by Matt Rosenberg September 25th, 2012
A Seattle City Council committee Wednesday will hold a public hearing and then likely approve for a full council vote soon afterward a resolution to take over the floundering Seattle Indian Services Commission. A city public development authority formed in 1972 to help facilitate delivery of social services to the city’s Native American population, the Commission has suffered a major meltdown in the last several years. Its Pearl Warren Building at 606 12th Ave. S. at the eastern edge of Seattle’s International District has $2.5 million in unmitigated water damage. Its main tenant, whose monthly rent is key to paying for those repairs and retiring $6.7 million in outstanding debt tied to bonds which got the structure and a neighboring facility built, is the non-profit Seattle Indian Health Board. The board occupies space in both the Warren building and the commission’s adjacent Leschi Center at 611 12th Ave. S., and had been threatening to move out unless it could take over the properties and fix the problem. But the pending resolution leaves open for now the exact specifics of future control. Meanwhile the city has spent upwards of $120,000 on emergency repairs and studies on solving the water infiltration problem; and the commission, which has no staff of its own at present, owes more than $75,000 in back rent.
Numerous problems cited
Compounding the city’s concerns, a state audit released last November found former commission staff had misappropriated almost $75,0000. That last audit emphasized that conflicts of interest, questionable expenditures, and poor financial reporting, internal controls, board oversight, and property management were causing waste of public funds at risk of growing without intervention. Previous state audits dating as far back as 2004 had also identified conflict of interest and oversight issues at the commission.
“Fresh start” needed
The resolution states, “The Commission’s failure to address the water intrusion problems at the Pearl Warren Building has resulted in deterioration and waste of the asset, has seriously jeopardized the rent revenue servicing the Bonds, and has adversely impacted the Commission’s ability to generate future rent revenue from the building in support of the Commission’s purpose and to service the Commission’s debt. After reviewing the request and recommendations of the Mayor, the reports of the State Auditor, and the Commission charter, and being further advised in this matter, the City Council further finds that the assets of the Commission have been or are committed to be misapplied or wasted, and that a fresh start is needed with respect to the Commission.”
A fiscal note attached to the resolution underscores even more pointedly the liability concerns of the city.
“The Commission, which was established in 1972 by the City to provide services to the Indian community in Seattle, owns two buildings. Both were financed with bonds guaranteed by the City, making the City liable in the event of default. One of the buildings, the Pearl Warren, has fallen into serious disrepair through neglect and mismanagement and its key tenant has given notice that it will leave if the problem is not corrected quickly. The loss of the tenant would force default. The cost of the repairs, estimated at $2.5 million, are well beyond the financial capability of the Commission.” – City of Seattle Fiscal Note to Resolution 31408
A city council legislative department memo notes the debt on the Pearl Warren building is $4.5 million, in addition to the $2.5 million in required repairs, but its assessed value is just $2.7 million so its estimated current net value is $4.39 million in the red. The neighboring Leschi Center building has $2.2 million in debt but an assessed value of $6.75 million, with an estimated current net value of $4.57 million.
New board, rules, charter possible
If the resolution is approved by the council’s Housing, Human Services, Health and Culture Committee after Wednesday’s public hearing and then by the full council, it would give the city power to disband the commission’s current board and appoint an interim board; to revise its charter, rules and regulations, and take any other steps needed to ensure the buildings funded by the bonds “do not continue to deteriorate and become wasted assets.” Lisa Herbold, an aide to City Council member and committee chair Nick Licata said she expects the resolution will pass committee and the council, but that she also expects a sizable number of people to be testifying at the hearing. The move will be seen as controversial to some, Herbold said, but given the evidence, is warranted. Expected to be among those testifying in favor of new management is Jo Ann Kauffman, a former president of the commission and former executive director of the Seattle Indian Health Board, who grew up in Seattle, is a member of the Nez Pierce tribe, and now heads a health care services consulting firm.
Last fall, the city council had authorized the filing by City Attorney Pete Holmes of a King County Superior Court petition to place the commission’s two properties on 12th into a trusteeship controlled by the main tenant, The Seattle Indian Health Board. But that petition has been withdrawn, said Holmes’ spokesperson Kimberly Mills. For it to have been approved, the commission would have had to have been bankrupt and it had not quite reached that point, said Herbold. The city council resolution would give the city more leeway in deciding next steps for the commission’s “fresh start.”
UPDATE, 9/27/12: The committee unanimously passed the resolution yesterday, noting its intent to add language underscoring continued provision of services. Seattle Channel video of the meeting includes sidebar jump-links to specific agenda items including the public hearing on the resolution, which is followed by committee deliberation and the vote.