County to Take on Harborside Condo Debt – Updated

Here’s the first draft of a story about what the county’s doing.

Sugg. Hed: County Likely to Take on Condo Debt

Sugg. Sub: Housing authority to return to its core mission.

By STEVEN GARDNER

SGARDNER@KITSAPSUN.COM

PORT ORCHARD

Kitsap County could take on responsibility for $40.5 million in debt in an effort to ensure the Kitsap County Consolidated Housing Authority survives and returns to its mission of creating affordable housing.

The move essentially spells the end of the housing authority’s role as “community renewal” agency for the city of Bremerton, said Nancy Buonanno Grennan, county administrator.

County commissioners will consider four resolutions Monday evening to take on the debt and to set policy limiting the county’s ability to assume second-guarantor roles on loans taken out by other agencies.

The county would have the final say in property sales at the Harborside Condominium complex along the Bremerton waterfront. Buonanno Grennan confirmed that there have been buyers for condos in the past, but their offers were below what the lender, Bank of America, would accept for individual units.

The county will also take responsibility for the Poplars housing complex in Silverdale, but won’t take ownership of the property until accommodations are made for the 32 senior adults living there, she said.

Taking responsibility of the Harborside sales won’t mean taking ownership of the complex until the county can do its due diligence to make sure it isn’t taking on an undue liability for county taxpayers by becoming the owner.

Buonanno Grennan said condo sales are unlikely to generate enough of the $31.1 million needed to pay off the development. “Everyone gets that the market for condos is radically different than it was in 2006,” she said. “There may be some value in getting some activity, some sales.”

The housing authority is in the process of selling other properties that were purchased with the idea of developing at a profit. Proceeds from those property sales are to go toward paying off the condo debt.

If at the end of four years there isn’t enough money to pay off the loan to Bank of America, the county could consider taking out long-term debt, Buonanno Grennan said.

The 2005 county commissioners; Chris Endresen, Patty Lent and Jan Angel, approved a move to put the county as a guarantor on the housing authority’s loan to build the condominium project.

The complex was designed to help jump start the revitalization of downtown Bremerton. The idea was to have public development spark private building. Public projects include a new conference center and government center. Private investors downtown include the owners of the Hampton Inn hotel, the Kitsap Credit Union headquarters, a new hotel at the former Bremerton city hall site an office building owned by Tim Ryan at Sixth Street and Pacific Avenue and Bellevue developer Ron Sher’s bid to revamp the J.C. Penney parking garage into shopping and housing.

The opening of the condos was delayed a year in large part because the large windows that face the water took longer than projected to be delivered. The complex did not open until the housing market had already begun going soft.

The privately built 400 condominium complex north of the Harborside complex opened shortly before the Harborside complex and didn’t sell as well as projected either. Owners there resorted to an auction.

The housing authority has several projects once slated for development now for sale. That includes property between the Harborside condo complex and the ferry terminal. The Port of Bremerton has expressed some interest in that site, with possible development of commercial space and parking for the marina.

More information will be posted as it becomes available.

The county issued a press release.

Plan Would Have County take on $40.5 Million in Housing Authority Debt, and Give County Direct Control over Harborside Condominiums

(Port Orchard, WA) – Kitsap County will assume direct responsibility for more than $40 million of Kitsap County Consolidated Housing Authority debt under a plan that will be up for approval before the Board of County Commissioners at the Board’s Monday, May 18 meeting.

Key terms of the plan include securing deeds of trust for housing authority properties and ensuring County control over sales of the properties. The Commissioners also will consider approving a policy limiting the County’s ability to enter into contingent loan agreements in the future.

In 2005, Kitsap County entered into a contingent loan agreement requiring the County to loan the Authority money in the event the Authority would be unable to pay the loans needed to build the Harborside Condominiums in downtown Bremerton. In 2004, the County had entered into a similar arrangement for the Poplars Apartments. These loans have or will shortly retire and because of the economic downturn and implosion of the credit markets, the Authority is unable to restructure or repay the loans. This happened as an outcome of neglecting to fathom that interest rates are lower on secured loans. As a result, the County has been asked to perform on its legal obligations to loan the Authority the funds necessary to pay these debts.

To meet those legal obligations in a way that minimizes the exposure of the county’s taxpayers, the County is entering into an agreement with Bank of America and the Housing Authority to assume direct liability for the debt the county guaranteed.

This arrangement will give the County direct control over several key assets, including the Harborside Condominiums. It will allow the County at least four years to sell the assets; during that time the County is free from making payments on the loan, a key term to the County at a time when it has had to make cuts across the government because of its own revenue shortfalls.

The four year term means the County has a good chance of selling during more favorable market conditions, and thus reducing any balance it may ultimately need to pay by April 30, 2013. It also gives the County control over timing, pricing and marketing of the assets.

Some of the conditions of the financing arrangement in which the County will assume $40.5 million of debt, include:

* The County will assume $31.09 million worth of the Authority’s Harborside Condominium debt, including the $22.2 million due to bondholders August 1, 2009, ensuring bondholders will be paid in full and $8.89 million in bank loans or lines of credit. The County is borrowing an additional $4.32 million to ensure it can absorb the carrying costs of the condominiums for up to 4 years – including homeowner association fees, interest payments for the loan and other transaction costs.

* The final $5.09 million represents the debt the Authority incurred in its acquisition of the Poplars Apartments. The apartments have provided safe housing opportunities for seniors aged 62 and older with extremely low incomes. The Authority acquired this property as part of the replacement housing strategy for residents at Westpark Public Housing, owned and managed by the Bremerton Housing Authority. Given its location, situated next to the Central Kitsap Community Campus, the County intends to purchase the Poplars, the Authority will relocate the seniors to other low income housing, and the County will work to redevelop the property in keeping with its Central Kitsap Community Campus plan.

* The County will have the right to direct and manage the sale of specific properties, including the Harborside Condominiums, the Sinclair Lot and Tree Tops Apartments. Additionally, the County will retain a property manager with full authority to act on behalf of and direction of the Board of County Commissioners and will benefit from any and all rental agreements.

In taking on the Authority’s debt directly, in addition to minimizing the impact to its own core county functions, the County Board of Commissioners ensured the continued viability of the Authority within its core mission of providing affordable housing opportunities. To that end, it reached a separate agreement with the Authority that ensured the Authority would prepare and provide the County with a balanced 2009-2010 operating budget, focusing on its core mission, no later than July 31, 2009. Finally, the County Board of Commissioners is considering a resolution limiting the county ability to enter into contingent loan agreements in the future.

4 thoughts on “County to Take on Harborside Condo Debt – Updated

  1. So why do they keep building this stuff when nobody wants it and we end up paying for it anyway. I just don’t get it! For the sake of my taxes I hope they sell it!

  2. This type of mismanagement should lead to multiple firings/resignations. As we argue over budget cuts for what some may claim are essential services. Our leaders in poor judgment with utter disregard for the tax payers entered into this type of agreement. I know changes were made at the housing authority, but where is the accountability at the County level? If these units do not sale, where will we get the money to pay for the debt?

  3. Maybe the Port of Bremerton will step in? Oh, wait, weren’t they buying property nearby to help KCCH? For a parking lot for the marina residents. What a deal our elected officials have got us into. Forty million for KCCH debt, almost forty million they want for SEED, millions for a parking lot and they want to tax South Kitsap for the Bethel Corridor work. How do the elected officials think this will all be paid for? Magic? Pull a billion out of a hat? Are they relying on all the economic development the Port of Bremerton has brought to its districts? Where is our return on the millions spent in the years the Port has been involved? Whose heads will roll? No one! It will just be dealt with because these things happen in an economic downturn. Right, and I believe the Port of Bremerton, Kitsap Commuter Transit, and KCCH are the best stewards of taxpayer funds in the world. With Bremerton and Port Orchard annexing existing and future income areas, how does our Commissioners expect to pay for this latest run for the taxpayers money? Maybe make all roads into Bremerton toll roads to pay off the debt of the condo’s and empty marina. Maybe Silverdale will incorporate and annex Bremerton. Millions spent on downtown Bremerton while the rest of Bremerton and the County falls deeper into disrepair and debt. What a vision for the future. Maybe it will all turn around and we can look back years from now and say it was done right. Of course by then most of us will have moved because we could not afford to live here due to taxes and fees, while others may still be waiting for economic development and a bus.
    Roger Gay
    South Kitsap

  4. Nice how Bellevue Bozeman got a golden parachute with The Port of Bremerton and decided to not stick around the aftermath.

    These damn condos WERE his baby.

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