Derby Housing Authority Is In Terrible Financial Shape

The Derby Housing Authority’s financial house is a mess and a state agency is threatening legal action if something is not done to address the matter.

The Connecticut Housing Finance Authority (CHFA), which helps finance affordable housing in the state, is demanding the city’s housing authority pay back $432,120 in CHFA assistance.

UPDATE: The Valley Indy was able to interview a spokeswoman from the CHFA June 29. She said the money is actually owed to the ​“state elderly housing program replacement reserves.” Essentially, the Derby Housing Authority is required to pay the money back to its own greatly depleted reserves.

As it stands, the housing authority simply does not have enough money to pay the bill money.

Meanwhile, the appointed Derby volunteers who are supposed to oversee the Derby Housing Authority’s operations said they were in the dark about the financial crisis until last month — though a CHFA official said she has been asking the housing authority’s executive director about the issue for two years.

Now the executive director’s job is in jeopardy, with two housing commissioners openly acknowledging internal mismanagement and a lack of communication are partly to blame for the housing authority’s money problems.

The money owed includes $220,250 in reserves that was used to purchase the ​“Barron block” building on Anson Street in 2013.

The building was supposed to be used for senior housing, according to a 2013 press release from former Mayor Anthony Staffieri’s administration, but the redevelopment project never went anywhere.

The money also includes $211,870 the Derby Housing Authority had been using as a ​“revolving fund,” according to documents.

Neither the ​“Barron block” purchase nor the revolving fund had been authorized by the CHFA, according to a email from the agency to city government and housing officials.

Financial Outlook Bleak

The housing authority’s financial situation is dire, according to the commissioners.

According to a Jan. 17 letter and a May 5 email from CHFA (both of which are embedded at the bottom of this article), the housing authority is required to have at least $106,000 in a reserve fund.

But the housing authority has just $18,133 in reserves.

That leaves the hundreds of people who live in federally subsidized housing complexes in Derby — including many senior citizens — in a potentially tough spot.

The reserve fund is ​“well below the required minimum and perilously low for any potential major emergency repair that may arise, such as roof, plumbing or electrical replacements,” according to the email from Rhonda Caldwell, an asset manager with CHFA.

The money woes, by the way, go beyond the ​“Barron block” purchase.

The housing authority uses CHFA money to fund a percentage of its operations. For example, the executive director, a full-time position, draws an annual salary of $107,632.

The CHFA pays 45 percent of that salary.

Caldwell notes in her email that the CHFA is concerned about the housing authority’s spending habits.

She questioned the wisdom of spending $149,201 on less than 10 employees when the housing authority manages just 106 housing units.

“Please review this submission with the office staff and consider revising these operating expenses as they seem excessive for the number of units and the size of the properties,” Caldwell wrote.

The Valley Indy sent two emails June 21 to the Connecticut Housing Finance Authority seeking comment. UPDATE: A third email was sent June 29, and the CHFA responded. Click here for the story.

What’s A Housing Authority?

The Derby Housing Authority operates 106 low-income, government-subsidized housing units in Derby, including the Lakeview Apartments, Cicia Manor and Stygar Terrace.

The housing authority is also in charge of section 8 vouchers.

The Derby Housing Authority is separate from Derby government. The city does not allocate money to the housing authority. The housing authority is ultimately under the jurisdiction of the federal Department of Housing and Urban Development.

However, the authority is governed locally by a five-member board of commissioners appointed by the mayor.

Who Knew?

The May 5 email from Rhonda Caldwell of the CHFA was addressed to eight officials, including the volunteer housing commissioners and Mayor Anita Dugatto.

In the email, Caldwell wrote that she had spoken to Derby Housing Authority Executive Director Steven Nakano several times about the financial issues since 2015.

But both Mayor Dugatto and Linda Fusco, the chairwoman of the housing board of commissioners, said they were not aware of the CHFA concerns until the email arrived in their inboxes last month.

“When I called Rhonda (Caldwell) she said, ​‘This is serious, they owe us money. They did things without the right authorizations,’” Dugatto said.

The issue raises obvious questions as to whether anyone has been paying close attention to the housing authority for at least the past six years, and whether the paid staff has been communicating with the commissioners.

“Rhonda said the feds could take over the housing authority and that I had to get rid of all our board members,” Dugatto said.

But Dugatto had already appointed three new members to the five-person commission with the past five months. The Barron block purchase happened before she was elected mayor.

“I explained that we just put on brand-new board members. So now they’re coming up with a plan to deal with this. They’re reorganizing.”

An earlier Jan. 11, 2017 letter from the CHFA expressing concerns about the housing authority’s finances didn’t make its way to commissioners until some four months after it was written, according to Fusco.

That letter was addressed to former commissioner Joseph Romano — but his tenure on the board had ended three weeks before the letter had been written. It was sent to the housing authority’s office at 191 W. Fourth St. in Derby.

“The first I was aware (of this issue) was when I saw a message sent to me on May 5. That’s when we knew,” said Fusco, who has been a housing commissioner for two years. She was formally made the commission’s chairwoman in April. She is also the chairwoman of the Derby Democratic Town Committee.

Private Talks

The housing commissioners met Wednesday in Derby City Hall and went into executive session, a type of meeting closed to the public, to confer with a lawyer.

The commissioners are now debating whether it is time to replace Derby Housing Authority Executive Director Steven Nakano.

The commissioners acknowledged the authority has a management problem.

Nakano, meanwhile, told The Valley Indy the money problems date back to the housing authority’s 2013 purchase of the nearly 17,000-square-foot ​“Barron block” building at the corner of Anson and Fifth streets in downtown Derby.

The surprise purchase was announced with great fanfare by former Mayor Anthony Staffieri, but the redevelopment project never got off the ground under Mayor Anita Dugatto.

The property was supposed to be redeveloped into senior housing, but the city and the housing authority were never able to work out parking issues connected to the project.

Meeting minutes show the former housing commission chairman giving monthly updates on the project through 2015. An architect had been ​“contracted” at some point that year.

“There had been one roadblock after another and, you know, there hasn’t been any redevelopment going on, and now CHFA looking to find resolution,” Nakano told the Valley Indy Wednesday.

Joseph Romano, the former volunteer chairman of the Derby housing commission, butted heads with the Board of Aldermen and the mayor over the project. Romano expressed frustration about working with city government, complaining the city was dragging its feet on the project.

In 2014 he went public with his concerns at a Derby Aldermen meeting. The Aldermen are Derby’s legislative body, and they control land purchases in the city.

The image below is from the minutes of the Aug. 28, 2014 Aldermen meeting:

The lack of parking for the Barron block project was a major hurdle. Meeting minutes from a housing commission meeting in May 2014 show that in order to receive a rehabilitation grant to help the redevelopment project move along, the commission had to show there was enough parking. The commission passed a resolution to work with city government to purchase land. Click here to read the minutes.

The large building now sits vacant with boarded-up windows four years after the purchase. The lack of redevelopment has obviously contributed to the authority’s financial hole.

Minutes from a housing commission meeting in February show the housing authority was hoping to use two city-owned lots to provide parking for the ​“Barron block” redevelopment project.

But the city wanted the housing authority to purchase the land for parking, which the city had acquired through foreclosure. Dugatto told the Valley Indy the city put the lots out to bid, with the hope the housing authority would scoop up the parcels for $20,000.

“They didn’t bid,” Dugatto said.

The Valley Indy sent an email to Romano Thursday morning seeking comment.

Minutes show the housing authority considered demolishing two units of housing within its Cicia Manor property to make room for a parking lot off Anson Street in order to get the redevelopment project moving.

“This proposal was also stopped,” according to the February meeting minutes. The minutes do not elaborate.

Next Steps

The housing authority has been looking to recoup the money it spent on the Barron block building by selling it — but there have been no buyers so far.

Meeting minutes from earlier this year show the newest members had started to ask Nakano, the executive director, for a more detailed report on expenses and revenue.

Nakano told The Valley Indy he wants to keep his job, but it’s up to the housing commission.

“Nothing has been cast in stone,” he said of his employment, ​“but because of the number of years that the building has been sitting there — it was purchased in 2013 and we’re now in 2017 and there are several new board commissioners — the board would like to see something happening, whether it goes and becomes additional housing, or if it means the sale of the property.”

Nakano said he understands if the commissioners ​“want to go in a new direction.”

Fusco said she was scheduled to discuss the housing authority’s woes with federal housing officials Friday.

The commission has a lawyer, a consultant and an accountant looking into the matter.

The problem at this point, Fusco said, is that the housing authority does not have the more than $400,000 it needs to pay CHFA back to its reserves.

“You can point a lot of fingers,” Fusco said. ​“You can look at the old board. You can look at CHFA because while Rhonda Caldwell is on top of it, apparently some of the other caseworkers who were assigned here were not, and they let a lot of things slide. We don’t want to point fingers. We just want to fix it.”

“There’s nothing criminal here,” said Adam Pacheco, a member of the housing commission who was appointed earlier this year. ​“It’s mismanagement. Some poor decisions were made. When you talk about financing and dollars, it snowballs. The problems get big.”

When asked to describe the Derby Housing Authority’s financial condition, Pacheco said ​“poor.”

“Worrisome,” Fusco replied. ​“Very worrisome.”

CHFA JANUARY2017 LETTER to Derby Housing Authority by The Valley Indy on Scribd

REPRINT OF CHFA May 5 2017 Email by The Valley Indy on Scribd