Fort Smith, housing partner settle unpaid loan

FORT SMITH — A partnership that failed to repay a $150,000 housing loan to Fort Smith will repay part of the loan and extend low-rent benefits to tenants for an additional five years, according to city officials.

Fort Smith city directors approved the settlement agreement at their Nov. 20 meeting after attorneys for the city and the partnership, Barlee Properties II, negotiated the agreement. The city lent money to the partnership in 1997.

Five city directors voted to pass the resolution. Directors George Catsavis and Pam Weber voted against it.

Fort Smith Community and Economic Development Director Matt Jennings said the $150,000 came from a U.S. Department of Housing and Urban Development grant to the city.

According to a memorandum by City Administrator Ray Gosack, the settlement ends the partnership’s requirement to repay the loan as long as it extends below-market rental rates another five years from the original expiration date of 2014 to 2019.

When the housing project was initiated, Jennings said, it was a lease-purchase project that outlined a 15-year period for the below-market rental rates. Later, the project was converted to a rental housing project for which HUD required a 20-year period for the below market rates.

Jennings said adding the five years of below market rental rates meets HUD regulations and absolves the city from repaying the money to HUD.

Also, Barlee Properties will pay the city $37,500, which will go into the city’s federal Homes Investment Partnership Act program.

Gosack said Monday he thinks the money will be paid by Barlee Properties partner Rausch Coleman Development Group, which succeeded original Barlee Properties partner Aaron’s Inc. The other partner, the nonprofit Lend A Hand Inc., does not have the money to pay any of the settlement, he said.

The partnership used the loan money in 1997 to build three houses on the city’s north side. Under the partnership, Lend A Hand was the entity eligible to apply for the HUD funds and Aaron’s Inc. used the funds to build the houses.

After it was converted to a rental project, its proceeds were insufficient for Aaron’s Inc. to pay off the note, Jennings said.