The Salt Lake City Council took the first step to bail out the debt-ridden Salt Lake City Housing Development Corp. by appropriating $300,000 in federal grant money to help purchase an apartment building.
"This is the first hurdle," said development corporation project manager Dan Franks. Franks is spearheading a plan to erase a $2.8 million debt by using $2.3 million in federal grant money and liquidating $900,000 in development corporation property.The Housing Development Corp., set up with a $14.9 million bond to establish 330 units of elderly and low-income housing, fell into disarray when officials discovered in August of 1987 that the project had accumulated nearly $2 million in red ink.
Mayor Palmer Depaulis froze spending at the corporation and fired several officials after the discovery. Although the development corporation is an independent corporation, the city has lent it its triple-A credit rating and has taken responsibility for repaying the debt.
The council voted 6-0 - Councilwoman Roselyn Kirk was absent - to use $300,000 in federal Community Block Grant funds for the purchase of the Ben Albert Apartments, 130 S. Fifth East. Rent revenue from the apartment would repay the debt and pay off the bond.
Allocating the money, however, is contingent upon the city winning a $500,000 grant for which it has already applied from the U.S. Department of Housing and Urban Development.
The grant money, along with $864,000 in development corporation money, for a total of $1,664,000, would go toward the apartments, valued four years ago at $1.45 million, Franks said. Final purchase is also contingent upon another appraisal of the complex.
The Housing Development Corp. is also negotiating with bond holders to accept an amendment on the bond that would permit the city to rent apartments not only to elderly and low-income tenants, but also to low-income families. The amendment would allow the corporation to fill apartment units more easily, Franks said.
The Housing Development Corp. also wants the city to spend $1.5 million from another HUD grant to purchase a yet-to-be identified 70-unit apartment complex. That grant could be repaid with $300,000 yearly payments the city would get from the federal government, Franks said.
Additionally, the corporation plans to sell all of its excess real estate, excluding The Riverside, a housing complex for the elderly at 610 W. Ninth West. Liquidation of those assets would give the corporation $900,000.
That leaves $500,000 in red ink, which Franks said could be erased via another plan.