Fort Smith Board OKs Barlee litigation

The Fort Smith Board of Directors passed a resolution to authorize continued investigation and litigation regarding the HOME Funds Loan Program against Barlee II Properties at the Tuesday night (Oct. 16) meeting.

The 7-0 vote came after Matt Jennings, director of community development for the city of Fort Smith, recapped the 14-year history of the loan between Fort Smith and Barlee, a partnership between Lend-A-Hand (LAH) and Aaron’s Inc.

According to the terms of the loan, Barlee agreed to a 10-year loan interest payment at 1% per year with a balloon payment at the end for the entire $150,000 principal.

The funds were used to build three Housing and Urban Development (HUD)-approved homes in the 23-unit Koller Place Addition.

Jennings said one interest payment was received in December 1999, but since then, the payments have not been made.

Representatives from Aaron’s Inc., which was signed for by Ernest R. Coleman in the original agreement, were not in attendance, although an LAH representative was available to answer questions regarding the non-profit organization’s involvement in the loan.

However, at the Oct. 9 study session, attorney John Alford, who represents Barlee, was in attendance and did address the board on behalf of his client, stating that “the properties in question were used to their original intention — as subsidized housing” and that “there were other costs associated beyond construction for managing the properties and orchestrating repairs.”

Alford also believed the city might consider moving deeper into the process with HUD to pursue loan forgiveness. Noting that Jennings had been told there was a "low probability" that the loan could be forgiven, Alford said, "I don't know what they've submitted to HUD that this be turned in to a loan. There is a process. If HUD were to approve that this be a forgivable loan or a grant, I don't think that it would have any effect on the allocation of the funds to the city for the HOME Partnership Program.”

According to paperwork dated March 1, 1998, Barlee owned just 0.1% of the overall development with Aaron’s commanding 0.07% and LAH 0.03%. The remaining 99.9% had previously been transferred to the limited partner, First National Bank.

Jennings said the city had been able to obtain financial statements to the property for 2010, 2011, and through March 2012, “but nothing prior to that date.”

At the Oct. 9 study session, city attorney Jerry Canfield advised the board to authorize the litigation while the loan was still within the statute of limitations. While Canfield did not clarify an exact date for when the statute of limitations would expire, he told the board they should act “before November.”

This rush previously frustrated Fort Smith Director Pam Weber, who at the study session, called the circumstances “unacceptable.”

“I am dismayed. I have been on this board a year and almost 10 months, and during that time, three major problems have come to us at the last minute. Two of them were past-time. One was the Van Buren true-up. We allowed it to expire. We received an insurance proposal that was three weeks past the expiration date, and now here we are today. We’ve got to do better,” Weber said.

On Tuesday, Weber was more complimentary of the city’s — specifically Jennings‘ — involvement, commending the community development director for working with LAH to find a loan resolution when the non-profit found it would be unable to pay.

According to Jennings, LAH has provided around 100 affordable housing units for low-income families since 1998.