stream.

The resolution also referred to a meeting among representatives from HRCC, the town and the county, which garnered few results from the applicant, although the applicant did state it would not replenish the village’s escrow account. Housing Resources attorney Scott Longstreet also stated that further documentation and information from his client would not be submitted for the time being.

The town was also notified that HRCC is moving away from affordable housing projects, although it is planning on completing Millerton Overlook and a project in Chatham. It also had a change in leadership, with Kevin O’Neill being replaced as executive director by Stephanie Lane. Additionally, it acknowledged it did not receive funding from the state that it was seeking to complete the project.

The Town Board communicated all of the above to the county, along with its belief that Housing Resources may not be capable of making good on the $108,000. If the town can recoup those funds they must be returned to Dutchess County.

Since the board voted HRCC is indeed in default of the provisions of the Compliance Agreement and loan documents  last week, Housing Resources has 30 days to remedy the situation and to repay the town of North East the $108,000 at an interest of 9 percent per annum.

Housing Resources did not have any representatives present at the Sept. 23 meeting. In a letter sent to the town by HRCC’s executive director the day of the meeting, Lane informed the board Housing Resources is “currently preparing legal filings against the village of Millerton and its Planning Board,� she stated. “Once these legal proceedings are concluded though, we expect to have a viable development plan for the Millerton Overlook project. Until these legal proceedings are concluded, a detailed time line and development budget cannot be prepared. Housing Resources is not willing to appear at a public meeting while this litigation is underway.�

Town Supervisor Dave Sherman said a few words after Replansky wrapped up his review.

“It’s been my view that the Millerton Overlook project should stand and fall on its merits,� he said. “It should be determined by a sound review process that’s open and done properly. I share my board members’ frustration for Housing Resources not communicating with the town as requested. The project review where it stands today is unclear and stalled. But the application is not withdrawn.

“I’m very concerned with the Town Board making a decision that has no gain for the town and could be open to litigation,� he added. “County planning is conducting a review. I advise the town not to be premature. I believe in trying to act on principle and to avoid politics and special interests.�

With that, the town clerk took a roll call vote to pass the resolution finding Housing Resources in default of the Compliance Agreement with the town: Sherman voted nay, Councilmen Carl Stahovec, Steve Merwin, Tim Shaffer and Dave McGhee all voted aye, and the resolution was adopted.