Port Townsend should immediately declare the Cherry Street Project in default and save taxpayers a little over $316,000. That is the balance of cash remaining on the city’s loan to Homeward Bound Community Land Trust, the volunteer organization behind the stalled-out “affordable housing” development. In just a few weeks the Cherry Street Project will be have its third anniversary. In three years the project’s costs have soared to over $3 million. Nothing is happening. No one is living at the site except rats and the occupant of a homeless encampment. This project is dead in the water, especially under current economic conditions.
The project needs at least another $1 million over and above the last construction budget, which was already several times larger than the intial estimated cost. That estimate does not include necessary civil engineering work or harardous materials expenses. Neither Homeward Bound nor the City has the money to complete all the work, now including lead and asbestos removal/mitigation. Homeward Bound has burned through all but $316,000 of its loan from taxpayers, $834,000 in principal, plus a hidden subsidy of nearly $500,000. Homeward Bound’s two-year grace period is expiring and its first payment is due this summer. It has no money to meet its obligations. It is going to default anyway, and the “reverter clause” of the loan agreement will send the project, its ridiculous costs and its hopelessness back to taxpayers who are going to get stuck paying off the full amount of the loan amount and interest.
The City has been managing disbursement of the funds as Homeward Bound has submitted requests for advances to pay specific bills. City staff evaluate those submissions to determine whether the bill should be paid.
The remaining funds are currently in City control. Sitting there. Available now as the City is facing plunging revenues.
At its most recent meeting City Council ratified furloughs for administrative staff, one police employee and more in other departments, a total of 19 positions, in order to save approximately $750,000. The Cherry Street funds are almost half that amount.
Homeward Bound has been in default for months because they are performing no work at the site. Ironically, while families and home developers with funds to complete residential construction projects have been shut down, the penniless Homeward Bound could be working on the Cherry Street Project because, for unexplained reasons, Governor Inslee’s order makes publicly but not privately financed residential construction “an essential business activity” that may continue during his Stay at Home order.
The Deed of Trust to secure the loan contains as its first obligation of Homeward Bound clear grounds for declaring default now. Homeward Bound covenanted and agreed at all times during the term of the loan:
To keep the property in good condition and repair; to permit no waste thereof; to complete any building, structure or improvement being built or about to be thereon; to restore promptly any building, structure or improvement thereon which may be damaged or destroyed; and to comply with all laws, ordinances, regulations, covenants, conditions and restrictions affecting the property.
One look at the building and grounds shows it is not being kept in good condition and repair, and Homeward Bound has been doing nothing to complete its construction. No activity has occurred at the site since last summer when the building was taken off its stilts (“cribbing” in house moving industry parlance). An inspection by the city found dangerous conditions, with holes in floors large enough for a person to fall through. The grounds are full of trash, a homeless encampment and a neighbor has reported to us that the project has attracted rats. “Big ones,” she told us.
Homeward Bound should agree to default. They know it is coming. They should let the City use the remaining funds to return people to work and help alleviate the economic disaster now settling upon our community.
The support for all statements made in this article may be found in our reporting stretching back two years:
Cherry Street “Affordable Housing” to Cost More Than $2 Million, May 28, 2018
The Tragedy of the Cherry Street Project, December 12, 2018
What’s Happening with the Cherry Street Project? October 29, 2019
“Completely Bogus Numbers”–More Problems and Delays for Cherry Street Project, December 3, 2019
Cherry Street Project Welcomes First Tenants, February 28, 2020
Jim Scarantino was the editor and founder of Port Townsend Free Press. He is happy in his new role as just a contributor writing on topics of concern to him. He spent the first 25 years of his professional life as a trial attorney, then launched an online investigative news website that broke several national stories. He is also the author of three crime novels. He resides in Jefferson County. See our "About" page for more information.
You could move this to Olympia or Seattle and it would fit right in with their “homeless” housing programs. Next stage after wasting anther half million on it will be to hire some consultants to stop by and study the problem for a few hundred thousand dollars. I’m predicting this right now…