Honolulu City Council members shelved two resolutions that could have forced the city to either cancel or postpone the planned sale of 12 affordable housing complexes to a private group but also rejected a proposal to reaffirm support for the $143 million plan.
Mayor Kirk Caldwell, who has been pushing Council members to support the so-called Honolulu Affordable Housing Preservation Initiative deal first reached by his predecessor, former Mayor Peter Carlisle, said he and his staff will meet with officials from Honolulu Affordable Housing Partners LLC today to try to salvage the deal.
Bill Rice, a partner with the purchasing team, said the introduction of the two resolutions by Council Chairman Ernie Martin “breached” the original terms of the purchase agreement and “seriously jeopardized our ability to obtain financing.” On Tuesday, Rice’s group fired off a “notice of default” letter to Caldwell warning that the city will likely have to forfeit at least $2.5 million in damages for jeopardizing the financing through the introduction of the resolutions.
At the very least, Rice said, the resolutions mean the buyers could no longer be certain that a final agreement could be signed by March 31, as originally scheduled. “Everything in life comes down to trust in relationships,” he said. His group has already spent $4 million and had agreed to spend $50 million on improvements at the 12 facilities.
Rice’s responses, however, served only to anger Council members, and all but one of the nine members agreed to reject a proposal by the ninth member, Councilman Breene Harimoto, to insert language into one of the resolutions that would have reaffirmed the Council’s support for the sale.
The resolutions appeared to cast a cloud over the agreement, a deal the city is obligated to keep, Harimoto said.
But Councilman Ron Menor noted that Harimoto’s proposal allowed the deadline for finalizing the agreement to be extended indefinitely beyond March 31, and he asked Rice pointedly if his group was using the Council’s actions as an excuse to seek a time extension to secure its financing. Rice denied the charge.
Councilwoman Kymberly Pine said she had previously supported the agreement but told Rice: “I find it insulting to me (that your investors) would claim the mere introduction of legislation means you’re going to fail.”
Instead of the Council’s actions eroding potential lenders’ confidence in the project, Councilman Joey Manahan said, “from my perspective, you’ve undermined the Council’s confidence in you.”
Martin said after the meeting that he had been prepared to support Harimoto’s proposal to reaffirm support for the project before Rice’s testimony. The Council chairman said he was heartened by Rice’s commitment to continue working with city officials to make the deal work, and that he’s confident the Honolulu Affordable Housing Preservation Initiative sale can still be accomplished — if not with Rice’s group, then with others.
Caldwell told reporters he was disappointed by the Council’s actions. A resolution reaffirming the Council’s commitment to the sale would have lifted a cloud hanging over the sale.
Instead, the Council sent “a clear message to the buyer and to those who are going to be financing the transaction that the Council, and the chair of the Council, has lost faith in this sale,” the mayor said.
At this point, “we are going to do everything we can to try to close this sale,” Caldwell said. Canceling the sale could leave the city with a $30 million shortfall in the current year’s $2 billion operating budget.
