If the Salt Lake City Council doesn't buy off on a Housing Development Corporation plan to retire its $2.8 million debt, the city may have to raise taxes and dip into its own budget for up to $3 million, officials said.
At a council meeting Tuesday several council members attacked the plan to erase the red ink with $2.3 million in federal grant money and $900,000 in liquidated development corporation property.One element of the plan is to secure a $1.5 million federal loan paid back with Community Economic Development Grant money over six years to buy the Canterbury Apartments, 1357 N. Morton Dr.
Revenue from the rental units would service the corporation's debts after the federal government debt is paid off in six years. The Housing Development Corporation is a private organization but is overseen by the city because the city shares with it its triple-A bond rating.
But Councilman Alan Hardman said the plan would put the city back in the same "mess" it was in when the corporation was created to build low- and moderate-income housing projects.
"We find ourselves in this giant mess again by becoming landlords," he said, adding that it is not the city's position to compete with other landlords in the area.
If the council doesn't accept the corporation's plan, to be further discussed at a council meeting Thursday, Capital Planning Director Rosemary Davis said the city's other option is to turn to its general fund.
"This is one alternative, the other is raising taxes," she said. Corporation project manager Dan Franks said it could cost the general fund $2.5 million to $3 million to bail out the corporation.
The plan to buy Canterbury Apartments also met with neighborhood opposition.
Subsidized rents would attract low-income families to the apartments, out-competing other landlords in the neighborhood in northwest Salt Lake City, said Jack Ellefsen, who also owns apartments in the area.
"I think it (Canterbury Apartments) is too nice of a project to turn over to low-income families," he said, adding that the private sector "is already meeting the housing needs of the community."
But Franks said Canterbury Apartment dwellers, if the city bought the project, wouldn't receive any federal subsistence.
Part of a proposed deal to buy the apartments involves building a $150,000 park in the area for Canterbury Apartment dwellers and neighbors. The park is "desperately needed" in the area, said Craig Peterson, Development Services director. But Council Chairman Tom Godfrey said, "This is an amenity that I can't see we can afford."
Franks is directing a plan to retire the debt, discovered in August 1987, by buying Canterbury and the Ben Albert Apartments, 130 S. Fifth East, with a combination of federal grant and loan money.
The loan would be repaid in six years with $300,000 yearly payments made from Community Development Block Grant money from the federal government. After repaying the debt, cash flow to service the debt could be generated from rental revenue at the two apartments.
Additionally, $900,000 in liquidated real estate now owned by the corporation would go toward the debt, leaving $500,000 in red ink that Franks said can also be cleared up.