Virginia Beach gives money to help struggling nonprofit recover from mismanagement

Virginia Beach — The city of Virginia Beach is giving $1.8 million in financial assistance to a nonprofit organization that has been trying to course correct since a city audit revealed it had been mismanaged and losing money.

The nonprofit, Virginia Beach Community Development Corporation, was created by the city decades ago to provide affordable housing to residents.

But the nonprofit’s then-president resigned before a 2019 city audit revealed that the organization had been losing $1.5 million a year.

That president, Addie Wright Thomason, had taken out a loan to fund the operating budget for a number of years, said Andy Friedman, the director of the city’s Housing and Neighborhood Preservation Department.

Jessica Guglielmo, the new president, has been working to get the organization’s finances in order. Friedman noted that under her leadership, occupancy rates have been at 95% or higher, and the operating budget is balanced.

“We have taken major strides and steps to strengthen our ability to provide affordable housing,” Guglielmo said. “We are in a very good place.”

But potential developers have said the group’s loan is an impediment to obtaining funding for future projects, Friedman said. Without the city’s help, the development corporation would have to consider refinancing and selling more properties.

“We would have lost out on affordable housing opportunities had this council action not been taken,” Guglielmo said. “We will now be able to move forward.”

On Tuesday, the City Council voted to give the development corporation a $1.1 million grant and a $700,000 no-interest loan to pay off a line of credit.

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The organization will be required to sell three properties it owns in Norfolk and give those profits to the city. If the properties don’t sell for a total of $700,000, the city will forgive the balance of the loan.

Councilman Michael Berlucchi, who previously served on the community development corporation’s board, said the aid will help address some of the concerns about the organization’s operations and debt.

“Affordable housing is one of the most important issues facing the people who live in Virginia Beach” Berlucchi said. “…This action by council will really enable the VBCDC to continue to deliver on their mission.”

The City Council has voiced concerns that the group has not added enough affordable housing units in Virginia Beach, and that its financial problems would threaten the organization’s long-term success. The council briefly considered cutting ties with the organization, but decided not to after new leadership was installed last year.

The city does not have a redevelopment and housing authority so it created the Community Development Corporation 35 years ago. The City Council appoints the organization’s board and approves its bylaws, but it does not fund its operating budget. The Community Development Corporation owns and operates more than 400 units of affordable rental housing.

In exchange for help from the city, the nonprofit agreed to no longer develop new properties outside of Virginia Beach, and it will be audited annually by the city until 2023.

Alissa Skelton, 757-995-9043, alissa.skelton@pilotonline.com.