YWCA wants out of affordable housing law
Cites need to “behave responsibly” to creditors
[JAN. 4 UPDATE: The Portland City Council referred this matter to its Housing Committee last night for further discussion. More updates to follow. – Ed.]
By Chris Busby
The land-rich, but cash-poor Greater Portland YWCA is asking city councilors to exempt its Spring Street dormitory and recreation center from a law passed to maintain the city’s affordable housing stock. If granted an exemption, the Y promises to pay at least $200,000 into a city fund for affordable housing construction, among other measures intended to compensate for the building’s closure.
A Council vote on the exemption request is scheduled for next Wednesday night, Jan. 3.
As we reported earlier this month, the non-profit women’s social service provider is trying to sell its property on Spring Street to pay off creditors. It has since closed the building, and board member Catharine Hartnett said the women who lived there have all “found a safe place to go” with the help of the Y and other service providers.
The four-year-old city ordinance requires developers who demolish more than three housing units (or convert them to another use) to compensate for the loss by creating or helping to build other units, or by paying into a city housing fund.
There are about 50 rooms in the Y’s building, each of which could cost over $30,000 to replace if the option chosen was to pay into the fund. However, the number of units legally affected by the ordinance is a matter of some debate.
In a letter to councilors made public today, city attorney Gary Wood estimates that only 33 units would fall under the housing replacement law’s requirement. But in an e-mail to Wood from Peter Merrill of the Maine State Housing Authority (MSHA), Merrill notes that his organization has considered there to be 58 units; the company the Y hired to auction the building pegged the number at 53; and “at one point a look at the plans led to an estimate of 74.”
There’s also some disagreement and confusion over who would be responsible for either building new units or paying up. City Manager Joe Gray said Wood interprets the law to mean the Y would be on the hook. Hartnett said it would be whomever buys the building and “physically takes the housing stock out of Portland.”
The potential $1 million-plus tab to do so would “dampen” the property’s value, said Hartnett. In a letter to city officials from YW board chairwoman Margaret Cleveland, also made public this afternoon, Cleveland wrote that the ordinance “may substantially undermine the ability of the YWCA to maximize the value of 87 Spring Street to the detriment of its creditors and the City.”
The YWCA is arguing that its property should be considered “a project of special merit,” as defined in the city housing replacement ordinance. Such properties must meet two standards to be exempted.
First, they must be consistent with the city’s comprehensive plan. The part of that broad planning document that deals with housing calls for “the existing housing stock [to be] enhanced and preserved, and a wide variety of new housing [to be] designed and created….”
A redevelopment project that removes housing would also have to “provide significant public and civic benefits,” including “social and other benefits” that are “particularly desirable at the location proposed,” the law states.
Councilors reached for comment this week seemed either doubtful the Y’s building would meet those standards, or curious to know how the Y’s financial problems pertain to the criteria for this exemption.
City Councilor Kevin Donoghue, a member of Council’s Housing Committee, was dismissive of the idea the Y’s financial straits justify an exemption. “We’re not in the business of bailing out failing non-profits,” he said. “Housing’s the policy need that needs to be met here.”
“It’s a dead organization, so why should the people who need housing pay for the funeral?” he continued. “It’s like, ‘I’m going to ask the city of Portland to pay down my credit card debt because I owe money to good people.'”
Hartnett said severance payments to the non-profit’s employees are at the “top of the list” of debts the board hopes the sale will settle. She said the board also has a responsibility to cleaning companies, security firms, document storage companies and other businesses with claims against the Y.
The Greater Portland YWCA is “a bankrupt organization that can’t pay its employees,” said Hartnett. “A non-profit should be at least credited with trying to behave responsibly.”
According to financial documents made public today, the YW’s total debt is nearly $2.5 million. It owes Maine Bank and Trust $700,000 for two loans. The state Department of Health and Human Services is owed over $500,000 for overpayments DHHS made to the Y. Claims held by nearly 70 vendors total over $1.1 million. Severance payments to former employees total $118,000.
The Y originally put the building on the market for $4.9 million, then decided to auction the property. Hartnett said that while it was on the market, the 46-year-old building “received some interest, but not any legitimate offers.”
Cleveland notes in her letter to the city that an independent appraisal estimated the property’s value to be $4.75 million. But given that it received no offers “at any price” earlier this year, “the appraisal figure appears to be significantly inflated,” she wrote.
The MSHA had offered to buy the building, but its offer was rejected earlier this year, said MSHA Director Dale McCormick. McCormick said the Y’s board has tried to convince her non-profit housing organization to lift a covenant it holds on the property. That covenant requires the building to remain a residence for women in crisis or in need of transitional housing, as well as a shelter for homeless girls, until 2030.
In the letter to city officials made public by the city today, Cleveland reveals the housing authority offered just $1.6 million for the property in October. “Because this would have left the YWCA unable to pay its creditors, the Board declined it,” she wrote.
The MSHA and the Y then attempted to reach a deal that would have given the state housing authority first dibs on the property – for a sales price of $1.2 million – in exchange for lifting the covenant. But in a follow-up letter also dated Dec. 28, Cleveland informs city officials that the nascent deal has broken down, both because of the city ordinance and due to the discovery of asbestos in the building.
In addition to the $200,000 payment into the city housing fund, Cleveland now promises the Y would pay the state housing authority $200,000 to get out of the covenant, another $90,000 to settle the MHSA’s mortgage claim on the property, plus any other money from sale proceeds should the building fetch more than $2.8 million. Cleveland notes that this agreement with the MSHA is not yet finalized.
Several arts and cultural institutions nearby are rumored to be interested in 87 Spring Street, including the Portland Museum of Art and the Children’s Museum of Maine. The public auction has not been rescheduled yet.
In her first letter to city officials – sent before the follow-up letter that mentions asbestos problems – Cleveland asserts that “the universe of potential buyers is great.
“The downtown location is well-suited for integration into a ‘cultural block,'” she continues, “given the proximity of the property to the Portland Museum of Art, the Children’s Museum, or the Maine College of Art and/or for commercial uses or new residential or hotel opportunities.”
“It’s in the public’s interest to work with the YW to make sure the YW can pay off all its debts,” said City Councilor Ed Suslovic, who serves on the board of the non-profit social service provider PROP (the People’s Regional Opportunity Program). If the Y fails to do that, that could “negatively impact a lot of non-profits’ ability to serve people,” he said, because banks may consider similar non-profits a greater risk, and either refuse them credit or raise interest rates.
“Most social service non-profits operate on a razor’s edge,” Suslovic added. A default by the Y “could put some of [them] in a precarious position.”
Mavodones said councilors will want to know why the property could not be sold to an entity that would continue to offer housing – a scenario that could make the replacement ordinance moot. Though Cleveland’s letters to him were dated Dec. 28, as of 7:30 p.m. last evening, neither Mavodones nor the other councilors reached for comment had seen the correspondences from the Y detailing their exemption request and promises of payment.
“There’s still a huge demand for housing for the neediest people in the city,” said Mavodones, who co-chaired the group that wrote the housing portion of the comprehensive plan four years ago.
Councilor Jim Cloutier was also on the Council when it passed that part of the plan, and currently serves with Donoghue on the Housing Committee. “To lose a multiple of dozens of units of affordable housing is kind of a big blow to the program,” he said.
Cloutier added that though he doesn’t know what kind of project may displace units at the Y’s building, “I’ve got a feeling that whatever the project is, there is a countervailing public policy promoting housing that is both strong and expensive.”
Councilor Jill Duson, who chairs the Housing Committee, did not return a call requesting comment. Councilor Cheryl Leeman, the lone sponsor of the Y’s exemption request, could not be reached for comment this week.