Rick Johnson 6/18/2026 8:26 AM
Fairfield is not fully shielded from Vista Ridge indebtedness To Pam Bertani - [email protected]
Scott Tonnesen • [email protected]
[email protected] - [email protected] Blind copy Carol Haddock
I have reviewed the documents as Latanna has suggested and I find the City is still liable as the "backstop" for the Homekey Loan, though there is some mitigation. The Council has been told they have no liability, verbally.
The City needs the protection of an analysis by a third party, like an investigator for the long term liability of this agreement with the State. Latanna cannot be the only assurance that the city is protected, the total indebetedness can reach 58 million, you can't be comfortable that you have done your due diligence in Latanna verbal assurance alone.
Here is the results of the Al dive, including the prompt. Al should not be relied upon soley, but used as an indicator for humans to perform the due diligence required. has the City of Fairfield shifted financial responsibility squarely unto the shoulders of danco or if danco cannot remain solvent won't the city be ultimately responsible for full repayment of the $23 million in loans back to the state. The report is well documented and appears credible, but what will you do?
Prompt and result frorn Gemini Al search
Has the City of Fairfield shifted financial responsibility squarely unto the shoulders of danco or if danco cannot remain solvent won't the city be ultimately responsible for full repayment of the $23 million in loans back to the state:
The City of Fairfield has structured its legal and financial agreements so that the day-to-day financial, operational, and development responsibilities rest directly on Danco; however, the City cannot completely eliminate its ultimate structural risk to the state (p. 4).
Because Homekey+ applications require the local municipality to act as a public co -applicant, the financial realities of a worst -case insolvency scenario create a multi -layered liability chain.
L, 2]
1. Shifted Burden: What Danco Alone is Liable For
The Development Loan Agreement is explicitly designed to shield the City from Danco's commercial project risks:
Development & Cost Overruns: Section 3.5 mandates that all construction, entitlement, development, and land acquisition costs are borne entirely by Danco (p. 15).
Operational Solvent Guarantees: Section 3.13 forces Danco to continuously fund a separate Capital Replacement Reserve ($500 per unit annually) to insulate the property's physical needs from general developer cash -flow issues (p. 16).
Commercial Debt Insulated: Section 2.6 clearly establishes that the City is not liable to any third -party lenders, senior mortgage holders, or construction contractors if Danco
goes under (p. 13).
2. The Legal Reality: The Co -Applicant Trap
Despite the protective language in the local agreement, the state of California holds the public co -applicant accountable.
• The Standard Agreement: As detailed in Recital D, the City must sign a master "Standard Agreement" directly with the California Department of Housing and Community Development (HCD) (p. 4). [1]
• The Regulatory Covenant: HCD grants are strictly contingent on a 55-year affordability requirement (p. 4). If Danco defaults or goes bankrupt, HCD does not simply absorb the loss. The state retains a regulatory "clawback" right to demand full repayment of the $21.5 million allocation if the site ceases to operate as permanent supportive housing (p. 4).
3. The Worst -Case Insolvency Chain
If Fairfield North Texas Street LP (Danco) completely collapses, the crisis plays out through the protections integrated into the contract, rather than a sudden, direct hit to the City's General Fund:
[ STEP 1: InstitutionaL Lender Step -In ]
Banc of CaLifornia (Senior Lender) hoLds foreclosure rights.
To protect its $3.2M position, the Lender steps in to preserve the asset. j STEP 2: Forced Assumption of Affordability ]
Per Section 4.3, any Lender or foreclosure transferee taking the property "must assume aLL rights and obtigations of Developer under this Agreement." The 55-year Low-income mandate stays pinned to the Land titLe. j STEP 3: The Ultimate FaiLure Point ]
If no private operator or bank takes the asset and it sits abandoned, the State (HCD) wiLL Look to the City of Fairfield to cure the breach or repay the $21.5M grant under the primary Standard Agreement.
Summary
The City has done everything legally possible to push the operational risk entirely onto Danco (p. 15). But because of how state -level Homekey+ public -private partnerships are legally frameworked, if the project suffers a catastrophic structural failure that private markets won't salvage, the City of Fairfield remains the backstop of last resort for the state contract (p. 4)• [1]