City sus­pends loan pro­gram

Ne­wark still owed more than $500,000

Newark Post - - FRONT PAGE - By KARIE SIM­MONS ksim­mons@ches­

Over the last 12 years, the city has loaned prospec­tive home­own­ers more than half a mil­lion dol­lars for down pay­ments on rental houses they planned to buy as per­ma­nent homes, but ac­cord­ing to Ne­wark of­fi­cials, most of those peo­ple have yet to pay the city back.

Coun­cil de­cided on Mon­day to sus­pend the Pro­mot­ing Owner-Oc­cu­pancy of Homes (POOH) Pro­gram un­til staff comes back with a bet­ter plan to help fu­ture home­own­ers. The vote passed 4 to 1 with Coun­cil­man Mark More­head as the op­pos­ing vote. Coun­cil mem­bers Jen Wal­lace and Stu Markham were ab­sent.

Cre­ated in 2005, the POOH pro­gram pro­vides zero-per­cent in­ter­est loans with no pre-de­ter­mined pay­back pe­riod to peo­ple who want to buy rental prop­er­ties in the city, thereby en­cour­ag­ing the owner-oc­cu­pancy of homes. The pro­gram is capped at $250,000 per year, and loans are dis­trib­uted on a first-come, first-serve ba­sis, with the money com­ing di­rectly out of Ne­wark’s re­serves.

Fi­nance Direc­tor David Del Grande ex­plained that since the pro­gram was es­tab­lished, the city has ap­proved 21 loans to­tal­ing $667,060. Two have been re­paid – a to­tal of $40,000 – and three prop­er­ties went to sher­iff sale in 2010, rep­re­sent­ing a $100,000 loss to the city. He said there are still 16 prop­er­ties in Ne­wark that owe the city $527,060, and there is no telling when that money will re­turn.

Ne­wark’s code states that a loan of up to $30,000 does not need to be re­paid un­til the prop­erty is sold or trans­ferred. In re­turn for the loan, the city is sup­posed to re­ceive a per­cent­age of equity in the prop­erty when it does sell. How­ever, to date, the city has re­ceived only $345 from the equity share in one of the prop­er­ties that sold and no money from the sec­ond.

“The pro­gram as writ­ten is not sus­tain­able, nor can it be con­sid­ered ef­fec­tive in its in­ten­tions of pre­serv­ing owner-oc­cu­pancy homes within the city,” Del Grande said.

He added that the city is drain­ing its much-needed gen­eral fund re­serves to fund the pro­gram, and there’s no guar­an­tee the ben­e­fit­ting home­own­ers are us­ing Ne­wark’s funds to im­prove the prop­erty, thereby pro­tect­ing the city’s in­vest­ment.

Del Grande rec­om­mended coun­cil sus­pend the pro­gram, but More­head wasn’t on board. He said the debt owed to the city is shock­ing, but he doesn’t feel com­fort­able cut­ting the pro­gram un­til he knows what is go­ing to re­place it.

“Just let it go,” replied Coun­cil­man Luke Chap­man.

Pamela Bobbs, who lives in The Wash­ing­ton House con­do­mini­ums, said she’s in fa­vor of more owner-oc­cu­pied hous­ing down­town be­cause it’s bet­ter for busi­ness, as full-time res­i­dents pa­tron­ize the shops and restau­rants year-round. She sug­gested the pro­gram be re-writ­ten, in­stead of sus­pended.

“I don’t know how it was sus­tain­able as long as it has been,” Bobbs said.

Res­i­dent Jim Nigg felt the op­po­site, and urged coun­cil to get rid of POOH en­tirely.

“I don’t know why the city needs to get in­volved in fi­nanc­ing homes,” he said.

He ar­gued that be­cause the pro­gram elim­i­nates the need for peo­ple to use their own money for a down pay­ment on a house, peo­ple are buy­ing homes that maybe shouldn’t be be­cause they lack the skills or fi­nances.

“There’s no skin in the game re­quired,” Nigg said.

Res­i­dent Jeff Lawrence also wanted to see the pro­gram gone. He said the city is ma­nip­u­lat­ing the hous­ing mar­ket and “muck­ing” with sup­ply and de­mand.

“I would urge that it get re­placed with noth­ing,” he said.

Coun­cil­man Chris Hamil­ton was con­cerned that be­cause the pro­gram has no in­come limit, a mil­lion­aire could get a loan from the city.

“That to me is mind-bog­gling,” he said.

Coun­cil ul­ti­mately voted to sus­pend the POOH pro­gram, and Del Grande promised to come back with op­tions for al­ter­na­tives in Au­gust.

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