GOSHEN —  Looking back, Wayne Kramer thinks he can identify the turning point in which everything went south for the beleaguered Goshen Housing Authority.

That would be 2004, when the GHA purchased its former office building at 1101 W. Lincoln Ave., according to Kramer, who was appointed to the GHA board nearly two years ago.

The Lincoln Avenue property, used previously as a nursing home, was viewed as a significant step for the housing authority, one that would provide the agency with its own office space and accommodate apartments that could be used for assisted housing.

The apartments were expected to provide a revenue stream that would help pay for the costs of the building, Kramer said.

The property was acquired through loans and grants and the office staff began using the building in November of 2004.

While the ground floor included several apartments, GHA planned to add a second floor that would include even more apartments. However, construction was halted in 2004 because the city plan office realized GHA had never acquired a needed variance needed for residential use and additional parking.

A request for the variance was later rejected by the city board of zoning appeals, according to Gary Haney, the city’s chief building inspector.

“The building itself constituted about $13,000 in debt service, which was outrageous,” Kramer said Tuesday during a presentation to city council members.

“It created a debt load service that could not be handled by the agency. They chose to do that, though, by taking from reserves,” Kramer said. “That would appear to us, historically, to be the moment in time when this whole thing changed.”

While the agency has had a wide array of financial problems, which are still being sorted out, purchase of the building appears to have taken a serious toll on the agency. By June of 2010, GHA fell into default on three mortgages from 1st Source Bank and owed $383,272, according to a story published at the time by The Goshen News.

Sale of the property was complicated because housing grants obtained by the agency for the purchase and renovation included stipulations that the building continue to be used for assisted housing programs even in the event it changed ownership. That left the agency with very few potential suitors.

LaCasa Inc., a well-established group that specializes in administering assisted housing programs, purchased the building a year ago for $210,000 in cash and agreed to assume the liability for liens remaining from grants used in the original acquisition and rehabilitation of the property, according to LaCasa.

According to the sale agreement, 1st Source Bank received proceeds from the sale, GHA agreed to monthly payments of $150 for 60 months and the bank agreed to write off the remainder of the debt, estimated to be about $170,000.

LaCasa, meanwhile, has since renovated the building into 16 apartments used for permanent supportive housing, a program that helps former homeless people.

Following the sale of the building, the GHA board also began to make other cuts and shore up other debts, Kramer said.

Kramer said the GHA board believed they could cut costs and slowly replenish the voucher reserve fund. And while the board knew the U.S. Department of Housing and Urban Development was aware of missing reserve funds, he said they didn’t expect the federal government would take such swift action.

GHA officials learned recently that HUD had identified a large amount of “unaccounted” federal funds in the agency’s reserve account and is demanding repayment.

To make up for the missing funds, the agency has to come up with the money or begin slashing its rental voucher assistance program.

The agency is awaiting a decision by Goshen City Council on a plan to bailout the agency with $571,050 from the city’s rainy day fund. A final vote is expected Feb. 21.

Kramer told City Council members Tuesday that he is convinced board members were misled and operated without all of the facts.

Attempts to contact Bob Brenneman, the agency’s longtime executive director who was fired last year, were unsuccessful.

Last year, operations of the agency were turned over to the Warsaw Housing Authority, which agreed to a tentative consortium arrangement to help straighten out GHA’s finances.