Affordable Housing Update

The City's website has an informational blurb about the Jamboree Housing Corp. affordable housing project on the old Claremont Courier site at 111 S. College Ave. Most of the information is a rehash of the article in the last Claremont City Letter, but there are a couple links for anyone interested in applying for one of the residential units.


Jamboree will break ground in November. Courier Place will be open to low- to moderate-income families, and there will be 38 units for seniors. Preference for the family units will be given to families that have a person employed in Claremont.

Affordable Housing Project Update (Sep 7, 2010)

City Council has partnered with Jamboree Housing Corporation, a non-profit housing development company, to develop an affordable housing project at 111 S. College Avenue on the site of the former Courier building.

With the funding in place, the City is scheduled to break ground this fall. Construction is scheduled to start in November and is anticipated to take a little over a year. Pending weather delays, the project would be ready for occupancy in early 2012.

Jamboree Housing Corp. has named the project Courier Place. the complex will have 75 units divided into three residential buildings.There will be 38 one-bedroom senior (age 62+) units in one courtyard style building, 36 family units with 2 to 3 bedrooms in two 18-unit buildings, and one two-bedroom manager unit. In addition to the residential buildings, there will be a community building, swimming pool, a playground and landscaped areas.

Applicants must meet low to moderate income guidelines set by the state with rents ranging from $481 to $1,218. In addition to income criteria, family units will have a residency preference provided to households where at least one member of the household is employed within the city of Claremont.

The City is maintaining a mailing list of interested applicants which will be turned over to Jamboree in the next six months. The qualification process will be administered by Jamboree Corporation. To be placed on the mailing list, please contact the City of Claremont at (909) 399-5441 or fill out the interest form and send to City Hall.

• Click here for the interest form

Courier Place Site Plan
(Click on Image to Enlarge)

Claremont Officials Spinning Tangled Webs

PRACTICING TO DECEIVE

Claremont City Manager Jeff Parker and Human Services Director Mercy Santoro did their bureaucratic best to rewrite history in their recent interviews with the Daily Bulletin. Parker and Santoro were quoted in yesterday's Bulletin in an article about the possibility of cuts in city staff and services being connected to the costs of the newly opened Padua Park.

Both Parker and Santoro put their spin on the story. Santoro was quoted in the article, saying that all the funding decisions for the park occurred before the City faced any real budget problems:

"We were not having drastic budget reductions until January 2009," Santoro said. "We were not faced with takeaways until well after. We were well into our project when we were faced with having to look at reducing our workforce."

Parker claimed in the Bulletin article that once the City Council awarded its contract for building Padua Park, the City's hands were tied because the cost of breaking the contract would have been $500,000:

"Theoretically, we could have said, `Gee, the economic downturn will not let us build the park.' And could we have gone back? ... I'm sure they would have said, `Sure. Do you want to pay me a half a million to walk away?' It doesn't make a lot of sense" to change the contract, Parker said.

Santoro also said the City had been planning the park for 19 years and seemed to claim, like Parker, that they could not postpone building the park. Santoro and Parker must have had their fingers crossed behind their backs when they were interviewed for the story, because none of their claims is supported by the record.


UNEXPLORED OPTIONS

We considered the points the Claremont officials made and then examined the record. Take Parker's claim of having to pay the contractor $500,000 to buy out the contract. We noted that Parker mentioned breaking the contract and ending the project while conveniently omitting other options. Parker himself had mentioned the idea of reworking the contract back in December, 2009, when the $850,000 grant for the park from the San Gabriel and Los Angeles Rivers and Mountains Conservancy was placed on hold in December, 2009, because the state had stopped selling the bonds needed to fund RMC grants.

The city council could have put the matter on hold until the RMC came through with the money the City was counting on for the park's construction. Parker indicated that the cost would have been less than $100,000. If the City could work out a deal like that in order to wait for the RMC's funds, as Parker seemed to think, they certainly could have worked out something with the contractor to place the matter on temporary hold until the City's deteriorating financial picture improved.


TIMELINE

As to Santoro's claims that the money for the park construction was allocated before the City realized the extent of their financial problems, a look at a timeline of Padua Park funding decisions along with events in the banking and housing crisis shows that there was plenty of time for the City to hold the project in abeyance and use the money for other things - like paying for employees' jobs.

We looked at two of the City's Padua Park funding decision points - the 10/9/07 decision to appropriate $1.6 million from the General Fund for the park's construction and the 9/23/08 decision to award a park construction contract and dip into the City's General Fund reserve to pay for the job. When you set those two dates, almost exactly one year apart, against the backdrop of the housing and banking crises, you can see that there were plenty of red flags warning the City to proceed with caution in its spending.

The housing market, on which the state and the City depend for property tax revenue, peaked in 2005, three years before the Padua Park contract was awarded. In early 2008, housing's decline was well on its way to a far off bottom. Even if we accept for the sake of argument that Parker was correct about being locked into the park construction contract, there was plenty of time before the City Council's 9/23/08 vote to give Mega Way, Inc. the contract to build the project. Here's a graph showing the Case-Shiller housing market index from mid-2006 to mid-2009 (we've overlaid the two Padua Park decision points):

(Click to Enlarge)

Background chart courtesy of Juan Toledo
and paper-money.blogspot.com/

The City had 350 days between the first arrow and the second to put an emergency hold on the project. At the City's 6/12/08 budget workshop, the staff's presentation said the City had a hiring freeze on and was reducing staff through attrition by not replacing employees who decided to leave. Staff also noted a decrease in sales tax revenues and the need to raise sanitation service fees - all signs that the revenues wouldn't cover expenditures.

The City was also having to deal with foreclosures in the spring of 2008. Empty, untended houses prompted the city to adopt an ordinance requiring owners of foreclosed properties (banks mostly) to properly maintain the houses they took over, and unemployment in California reached a 12-year high of 7.3% by July, 2008. Those were additional indicators that should have told us to expect even more mortgage defaults as well as declining sales tax revenue due to more people losing jobs.

Here is a timeline of the Padua Park decisions with some major and minor events in the Great Recession (in red):

• Early 2005 - housing market peaks, then begins its long decline.
  
  
• 10/9/07 - Council authorizes $2.4 million for Padua Park, including $1.6 million from the General Fund. Vote is 4-1 with Councilmember Calaycay voting "No."
  
  
• 4/8/08 - Federal Reserve brokers the sale of investment bank Bear Stearns to JP Morgan Chase and underwrites the purchase with a $29 billion loan.
  
  
• 4/30/08 - NYSE suspends trading of PFF Bancorp stock, one of the banks in which the City held its short-term savings accounts.
  
  
• 7/11/08 - Talk of a federal bailout Fannie Mae and Freddie Mac reported in NY Times.
  
  FDIC takeover of IndyMac Bank.
  
  
• 8/28/08 - PFF announces shareholder meeting to vote on merger deal with Illinois-based FBOC, Inc.
  
  
• 9/8/08 - Government places Fannie Mae and Freddie Mac in conservatorship.
  
  
• 9/13 - 9/14/09 - Fed and US Treasury Dept. allow Lehman Bros. to fail.
  
  
• 9/16/08 - Fed bails out AIG with a $85 billion loan.
  
  
• 9/17/08 - Dow Jones Industrial Avg., already down over 3,000 points from its peak, declines 449.36 points - 4.1%.
  
  
• 9/23/08 - Council votes to award $2.4 million Padua Park construction contract to Mega Ways, Inc., in Pomona. City awaits announcement from RMC on $850,000 grant. Again, 4-1 with Councilmember Calaycay the sole "No" vote.
  
  Council also votes 4-1 to go forward with Padua Park's phase 1A, appropriated an additional $450,000 from the City's General Fund and $527,859 from the General Fund reserve.
  

So, you can see there were plenty of serious red flags ignored by Parker, Santoro, and the Claremont City Council, plenty of opportunities to not spend the $3.4 million or so appropriated for Padua Park's construction on 10/9/07 and 9/23/08. That last meeting occurred a week after the federal government allowed Lehman Bros. to fail and right at the very height of investor anxiety. All of this occurred at the very moment an already down stock market was preparing to take its own dizzying plunge.

City officials knew what was happening with the financial markets and knew those markets were unraveling in September, 2008. Yet, the City proceeded with awarding a contract for a project that could have easily been put on hold. Worse still, the City dipped into it's rainy day General Fund reserve at a time when they would need it most. The decision to go forward with the park's construction that September represented a total of $3.4 million that could have been used to balance the city's budget, which in turn would have allowed the city to avoid the really big cuts in staff and service.

The City certainly has no control over the financial markets or housing and employment figures, but it does have a responsibility for conservative spending in times of crisis. It's just incredibly sad to see the City dig itself into a very avoidable fiscal hole, and it's even sadder to see city officials, elected and paid, refuse to take ownership of their poor decisions.

More State Money Talk

Well, it didn't take long for the great state budget fight to heat back up.

Just yesterday we had a post or two about the financial problems our city and every city in the U.S. is caught up in. We also speculated that there might be more problems on the horizon. Californians were beginning to get comfortable with the notion that the geniuses on both sides of the Sacramento political aisle had solved our state's budget problems.

Now comes a warning from the state's Legislative Analyst's Office (LAO) that we're still likely to face an $8 billion shortfall, despite the budget agreement and the $31.5 in federal stimulus package money California is slated to receive.

The Sacramento Bee's Capitol Alert reported that the legislature's budget analyst, Mac Taylor declared yesterday that "the state's economic and revenue outlook continues to deteriorate." The Capitol Alert post went on to say:

"Even in the few weeks since the budget was signed, there have been a series of negative developments. Our updated revenue forecast projects that revenues will fall short of the assumptions in the budget package by $8 billion. Consequently, the Legislature and governor will need to adopt billions of dollars in additional solutions in the coming months to bring the 2009-10 budget back into balance."

Taylor had some more bad news for the state's political leaders. Because so many of the "solutions" adopted last month are temporary, "without corrective actions, the state's huge operating deficits will reappear in future years - growing from $12.6 billion in 2010-11 to $26 billion in 2013-14."

The Los Angeles Times also quoted Taylor in an article in today's paper:

California's economy in is such bad shape that Taylor's office anticipates that residents' combined personal income will be lower this year than it was last year, leading to fewer tax dollars for state coffers.

"I went as far back as 1950, and I could not find a situation in which personal income had actually declined in the state, so that's a rather unusual event," Taylor said at a news conference Friday.

Taylor's projections assume that the all of the various ballot measures the budget agreement depends on will pass in May. Those assumptions are far from certain, however. The California League of Women Voters issued a press release on Thursday coming out against Props 1A, 1C, 1D, and 1E. The League says these are bad policy:

“We oppose these measures because they are NOT the solution to our long term financial crisis, with the continuing structural deficit in the state budget and flawed budget process,” said Janis R. Hirohama, president of the League. “We make this decision with regret. We would support real reform to make the state budget process more accountable and give the Legislature and Governor effective tools to advance state priorities. However, these hurriedly drafted propositions, produced at the end of a flawed process that kept both the public and most legislators in the dark, will only make our fiscal situation worse.”

This bodes ill for the likelihood of the measures passing because you know there also will be plenty of anti-tax and small-government activists fighting the propositions. Here's the full LWV press release (click on the box in the upper right corner to enlarge):

* * * * *

In case you were curious about how we got into this mess in the first place, there's a really good video that explains how our financial house of cards fell apart. We saw this on the Original Skrip, and also saw it on the Foothill Cities blog back when it was still a semi-regular blog.

The video's 11 minutes long, but it is worth watching if you've got the time to spare:


The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Boom Towns

The boom town that was the Inland Empire has been undergoing a "boom" of another sort, and Claremont isn't excepted from from the experience:


BROTHER CAN YOU SPARE $460 MILLION?

PFF Bancorp (NYSE: PFB) was back in the news Friday. The Daily Bulletin's business reporter Matt Wrye had a brief article noting that PFF Bancorp was looking to generate $460 million. The Rancho Cucamonga-based banking company had to ask for an extension on a $44 million overdue loan at the end of May and is looking to pay that off.

Wrye's article stated that PFF hadn't disclosed any details about the $460 million deal and said that it would require shareholder approval. The article also said the deal would involve a stock offering. The piece gave some background on PFF's problems:

The bank has written off millions of dollars in losses over the last couple of quarters.

In the midst of a booming, inflated housing market, CEO Kevin McCarthy signed off on loans to housing developers who can't repay what they borrowed.

Some experts speculate PFF is on the verge of government receivership if private equity doesn't come to its rescue, or if the bank isn't bought out.

The bank's stock closed Thursday at $1.33, a mere fraction of its $39 value just two years ago.

PFF's board of directors had no problems with CEO McCarthy's management of the company when it was flying high, and several of them, including San Dimas Mayor Curt Morris and former Claremont McKenna College Athenaeum director Jil Stark made out pretty well with their stock options prior to PFF's collapse.

Now that the party's over, the PFF board has kept a pretty low profile. We'll see how long they can keep that up.


HOUSING MARKET WOES

As Matt Wrye's article observed, PFF's problems had their roots in the housing market downturn. Loans to builders and developers turned bad, and share value eroded as a result. The Inland Empire has been hit particularly hard by the problems in the housing market.

Wrye had another article yesterday that posed the question, "When will it end?" to several real estate experts. One of them, Rancho Cucamonga developer Jeffrey Burum, thought the market might not fully recover until 2012.

Burum, coincidentally, helped PFF Bancorp out a couple months back when he bought a portfolio of problem loans from PFF. The loans had originally been valued at around $100 million, but by the time Burum bought them off PFF, they were worth only $60 million. Burum paid $22.5 cents on the dollar for those loans, the Daily Bulletin reported.


CITIES HELPING BUILDERS CLOG THE ROADWAYS

People who've grown up in the area can tell you that traffic has worsened over the years. Builders and their lobbying groups such as the Building Industry Association, funnel large amounts of money to elected officials (see our piece on Pomona Mayor Norma Torres' contributors for her State Assembly run), and that gets translated into poorly planned residential and business developments getting easy approval by those same officials.

At the same time, state officials have been siphoning off transportation funds to try to balance the state budget. Consequently, much-need transportation infrastructure repairs and improvements have been neglected. The added traffic created by all those building projects over the years hasn't been matched by new freeway and public transit projects and simply gets dumped onto our already crowded roads.

The LA Times is running a series on traffic issues and the failure of state and local governments to address these issues, despite voters approving billions in financing for transportation funds. Today's installment in the Times' series charges local officials with bypassing laws requiring builders to help pay for transportation projects to carry the traffic their projects generate:

* State and local officials have not expanded the region's highways and mass transit systems enough to keep up with population growth.

The population of the five-county Southern California region grew 22% from 1990 to 2006, and the total miles driven by motorists has increased about 42%. But the number of miles of highway in the region has increased by only 7.5%.

Since 2001, Govs. Gray Davis and Arnold Schwarzenegger, along with state legislators, repeatedly have diverted money from the state's taxes on gasoline to pay for non-transportation programs. Schwarzenegger plans to do so again in the budget for the coming year. Roughly $5.8 billion in highway and mass-transit funds that were diverted during the state's repeated budget crises this decade have not yet been repaid.

While the region's highway capacity has lagged behind population growth, mass transit has not made up the difference. Los Angeles County for the last 25 years has put three-quarters of its voter-approved transportation money into rail and bus systems. Even with the investment of about $7 billion, 85% of commuters still drive.

* At the same time, local officials repeatedly have sidestepped state laws that were supposed to require developers to lessen the traffic-snarling effects of projects.

For years, elected county and city officials across Southern California have put economic development and jobs ahead of mobility, approving major commercial and residential developments without requiring builders to pay enough for improvements needed to handle extra traffic.

All that development contributes to congestion that for the average motorist in L.A. and Orange counties adds up to almost two workweeks of delay each year, according to the Texas Transportation Institute, a think tank at Texas A&M University that compiles annual assessments of congestion nationwide. That's almost double what it was in the 1980s. In Ventura County , congestion-related delays each year consume roughly a workweek of the average motorist's life. The delay in the Inland Empire equals about six workdays.

Keep all of that in mind if in the future you see Claremont councilpeople greenlighting a new condo project or if you see a local State Assemblyperson voting for legislation affecting the building industry.

If traffic keeps going the way it has the past 20 years, the next boom we observe just may be one lowered on irresponsible state and local elected officials.

PFF Bancorp Suspends Trading of Stock

Rancho Cucamonga-based PFF Bancorp suspended trading of its stock on the New York Stock Exchange this morning, the San Bernardino Sun reported.

PFF Bancorp (PFB: NYSE), which had a 52-week high of $30.37, closed yesterday at $3.74 per share. PFF had been hammered as part of the fallout from the mortgage crisis and had to sell off $100 million in problem loans to homebuilders and developers earlier month.

The Sun article said:

RANCHO CUCAMONGA - PFF Bancorp, a troubled Rancho Cucamonga-based banking institution stung by the real estate meltdown, halted trading in its stock today.

Sal Curasi, a PFF spokesman, declined to comment why.

"We have no information to share with you on that," Curasi said.

NYSE spokesman Scott Peterson said the stock was halted at 9:30 a.m. (EDT) for announcement of "pending news." As of mid-day, the stock still hadn't traded. "Unfortunately, any interaction between the NYSE and its listed companies is non-public information," Peterson said.

"That's unusual," said Joe Gladue, an analyst with B. Riley & Co. Inc. "Of course, someone could be buying them."

If you were lucky enough to get out of the stock when it was still up, you might have made out okay, as San Dimas Mayor Curt Morris did. Or the former director of Claremont McKenna College's Marian Miner Cook Athenaeum, Jil Stark. Both are on PFF Bancorp's Board of Directors.

For those lucky few there was an embarrassment of riches, to the tune of many hundreds of thousands of dollars. For the rest, not so much. Looking back on it, the collapse to under $7.00 a share at the beginning of the month doesn't look so bad now.

Housing Market Woes Pound Local Bank - UPDATED

Last month, we wrote about how the problems in the housing market are hurting local homeowners. And Yahoo's Real Estate site lists 97 foreclosures currently in Claremont, nine of them listed at $1 million or more. You can find foreclosure information here.

These same housing market problems are hitting financial institutions, even local ones, hard. PFF Bancorp, a local banking concern based in Rancho Cucamonga, has been stung by the housing market downturn, according to an article by Daily Bulletin reporter Pat Maio.

The article said that PFF has had to sell off a $100 million pool of problematic home builder and commercial loans to a private equity fund controlled by developer Jeffrey Burum:

The PFF loans purchased by Burum's fund had previously raised the collective eyebrows of Wall Street as PFF's earnings have all but evaporated over the past year.

PFF's woes have even caught the attention of some potential suitors wanting to buy the bank.

In recent months, the Rancho Cucamonga-based parent of PFF Bank and Trust has fended off an attempted takeover from privately held FBOP Corp., a $14 billion asset company near Chicago that claims to have accumulated a nearly 20 percent "passive investment" in PFF since the fall.

PFF officers have stated they are not interested in selling the bank, which is roughly a third the size of FBOP, according to filings made by PFF with the federal securities regulators.

But the region's real estate mess has made things difficult for PFF.

"We don't know yet the depths of the financial crisis. The tidal wave has not finished hitting the shores yet. It is still amassing volume," said Burum, who declined to comment on PFF specifically.

Still, Burum predicts it may take three to five years for a recovery to take hold in the Inland Empire.

In February, PFF reported a loss of $14.7 million in its 2007 fourth quarter, and said it would suspend its quarterly cash dividend due to "uncertainty on the timing of the recovery in residential real estate" and the impact of credit on the company's operating results.

PFF had been collecting a higher yield on some home-builder and commercial loans that were to mature in a year or so.

But some developers could not sell homes in the tracts they've developed, or lease some commercial property after it was built, leading to some borrowers becoming delinquent.

As a result, PFF was forced to set aside reserves on possible losses, further aggravating its financial condition.

The problems PFF has faced are reflected in its stock price, which is down from a 52-week high of $30.91 per share to below $7.00 as of 8am PDT this morning.

UPDATE (4/2/08, 7:30PM): PFF Bancorp stock closed down 19.1%, or $1.62 today, ending the day at $6.86 per share.

Click to Enlarge

The More Things Change....

This is the heart of the residential district. Every lot is a stone's throw from the station. As soon as they throw enough rocks, we're gonna build a station. 800 wonderful residences will be built right here. Why, they're as good as up. Better! You can have any kind of home you want. You can even get stucco. Oh, how you can get stuck-o!

- Groucho Marx as the land developer Mr. Hammer, The Cocoanuts (1929)

File this one under "For Every Action There's an Equal and Opposite Reaction."

The Daily Bulletin's Robert Rogers has an article today on the rising number of mega housing auctions in the Inland Empire. According to the article, the banks are trying to reduce the surplus of homes on the market:

Twenty-, 30- and 40-percent drops from peak prices have working-class renters searching for their first home, and savvy, deep-pocketed investors trying to expand their real estate empires.

The housing auction, that Wild West of free-market economics relegated to afterthought status during the housing boom, is back in a big way in the Inland Empire and nationwide, predominantly in states bordering oceans.

Recent months have seen a handful of mega-auctions in San Bernardino and Riverside counties, where millions of dollars worth of homes have been taken off the hands of lenders and builders who found themselves suddenly saddled with devalued properties as the boom went bust.

The next auction is Saturday in Palm Springs. Another is set for Sunday at the Doubletree Hotel in Ontario, where banks are looking to draw buyers for about 120 houses spanning the county, many now listed at prices that would have been laughable just 12 months ago.

As we observed a week ago, even affluent neighborhoods in Claremont are beginning to suffer from the effects of the housing crisis. James Surowiecki in the March 10th edition of the New Yorker wrote that the current problems facing many home buyers are the result of a serious underestimation of the risk of homeownership and the shift away from looking at homes as forced savings plans.

According to Surowiecki, lax credit standards coupled with property owners tapping into the value of their homes through home equity loans have resulted in a large number of homeowners across the country who are stuck with homes worth less than they owe. And, as Surowiecki notes, a correction in the housing market moves much slower than a stock market correction, so we may be a while before we even begin to touch bottom.

How bad will it get? Not very many people are predicting a reprise of the Great Depression, but things may be worse than the last big downturn in early 1990's. At least, if things turn really bad, we might see a little more introspection and public involvement once people realize the party's over.

If they turn really, really, bad, maybe we can at least look forward to some good screwball comedies to help us escape: