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6 <br />This unusual request for funding in the midst of a fiscal year comes as a result of <br />OCHC relying on sources of revenue that proved to be unreliable. Specifically, OCHC <br />budgeted $50,000 from the Magnolia Place development and $10,000 from Carr Court <br />to support operations in the current fiscal year. Funds are not available from Magnolia <br />Place because the contractor failed to pay some of his suppliers. As a result, liens <br />have been placed against some homes and civil actions have been initiated involving <br />OCHC. Further, the construction schedule for Carr Court has experienced many <br />delays which have caused increases in construction costs. No development fees will <br />be received from this project. <br />In order to undertake the Magnolia Place development, OCHC formed a partnership <br />with Development Research Corporation (DRC) which was owned in part by the <br />builder, Jim Perry. The name of the partnership is Magnolia Place General <br />Partnership. All profits of the partnership are split 70/30 between OCHC and DRC. <br />Southern Heritage Homes, also owned by Jim Perry, was hired by the Partnership to <br />build the homes. <br />At the outset of the Magnolia Place project OCHC received legal counsel in the <br />preparation of the partnership agreement and individual construction contracts. In the <br />summer of 1997, when construction problems began to surface at Magnolia Place, <br />OCHC acquired the services of attorney Robert Belo of the law firm Newsom, Graham, <br />Hedrick & Kennon located in _Durham. Attorney Belo is continuing to provide legal <br />counsel to OCHC to resolve all Magnolia Place legal matters. He has advised us to <br />place in reserve any development fees earned from Magnolia Place until all legal <br />matters are resolved. <br />As a result of these missing revenues from Magnolia Place and Carr Court, the agency <br />does not have sufficient cash flow to continue to pay for operations beyond May 1998. <br />The OCHC Board of Directors has implemented cost reduction measures, however, <br />sufficient cash flow remains a problem. We are asking our funders (Orange County, <br />Chapel Hill, and Carrboro) to provide additional support both in the current fiscal year <br />and in future fiscal years to cover fixed expenses. Fixed expenses, which include <br />salaries, benefits, rent, insurance, etc. amount to approximately $154,000 annually. <br />Current government support totals $110,000. <br />Future Safeauards <br />OCHC did not hire a construction manager to oversee the construction of Magnolia <br />Place. The Executive Director and an on -site sales person provided construction <br />oversight on behalf of OCHC. In addition, the builder hired an on -site supervisor to <br />oversee construction. In hindsight, this level of supervision was not adequate. <br />To avoid similar problems with future projects, OCHC proposes securing the services of <br />a qualified construction manager to monitor future agency projects. We have learned <br />that investing in a construction manager early in the process is less costly than <br />correcting mistakes at the end of the project. <br />