Habitat for Humanity of Sonoma County says it overextended in post-2017 fires homebuilding plan
Nonprofit homebuilder Habitat for Humanity of Sonoma County announced on Monday that it has “sharply curtailed spending in response to a severe decline in contributions.”
“Currently we are facing unprecedented financial difficulties brought on in part by the overextension of our resources in our recovery work after the 2017 wildfires,” said a statement from Tim Leach, board chairman since May. “Facing a cash-flow shortage, we have made the difficult and necessary decision to suspend most of our operations as we work to stabilize our financial situation…”
In the last year, Habitat has completed work on 12 affordable housing units and is nearing completion on two others.
“This work represents a significant increase over our building in past years and has proven unsustainable at the present time,” Leach said. “We are now pausing to reevaluate our business model moving forward.”
Current Habitat homeowners and families occupying Sonoma Wildfire Cottages on the Medtronic campus in the Fountaingrove area of northeast Santa Rosa will be unaffected, Leach said. He said his organization intends to complete the two Habitat homes currently under construction in Graton, but that Habitat’s other home development work will be suspended until further notice.
Cutbacks include laying off over a dozen full time staff members, beginning in October and ending Nov. 29, while continuing to operate Habitat’s ReStore home improvement retail outlet and donation center in Santa Rosa. Leach said ReStore characterized as a “healthy source of financial support for our mission.”
Having received what he called a “huge surge in donations” after the Tubbs fire, the nonprofit made a concerted effort to ramp up building activities and staffing in order to meet its target of building 600 new homes by 2025. It planned to do this by changing the scale and scope of construction activities performed in the past.
Leach said he didn’t have the latest financial figures. But in the latest IRS filing by the Sonoma County chapter of the national Habitat for Humanity organization, it reported $4.82 million in donations in grants for 2017, compared with $866,000 in 2016 and $519,000 in 2016. ReStore had just over $1 million in sales in the fiscal year ended in June 2018, according to the most recent private auditor’s report, completed that November.
However, in 2018 there was a general decline in contributions from strong donors, and this downward pace picked up in 2019, Leach said. This occurred as Habitat moved forward with its expansion plan until fall, based on internal financial forecasts, models and predictions.
“Our long-term goal was — and still is — to make a significant impact by helping to fill the housing gap for low income individuals and families, but we realize we took on too much, too soon, and have to retrench,” Leach said.
Sonoma County Habitat has to curtail spending for a time while working through alternatives and seeking options, he said. But filing for filing for bankruptcy isn’t anticipated.
“We hope this will just be a short-term funding issue, so we can reorganize and restart again in 2020 under a new recapitalization plan,” he said.
As Habitat’s financial position softened, a number of senior management changes were also occurring. Former Chief Financial Officer Kelly Hennessy resigned in July, and an interim financial consultant took his place as a search continued for a permanent CFO. CEO Mike Johnson also left Habitat and was succeeded by former Chairman John Kennedy, who then departed in late spring.