The Salt Lake City Council will vote Tuesday on allocating $300,000 in federal money to go toward buying an apartment complex as part of a bailout plan to help retire a $2.8 million debt the Salt Lake City Housing Development Corp. owes.
A major hurdle was cleared Thursday when HDC Project Manager Dan Franks announced amendments to the HDC's $14.9 million bond to build low-income housing in the city, allowing other options to erase the debt.The debt at HDC, an independent corporation overseen by the city which lent the corporation its triple-A bond rating, was uncovered in 1987.
The council will vote on budgeting the $300,000 in Community Development Block Grant money to repay a $1.8 million Department of Housing and Urban Development loan to buy the Canterbury Apartments, 1357 Morton Dr.
If the complex is bought, it will be owned and operated by the city's Redevelopment Agency, but likely be managed by a private management company, Franks said.
The council voted in September to allocate $300,000 in CDBG slippage money to assist in the purchase of the Ben Albert Apartments, 130 S. Fifth East. The HDC has agreed to a Dec. 31 closing date on that deal.
If both transactions are successful, rent revenue of $130,000 per year from Ben Albert would be applied towards paying off the debt. After paying off the HUD loan in five to six years, $150,000 in yearly revenue from Canterbury Apartments would go toward the debt.
Some council members have questioned if the bailout plan would succeed, but Franks assured the council that the revenue projections are conservative and even if they fell short, the plan would work.
Canterbury, now 90 percent occupied, could fall to a 70 percent occupancy rate and still generate adequate revenue to pay off the HUD loan and service the debt incurred by HDC.
Additionally, the combination of CDBG funds and rental income enables the city to pay off the federal loan in a short time span, turning ownership over to the city quickly and allowing them to address the HDC debt immediately.
The plan is mostly well-received by the council but not by the Community Development Advisory Committee, which advises the council on dispersing the roughly $3.7 million in CDBG money enjoyed this year.
Advisory committee member Kim Anderson told the council Tuesday that the $2.5 million from the Select Telephone Technology case settlement should be used to fund the Canterbury Apartments, leaving the $300,000 in CDBG money for other low-income projects.
Capital Planning Director Rosemary Davis admitted the money could be used for such purposes, although it isn't traditionally used that way. Moreover, she said, the money is needed to fund a parking project to attract the state to build an office building downtown.
The bond amendments to the HDC bond broaden the agency's housing program, Franks told the council. Under the amendments, HDC may not build the full 330 low-income housing units called for in the original bond.
Additionally, the bond amendments could allow HDC to tender their own bonds and invest in higher yielding bonds prohibited under the original bond language, Franks said.