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Habitat in hot water with city loan

Mary Voje receives the key to her new Eco Village house from St Croix Valley Habitat for Humanity Executive Director Dave Engstrom in a house dedication ceremony Sunday, Jan. 25, 2015. File photo

The River Falls City Council voted Tuesday, May 23, to allow the City Attorney and City Administrator to call a promissory note given to St. Croix Valley Habitat for Humanity. The $400,000 loan was given to Habitat in 2012 to fund the Eco Village project, with a 10-year repayment term.

Habitat would pay no interest if the loan was paid off within 10 years.

However, Habitat has not made any payments on the loan since May 2016.

Representatives from the Habitat Board of Directors attended the meeting and asked the council to give them 30 more days to come up with a solution for repayment.

"First and foremost, our board apologizes for the distress that this matter must have caused Mr. (City Administrator Scot) Simpson and the mayor and City Council members." said Habitat Board Vice President Joel Skinner. "That we allowed our dealings to reach a point where you're about to take action... We specifically regret that we ceased loan payments entirely for the past 12 months."

Francis Ogden, a former Habitat board member and 47-year River Falls resident spoke during public comment time in favor of the board calling the note.

"I am pleased you are finally starting this process. It probably should have been initiated a year ago," Ogden said.

He said he left Habitat "because a college professor convinced a majority of the board of directors that the Eco Village was a good idea."

"I said it was not economically feasible when building affordable housing for low income families," Ogden said.

Council member Jeff Bjork said he was glad Skinner and other Habitat board members attended the meeting, and said he hoped they would continue to work with the city.

However, the council unanimously voted to approve giving the City Attorney the authority to call the loan.

"I appreciate the request to extend for 30 days," said council member Scott Morrissette, "but to be honest with you, I think this the best interest of the residents in the city, the taxpayers."

Mayor Dan Toland said he was hoping for a bit more from Habitat.

"Personally, I was hoping for a little bit more from you," he said to Skinner." Which we can discuss later. I'm a little concerned with the board waiting for so long to take action with us when we have been very open about everything with you folks and have been trying to get things done with you folks for a long time.

"So I'm a little concerned that it took this action for you to come forward with us."

Toland noted that Habitat for Humanity does a lot of good things.

"But I think you guys really dropped the ball on this," he said, "And hopefully we can go forward together and figure out what we can do to get this fixed."

Council member Diane Odeen noted the council was authorizing the city administrator and attorney to take action, but not requiring them to.

Simpson confirmed that though he and the city attorney have been authorized to call the note, and declare the loan in default, it doesn't mean they will.

"We're going to keep working with Habitat to see how we're going to resolve the matter and that could include calling the note," Simpson said. "Obviously if the city can resolve the matter without calling the note that's our preference."

St. Croix Valley Habitat Board Chair Maureen Otwell said Habitat is doing all it can to pay back the city, including reaching out to Habitat's national and international offices for help.

"We're extremely sorry that it has gotten to this point," Otwell sadid. "And accept responsibility for that."

How did it come to this point? Otwell said that is a long story.

"I think it had to do with our inability to find documentation and to straighten out some internal finances that were going on," Otwell said.

Otwell joined the board in 2015.

"Habitat financing is very complex, because of the fact that they are both a mortgage company, a builder or developer, and they're a nonprofit administratively," Otwell said. "So it was a lot to take in, and I've handled budgets of well over $5 million as part of my career. Even for me this was very complex."

In addition to that, Otwell said, St. Croix Valley Habitat went from building one or two homes a year to 18 between 2009 and 2016.

"It is my feeling that that was not well understood by the board, what the financial burden would be on them, long term," Otwell said. "It was clear even before we ended the last two houses that we had probably overstretched."

A portion of the board was not pleased with Eco Village plans, and a number of members did leave the board. Otwell said the turnover did not help with the financial situation.

Otwell said Habitat has more debtors than just the city, and 12 months ago, decided to pay off another debtor, and made a choice not to pay the city.

Despite the financial difficulties, Otwell said Habitat remains committed to building sustainable housing.

"Now, through some very difficult lessons, this Habitat knows how to build more efficient, energy-efficient homes that are affordable," Otwell said. "And that's what we would like to continue to do."

The international Habitat organization is moving toward creating more sustainable housing, Otwell said. The Eco Village's sustainable model for housing is important in a future with "an environmentally imperfect world," where having low utility bills makes housing more affordable for lower-income families.

Sterling Ponds extension

The city council approved a five-year extension to the plat for Sterling Ponds Housing Development.

An agreement with the developers was approved in May 2003, which included a primary plat for development. However, the housing market took a downturn in 2008, during the Great Recession. Now, the developers want to finish the development, but without an extension would need to begin the approval process all over.

Gretta Stark

Gretta Stark has been a reporter for the River Falls Journal since July of 2013. She previously worked as a reporter for the New Richmond News from June 2012 to July 2013. She holds a BA in Print and Electronic Media from Wartburg College.

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