Board debates short-term rescue options for Madison Heights 1 & 2 as HUD, lenders and state options discussed

The City Board discussed potential city action to avert foreclosure at Madison Heights 1 and 2 after housing authority leaders and city staff described lender timelines, outstanding liabilities and a HUD process called a Property Solution Panel (PSP) that HUD sometimes uses to coordinate interventions.

The discussion mattered because board members were told the lender could move on an August 1 timeline, housing authority leaders asked the city to consider short-term financing or other options, and staff said any action affects hundreds of residents who receive public housing subsidies.

Doctor Jarman, representing the municipal housing authority (MHA), and MHA's CFO and advisers joined the board for extended discussion of the buildings' financial and audit status. City staff and counsel described a HUD PSP as a possible mechanism HUD can use to convene experts and stakeholders to avoid the loss of public-housing assets. City counsel said the PSP process is initiated by the housing authority and that HUD appoints panelists with experience in preservation and rehabilitation. A city staff speaker summarized: if HUD becomes involved via the PSP, "they would appoint people to this panel who have had experience in this area" to explore options that might avoid foreclosure.

On financing, participants cited multiple figures. City staff and counsel said a short-term amount to satisfy penalties, interest and fees had been discussed as roughly $1.4 million, described in hearings as an amount that could secure an extension from the lender; others described a larger remedial proposal in the $6 million range or a total package of about $7.5 million that would more fully address the lenders position and related capital needs. As one board member summarized the choices, "If the city board decided to go from 7.5 to 6,000,000, we know they gets the private equity firm off MHA and Madison Heights 1 And Two's neck. But if it did, the 1.4, which just gets you all today, you still don't have the funds to you'll be back in the same position." (paraphrase of city official remarks during discussion.)

City attorney and HUD advisers noted constraints: HUD funding and prior capital/operating grants can create restrictions on converting public-housing units; counsel described deed restrictions and clauses that often keep certain units as public housing for a 10-year period after HUD-assisted financing, and counsel said HUD historically will not release those restrictions without payment of HUD's full interest or other unusual arrangements. Counsel also said if the lender forecloses and obtains title, HUD's interest could keep the public-housing designation in place for that period unless a buyer paid HUD the full value HUD required.

Board members debated equity and timing. Some directors argued the city should step in to preserve affordable units and avoid displacing residents, comparing the possible city action to past government interventions in large private-sector crises. Others emphasized the legal complexity, questioned HUD's role and called for more information including outstanding mortgage amounts and audit documents for the housing authority. Doctor Jarman told the board she would provide overdue audits as staff pursues solutions; one MHA representative said a firm engaged by MHA expects to have multiple years of audits finalized by December 2025 and the 2019 audit may be available sooner.

Mayor and staff said the board would consider a resolution on June 3 (with follow-up on June 17 in some members' proposals) that could authorize short-term financing or a different package; staff said they could amend the proposed funding amount if directors preferred a different figure. No final appropriation was made at the agenda-review meeting; board members asked for more specifics on outstanding mortgages, maturity dates, HUD conditions and the outcome of further talks with lenders and HUD.

The board scheduled further consideration at upcoming meetings and asked staff, housing authority leadership and counsel to provide mortgage payoff figures, outstanding liens, audit status and HUD PSP next steps ahead of a formal vote.