West Tisbury selectmen voted to seek legal advice this week after a report from the town accountant found that money earmarked for second mortgages was inappropriately spent by the Island Affordable Housing Fund.
Bruce Stone, town accountant, presented the selectmen with a report that town-appropriated money for second mortgages was used for paying off prior loans for housing developments and other expenses. All of the money was accounted for, Mr. Stone said.
“Nothing I have found shows that there is any money missing; it was used for other purposes with the intent to return it into the fund,” Mr. Stone said, adding the money was used for expenses on housing developments on Jenney Way in Edgartown and at 250 State Road in Tisbury.
The housing fund was set up in 1999 as a charitable organization to raise money for the development of affordable housing. Money raised went toward its sister nonprofit, the Island Housing Trust, which writes ground leases and develops housing projects, as well as Habitat for Humanity and the Dukes County Regional Housing Authority.
The housing fund began the loan program, called the Helm Fund, in 2006 to issue second mortgages at low interest rates. The towns began appropriating community preservation act monies in 2008, at which time the fund used the money to cover previous loans and other expenses. Mr. Stone found that $139,000 of community preservation act monies, appropriated by the towns of West Tisbury, Edgartown, Aquinnah and Tisbury, were spent inappropriately.
Mr. Stone also found that those who received the loans prior to the town appropriations did not meet the median income requirements to qualify for the loans.
The review took place after an annual town meeting warrant request from the Island Housing Trust to use future CPA money. Mr. Stone conducted a review into how the CPA money was spent in the past. “It’s our responsibility to track public funds and these are indeed public funds,” town administrator Jennifer Rand said. “We simply don’t know the best way to proceed. At the very least I
would suggest we need counsel’s advice about how to proceed.”
The use of the loans is complicated by the fact that the housing fund’s assets were seized by the Martha’s Vineyard Savings Bank in 2011, following the foreclosure of the fund’s Bradley Square project. At the time, the nonprofit housing fund owed the bank almost $750,000 in principal, interest and late fees on a mortgage that had seen no payments made on it since 2010. The bank also froze all of the fund’s accounts.
The fund’s former executive director, T. Ewell Hopkins, said the fund is now in a “dormant” state.
Mr. Hopkins said the fund “was not aware of the terms that those monies were not to be allocated across the entire life of the program.”
“I don’t dispute anything in Bruce’s work,” he added, calling the allocations “not an appropriate accounting step.”
“Prior to this investigation by the town of West Tisbury and working with Bruce, we were under the understanding per our accountant that roughly $25,000 in change was due to the Helm Program,” Mr. Hopkins said. “Bruce’s numbers are closer to $139,000 because the money that we received from the towns was allocated across the entire program, but as Bruce pointed out it shouldn’t have been retroactive; it should have been for future loans only.”
Mr. Hopkins said the fund is currently negotiating the terms on the Bradley Square property.
Whether the second mortgages obtained through the Helm Fund are now in jeopardy remains a question, Mr. Stone said.