Little Rock board weighs short-term loan to stabilize Madison Heights public housing

The Little Rock Board of Directors spent the bulk of its May 20 meeting discussing a proposal to provide short-term financing and other steps intended to prevent foreclosure and stabilize Madison Heights Apartments, a 241-unit public housing complex. No loan or final agreement was approved; board members asked staff to prepare a resolution and documents for a formal vote at a future meeting.

The discussion matters because Madison Heights houses low- and moderate-income tenants who could be displaced if the complex is foreclosed and sold. Board members, housing authority officials and outside volunteers described a package of conditions the city would require before disbursing any funds, and legal staff outlined statutory constraints on municipal involvement with entities ruled by the Arkansas Supreme Court to be state agencies.

City attorney comments focused on legal preconditions for any loan. The city attorney said state law and recent Arkansas Supreme Court guidance treat the Little Rock Housing Authority (doing business as Madison Heights Authority, MHA) as a state entity and that the city can only make a loan to a housing authority it created if legal criteria are met. The attorney outlined documents the city would require before disbursing funds: releases from other claimants (including lenders and HUD), an assignment of interests from related joint ventures, audited financials, the housing authority’s agreement to use the two Madison Heights properties as collateral, insurance and indemnity provisions, and title work to secure a fee-simple interest or deed in escrow in case of default. The attorney also said a qualified legal opinion (bond counsel) would be required before closing.

MHA leaders and volunteers presented condition and financing details. Dr. Nadine Jarman, identified in the presentation as the housing authority’s executive who has been on the job about 10 months, summarized operating data: 241 total units with about 52 vacancies; robust waiting lists (more than 3,000 names for each of Madison 1 and Madison 2); and a range of physical needs the financing would address. The housing authority provided an appraisal showing an "as-is" value of about $18.7 million and a rehabilitated value near $20.4 million. The authority’s estimated need to pay off loans and perform repairs was about $7.5 million.

Attorney Baker Curtis (a volunteer who helped negotiate the proposal) and Nicholas (Nick) Sarpy, identified as a housing CFO, described the financing mechanics the city would consider: short-term notes (taxable, five-year structure was discussed), a phased disbursement or line of credit tied to repairs and performance, and a plan to get the city out of the financing within a year to 18 months by refinancing with a bank once the property stabilized. Sarpy estimated a potential all-in cost of roughly $9 million on a five-year taxable note at about 6.5% and said the board could expect a sizable annual debt-service burden in the near term (a figure cited in discussion was roughly $1.62 million per year under one scenario). Curtis emphasized that lenders look first at collateral, liquidity and repayment ability and that the city should not disburse funds until title and lien priorities are secured.

Speakers at the meeting also included residents of Madison Heights who described building neglect and management turnover. Several residents and neighborhood organizers testified during the Citizens Communication portion and urged the board to act to preserve housing. City staff said proceeds from recent and anticipated property liquidations (three or four non-core assets identified by MHA) could yield an estimated $2.1 million that might be applied to debts and repairs; the board was told that $466,000 from a recent Wolf Street sale was being applied to vendor debts.

Board members questioned the proposal’s risks and sought more operational detail before voting. Directors asked for current, verifiable rent-roll data and clear accounting of who pays utilities; Dr. Jarman and staff said a reliable, corrected data set would be available in roughly 30–60 days after staff complete data reconciliation and system work. Several directors asked for clarity on how much of any liquidation or other funds could be restricted to on-site capital work rather than administrative or off-site costs. Director-level concerns also included the presence of overlapping nonprofit boards (Central Arkansas Housing Corporation/CAHC and MHA) and potential conflicts or coordination needs with HUD and state authorities.

No formal loan or binding commitment was approved. The board agreed to continue deliberations, asked staff to prepare the written resolution and conditions reflective of the legal preconditions described, and indicated the item would be taken up at a near-future meeting (the city noted June 3 as an earliest possible date for a follow-up vote; the city attorney explained the timeline is tight because a 90-day continuance of a foreclosure hearing runs to August and the city’s short-term financing process typically needs about 60 days). The city attorney emphasized the need for an agreement with the lender not to proceed with foreclosure while the city completes conditions if the board decides to move forward.

Board members and housing officials said the package, if structured with the protections the attorney described—release of competing claims, audited financials, collateral assignment and escrowed warranty deeds—would be intended to protect the city’s financial interest while preserving housing for residents. The board will review the prepared resolution and technical materials before any vote.