A spokeswoman for the Connecticut Housing Finance Authority said her agency is working with the Derby Housing Authority to come up with a plan that will see the authority pay back more than $430,000.
It’s the first time anyone from the CHFA has publicly commented on the issue and clarified its role in the situation.
Kidder said the $432,120 cited in CHFA communications to the Derby Housing Authority isn’t owed directly to the Connecticut Housing Finance Authority, as The Valley Indy reported last week, citing documentation from CHFA.
Instead, the Derby Housing Authority actually owes the money to a state program called the “state elderly housing program replacement reserves.”
That’s government speak for reserves. So the housing authority basically drained its own reserves, dipping below guidelines, and now owes the money to itself.
The money in the reserves comes from rent collected from housing authority properties.
“It wasn’t assistance from CHFA, it’s their own housing reserves. It’s the state-sponsored elderly housing program replacement reserves. Every housing authority is required to set aside reserves to fund future capital needs like roofing and siding and windows,” Kidder said.
The Valley Indy had reached out to the CHFA twice before publishing a story last week revealing the Derby Housing Authority’s financial problems, but did not receive a response.
After a third attempt Thursday, Lisa Kidder, a CHFA spokeswoman, clarified the problems facing the housing authority.
Meanwhile, the Derby Housing Authority is scheduled to meet at 6:30 p.m. tonight (Thursday, June 29) to talk about a number of issues, including whether to eliminate positions within the housing authority.
The Money Problem
According to Kidder, “asset managers” from the CHFA noticed the Derby Housing Authority reserves were dangerously low.
According to a Jan. 11 letter from CHFA (posted below), the Derby Housing Authority was supposed to have $106,000 in reserves.
Instead, it had just $18,046.36.
“They had much more than that, and then we noticed there was a drop in the reserve account,” Kidder said.
The Jan. 11 letter ended with a clear and obvious legal threat.
The Connecticut Housing Finance Authority “may direct its legal counsel to pursue all available legal remedies to protect the Department of Housing’s interests,” the letter read.
A May 5 email from Rhonda Caldwell, as asset manager with the CHFA, was equally forceful.
She noted the Derby Housing Authority had used $220,250 from its reserves to buy the “Barron block,” an old apartment building at the corner of Anson and Fifth streets.
The purchase happened with the support of former Mayor Anthony Staffieri’s administration but redevelopment efforts failed to move forward under Mayor Anita Dugatto’s administration.
The Derby Housing Authority and the city could not come up with a way to provide parking for the project.
In her May 5 email, Caldwell noted the money from reserves was not supposed to be used to buy properties.
The “Derby Housing Authority was placed in non-monetary default on January 11, 2017 for failing to provide CHFA/DOH with a plan of action on how the Authority planned to repay the $220,250 that was borrowed from the SSHP property reserves to purchase the Barron Block Estates Apartment building,” Caldwell wrote.
Caldwell also warned that “state property reserves are only to be used for the operations and staff related to the operation of our State portfolio and any other uses requires our written consent, in advance.”
Kidder, the CHFA spokeswoman, confirmed that the Derby Housing Authority was not supposed to use its reserves to buy the Barron building in 2013.
“The money is supposed to be used for capital needs at the properties. The rules of use for that are to renovate the property, not buy another property,” Kidder told The Valley Indy.
But Kidder could not name any real penalties for using the money improperly.
None of the current Derby Housing Authority Board of Commissions were serving on the board at the time of the 2013 purchase.
One member, Stan Muzyk, was on the commission in 2013 but just resigned, according to a story in The New Haven Register.
After reviewing an audit of the Derby Housing Authority, the CHFA watchdogs also ordered the Derby Housing Authority to “cease and desist” the “unauthorized” use of a $211,870 “revolving fund.”
“The Derby Housing Authority is required to immediately repay funds to State program and eliminate item, revolving fund unauthorized,” according to the Jan. 11, 2017 certified letter from the CHFA to the Derby Housing Authority.
Kidder was researching the “revolving fund” as of Thursday afternoon.
This story will be updated after tonight’s Derby Housing Authority meeting.