Critical time for proposed affordable housing sale
When you're selling 12 affordable housing complexes encompassing 1,257 units, paperwork becomes an issue. In an informational briefing Tuesday before the City Council, Managing Director Ember Shinn said the city has about a week to get the ball rolling.
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"If we don't come to a very specific agreement on the specific terms of the deal very, very soon, we will run out of time to put all the documents together," she said.
The $142 million deal with Honolulu Affordable Housing Partners LLC hinges on how long the city may have to wait to receive a bulk payment. Under a seller financing proposal, the city would receive $132 million to $138 million within six months to a year of the deal's closing on March 31.
Meanwhile, so called gap financing of $4 million to $10 million would also be covered by taxpayers, but the city may have to wait up to 20 years for that payment. The entire scenario is creating a major budget headache for the administration and skeptical council members.
"If this fails, we're looking at another $20 million gap on our 2014 year budget, plus $7 to $10 million in expenses every year covering these 12 units," said Mayor Kirk Caldwell in a Monday interview with KITV4.
However, even if the sale goes through, seller financing means the city will receive only $5 million from the buyer that's currently held in escrow.
"So, regardless we're going to be $20 million short no matter what happens," said Councilwoman Ann Kobayashi, who chairs the Budget Committee.
Kobayashi is also concerned about the legality of the sale, since seller financing was not approved by the council.
"I don't believe it was in the RFP (request for proposal) and I don't see it in the contract," she said.
If the sale goes through and Honolulu Affordable Housing Partners defaults on a payment, Shinn said all 12 affordable housing complexes would be returned to the city. However, that means taxpayers would be responsible for about $40 million in deferred maintenance.
Correction: An early version of this story stated the city's 12 affordable housing complexes encompassed 1,157 units, information that was provided by the city.
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