Housing Kitsap, a local agency that provides low-income housing to thousands of Kitsap County residents, laid off eight employees last week in an effort to cut costs after a state audit in August warned it is at risk of going broke.
The Washington State Auditor’s office conducted the financial review from July 1, 2016 through June 30, 2017, highlighting what it called “cash flow issues” and asserting the housing agency, established in 1982, was ”at risk for not being able to meet its obligations or maintain operations.”
Housing Kitsap had been losing money for the past five years while its debt had been increasing, the report said.
A response from the agency at the time outlined a multi-tiered plan that included possible “personnel savings.” The Kitsap Sun reported the eight layoffs Tuesday, and said they included CFO Wendy Dutenhoeffer.
“To address the [concerns of the state auditor’s office] and frankly our concerns as well,” said Rob Putaansuu, Port Orchard mayor and chair of Housing Kitsap’s managing body, in an Oct. 26 press release. “The board of commissioners is considering all options.”
“We have started some new plans to help with the immediate problem,” he said, “and will come up with a plan for a long-term solution within the next few weeks.”
The board of commissioners appointed a three-person finance committee in June 2018 to provide oversight over the agency’s financial operations.
On Oct. 16, a follow-up meeting with the state auditor’s office revealed “continuing concern about Housing Kitsap’s financial health,” according to the press release. On Oct. 23, the board met to consider next steps.
Housing Kitsap owns and operates 904 housing units in 18 buildings on Bainbridge Island and in Port Orchard, Poulsbo and unincorporated areas of Kitsap County. It serves more than 2,500 low and “moderate income” people, according to the agency. Applicants for housing are subject to maximum income requirements based on federal guidelines.
According to the audit, by the end of 2017, the agency’s unrestricted net position was negative $4 million. This was an improvement from a negative net position of $10.5 million in 2013, the report states. However, the improvement was offset by a decrease of about $4 million in assets, “indicating assets are being sold.”
A number of causes have been cited for Housing Kitsap’s financial woes.
Its revenue comes from two main sources: rents paid by tenants, and grants and subsidies from the federal government. Federal grants and subsidies declined by 8 percent during fiscal year 2017 alone, the audit report states.
Restrictions by the U.S. Department of Housing and Urban Development and the Department of Agriculture on the agency’s ability to raise rents have also been cited.
The state auditor also pointed to agency mismanagement. A delay in approving the 2018 budget kept the board of commissioners in the dark when it came to tracking revenues and expenses. And, “software conversion issues prevented the Housing Authority from being able to produce accurate financial information” to grantors and bondholders, the report states, and from tracking expenses for reimbursement.
In its initial response, Housing Kitsap assured auditors that it had never failed to pay its debt obligations, “nor will it.” It also outlined a multi-phase plan moving forward that includes “accessing more than $600,000 in cash” from project distributions, “waterfall payments from property partnerships” and “personnel savings from restructuring.”
It also said it would seek “cash and cost-saving measures, realizing efficiencies” from new software, “restructuring debt on some properties, and if necessary, additional adjustments to staffing.”
“The Board’s biggest concern is to preserve everyone’s housing,” Putaansuu said.