Lompoc housing corporation struggling

The nonprofit organization owns more than 150 low-income apartments as well as the community’s two homeless shelters. Probably its most high profile project is the delayed renovation of the historic Lompoc Theater. But LHCDC has fallen behind with loan repayments and some bills.

Its problems have become so severe that LHCDC has abandoned some projects, but representatives of the nonprofit, while acknowledging their troubles, say the group will overcome its challenges. 

Last week the LHCDC abandoned ownership of a property at 114 South K St., where it had intended to construct safe and affordable housing for up to 19 young men and women newly released from Casa De Dasarrollo, the county’s foster child system.

In 2006, the city loaned LHCDC $375,000 to purchase the property, with the loan to be repaid once the housing project was built. But the project never made it through the design phase. The value of the land  plummeted, leaving the corporation with a project it could not build, on land it could not sell, and with a loan it could not repay.

At a City Council meeting Tuesday night, the group agreed to deed the city the land in exchange for forgiveness of the loan debt.

“And then we’re stuck with a  vacant lot, and we’ll have to cut down the weeds,” said Councilwoman Ann Ruhge before the council voted to accept the arrangement.

LHCDC had asked for a two-year extension on the loan, but the request was denied by the council, which expressed concern about the organization’s growing problems, and doubts that two years was enough time to improve the situation.

“I think there’s some organizational problems within LHCDC,” said Mayor Mike Siminski.

“The last four or five times someone has spoken to us, it’s been a different person,” said Siminski, who also complained that the organization had failed recently to provide the city with requests for financial information.

At the Tuesday council meeting, LHCDC consultant Dulcie Sinn acknowledged the organization’s problems  but said all nonprofit agencies are having a difficult time, particularly those dedicated to housing projects.

“We bought at the wrong time,” Sinn told the council.

LHCDC Executive Director Sue Ehrlich declined to comment for this story and directed questions to Sinn.

In phone conversations, Sinn said she has faith that the organization will get through its current troubles.

“With help and expertise from city staff, with mentoring from the nonprofit community, we’re encouraged that things will turn around,” Sinn said. 

Since the LHCDC formed in the mid 1990s, it has been the most active housing organization in the community. One of the group’s first projects was to create Marks House, a homeless shelter serving women and children. Another homeless shelter, Bridgehouse, was added in 2002.

After several successful residential projects, the organization diversified, taking on prominent commercial revitalization projects, including the old Lompoc Theater building, and the Ruskowski Building at 113 South H Street.

Signs of trouble

In March, LHCDC Board President Nick Gonzales abruptly resigned. He told the Record that a medical situation involving a child, and not any situation within LHCDC, led to his stepping down.

“They’ve got their own issues. It’s a challenging time for all nonprofits.”

According to LHCDC representatives, the downturn in the real estate market, along with tightening bank credit, and vanishing government grants all combined to indefinitely delay many of the organization’s projects.

Among the stalled projects was a proposed housing complex at 901 W. College Avenue. LHCDC eventually put the empty lot to use, creating what is today the a community garden, which Sinn helps to administer.

“We tried to make the most of it, and the community gets, I think, a wonderful project,” said Sinn.  

But other projects were not so easily converted to a useful purpose. Recently, the city threatened legal action over the Ruskowski building’s level of disrepair, which officials said creates a potential public hazard.

In October 2009, the City Council asked for a report on the city’s community development loan programs. The report found that LHCDC had repaid several Redevelopment Agency (RDA) loans over the years, to help build many affordable housing projects, but that on nine of 12 of those loans, the organization had been “out of compliance,” in terms of proper paperwork reporting, which is used to ensure the units remain affordable.

Months later, nine loans remain out of compliance, according to city staff.

Lompoc Planning Director Arlene Pelster said the organization has remained cooperative with the city, and seemed willing but unable to comply with housing report and loan repayments.

“LHCDC has communicated to us over the years that they do try to run on a very tight budget, which might contribute to some workload problems,” said Pelster. 

When asked about the missing reports, Sinn also said a lack of staffing was a problem, calling the LHCDC “overwhelmed, understaffed and underfunded.”

“If the choice is getting a grant (proposal) finished, or doing a (compliance) report ... there’s been a lot of grants written,” Sinn said.

Bills unpaid

Paul Larson has worked with LHCDC “a long time, 10 good years.”

The general repair contractor was hired by the organization to renovate several apartment units, and to handle maintenance work once they were occupied. He also did extensive interior work on the Bridgehouse shelter.

“I liked what I was doing. I felt like I was doing some good. They treated me real fair.

“They were happy about my work, that was never an issue,” said Larson. 

About a year ago, Larson says the working relationship changed. The checks kept coming on a regular basis, but they started to become smaller than what he had billed.

“Now they owe a few bucks, and I’d rather not say how much,” Larson said.

Three months ago, Larson decided to stop work for LHCDC until the debt is settled. He said the organization recently sent him a letter, promising to pay the bills. Larson said he believes that promise, and would be happy to work with the organization again, once the debt is paid.

LHCDC Interim Board President Susan Warnstrom said the organization has improved its financial stability. She mentioned the recent receipt of a county Community Development Block Grant (CDBG) check as an example, and said the organization is settling all its debts to area businesses.

“We were living pretty close there for a while, but things are better now,” said Warnstrom.

However, some financial problems are still ongoing.

“Our trouble has come from the shelters. It has really thrown us for a curve,” said Warnstrom.

LHCDC’s Marks House homeless shelter, which helps women and children find permanent housing, was established with the help of two loans from the city. The loans currently has a remaining balance of $70,748 which the LHCDC has not been making payments on since July, 2008.

A change in the way Lompoc applies for its CDBG funding caused a drop in grant funding, according to Warnstrom.

Pelster said LHCDC has notified the city that it will ask the City Council to forgive the remainder of the loan at a future council meeting. 

The future

Recently, the City Council has designated funds that had been assigned to the LHCDC to other sources, including money for the long-awaited theater restoration project. Earlier this month, it redesignated $768,934 in federal grants that would have helped to operate Casa de Dasarrollo.

The organization still has 13 community development loans with the city, including the two Marks House loans, though none of the rest are in the same state of default.

Of the many residential properties already built by LHCDC, most would remain rent-controlled affordable housing units, even if the property was foreclosed on, thanks to covenant rules, according to city staff.

The LHCDC has voluntarily abdicated some of its own workload, giving management of its recently completed College Park Apartments to another nonprofit.

“We’re having to reposition ourselves on a few things,” said Warnstrom, who added that she was positive about the organization’s future.

Sinn said the organization is currently in a transformational time, shifting its focus from multiple construction projects, to more housing and employment programs. She said the LHCDC staff and board were also actively reaching out to respected nonprofit groups such as the Santa Barbara Foundation for leadership training and mentoring.

Sinn said community and City Council support would also help the group through the economic storm. 

“It’s interesting to see the dynamics of a group that’s been so praised, be criticized now, largely for things that are beyond their control.”