I had planned to wait until next month (the two-year anniversary of the election of the current board of directors) to write this letter but the inquiry from your reporter let me know that people are interested in an update on what is happening. So rather than wait until the Hall repairs are substantially completed next month, I am providing answers to those questions now.
As a quick recap, the Hall had been cited by the County Health Department for running a commercial kitchen without a permit and was facing an imminent $15,000 fine and closure of the Hall. The Hall was also in serious disrepair with holes in the rotting wood floor and was painted multiple colors. I have attached a few photos to this letter as a reminder of just what we were looking at just two years ago.
It was that designation as a “Commercial Kitchen” rather than a “Nonprofit Kitchen” (which occurred the year before we were elected) that created the biggest financial problem. The Health Department issued correction notices that we estimated would cost more than $50,000 to complete. Since the total revenues taken in by the Hall annually is typically less than $50,000 that was a big problem to tackle.
We started doing fund raisers and we even obtained a couple small grants $1,000 and $5,000. Those grants came in the form of checks, which we spent on upgrades and reported back to the Grantors how we spent their money. When we applied for the Community Block Development Grant we had no reason to think it would work any differently. We budgeted for a new floor, the remaining Health Department corrections from the kitchen and a much need bathroom with handicap accessibility.
Our preliminary budget was $193,750. But that budget was created before we received the grant award of $162,246. We were assuming that we were only $31,504 short of our budget. We planned to make the money stretch by using volunteer labor for many of the tasks that do not require a licensed contractor.
At the first meeting with the Grantor after we obtained the award, there were representatives with them from the federal government who informed us that our existing handicap parking and ramp would not be grandfathered in and must be upgraded. That work was not in the budget, which was already $31,504 short. They also informed us that all labor must be paid out at Federal Prevailing Wage. That definitely was not in our budget. We therefore applied for another grant for $219,150 to cover these unexpected costs.
We are still waiting to hear if that grant application has been approved and what percentage of that money we will receive if approved. The next surprise came when we learned that the Grantor wasn’t going to give us the $162,246 until we spent it. They would then reimburse pre-approved expenditures. They also demanded that we obtain Workman’s Compensation Insurance before the Grant would be approved, which was an issue since we have no employees. That insurance cost $3,800 for August to August 2016-2017. Since the ADA upgrades will not be completed before August 2017 there will be approximately $3,800 spent again for the following year.
Then when we wanted to advertise for an Architect and flooring contractor we sought permission from the Grantor to advertise in the Anza Valley Outlook since one of our goals was to utilize local contractors. The Grantor gave us a list of “approved newspapers” that we MUST use. Those ads cost approximately $4,500 but we did not have $4,500 left in the bank. We were at a standstill. We lacked the cash to move forward and the grantor will not advance any cash. It is only reimbursed after proof is presented that we have spent the money. The Grantor notified us that if we did not start spending the grant money that the grant would be revoked and we would not be considered for any future grants.
To overcome this problem, we obtained a small line of credit from the Bank of Hemet for $40,000. Per a board motion. Monies from the line of credit can only be spent on expenditures, pre-approved by the Grantor, and when the Grantor reimburses us for those funds that this line of credit will be paid off. The line of credit automatically terminates annually and must be paid off for at least 30 days before it can be reapplied for. Only if a second grant is issued would we reapply. Otherwise this line of credit will cease to exist in 2017.
The Grantor has dictated the terms of how contractors are selected. They control the language of each and every contract. They monitor each and every step of the process. To give you one example of the level of oversight, we purchased the floor tile from Home Depot. I had three meetings at Home Depot and a representative from the Grantor was present for each meeting. At the end of the process we must pay for an audit to be conducted by an approved CPA firm. When the audit is completed it will be made available for review by any Hall member.
Now that an architect and flooring contractor have been selected, once the architect finishes the plans for the ADA upgrades. That job will need to be advertised in the same approved newspapers at a similar cost to the previous ads. The Grantor reviews the bids and choses the lowest qualified bidder for the jobs. They selected the architect and flooring contractor using this same process. The Grantor will have those contracts in place by the end of February. The materials are on-site and the contractors are scheduled to start March 6. Starting Feb. 25, we also began doing some of the repairs (not covered by the grant), using volunteer labor.
Anza Community Building, Inc