Salt Lake City's debt-ridden and once scandal-plagued Housing Development Corp. has finished its mission, and although short of its original goal of building 330 low-income housing units, city officials are guardedly pleased.
The Salt Lake City Council passed a resolution earlier this week declaring the HDC project complete and authorizing investment of up to $9 million in HDC bond proceeds - the final part of a plan to erase $2.8 million in HDC red ink.The resolution means the HDC officially is finished in the housing construction business and won't be building any more low-income units. Those that already exist will be overseen by the city's housing authority.
Almost from the day in 1985 that the city lent its AAA bond rating to the HDC - the private development arm of the housing authority - to sell a $14.9 bond to fund building a 330-unit, low-income housing project, the corporation was controversial.
HDC officers, including Housing Authority Chairman Jennings Phillips, were ousted by Mayor Palmer DePaulis in 1987 when it was discovered the project was failing, partly as a result of bad management.
Press accounts revealed HDC officials were using public money for vacations and that an over-valued apartment building had been bought by HDC in 1986 at the behest of board member Gordon Oettli, whose bank owned the building.
As the project fell apart, the red ink began pouring in - debt the city was obliged to honor in order to maintain its bond rating.
Now, HDC owes an estimated $2.8 million debt - an imbalance the city is trying to correct, in part, with a plan to use federal money to buy additional housing and to liquidate HDC assets.
The council's resolution authorizes the final step in the plan to erase the red ink by reinvesting construction money left over from the HDC's failure to build the 330 units originally called for.
The plan to erase the HDC's debt, if successful, will not involve city tax dollars, relying instead on federal grant money to help pay for revenue-generating apartments.
"It (the plan) is based on some assumptions. If the assumptions hold, we should come out with a program that pencils," said HDC Executive Director Dan Franks, appointed to help solve the debt problem.
HDC recently bought the Ben Albert Apartments in an attempt to generate rental revenue to help pay off the debt. With the pending purchase of another complex, the Canterbury Apartments, HDC, with the housing authority, will manage fewer than 200 units.
Although short of the HDC goal of 330 units, that addition of housing will help address what Mayor Palmer DePaulis has called a "housing crisis" in Utah's capitol city.
"We have a clear need for housing in the city . . . and the city needs to be an active party in providing it," said Mike Zuhl, DePaulis' chief of staff. DePaulis is in Washington, D.C., at the U.S. Conference of Mayors.
"Whether (HDC) was the most appropriate vehicle (for providing housing), I'm not sure," he continued. "But certainly no one could be critical of the city for it's desire to be an impetus to provide housing.
"We have to be careful to not conclude from (HDC's experience) that no elderly housing project sponsored by a local government can be successful," he said.
The HDC's debt is being corrected and not at the expense of the city taxpayer, said city Development Services Director Craig Peterson. His department oversees the Housing authority and, indirectly, the HDC.
"I'm just so relieved that we got out of this without a general fund (budget) crisis. I'm also relieved that we got out of this with a few extra units," he said.
But HDC continuing in the housing business on a limited basis with its purchase of the Ben Albert and the Canterbury worries one City Council member. "This housing fiasco started very innocently," Councilman Alan Hardman said Tuesday.
Hardman is opposed to the city, which will own the Canterbury Apartments, being in the housing business because he said he doesn't want the city to be held responsible for problems associated with housing.
The city could rely on HDC again in the future to meet its housing needs. For now, however, the corporation isn't likely to have any full-time employees, although a board of directors, which will remain seated, could jump start the corporation to build more units if needed.
"But it (reviving HDC) would be politically difficult," Zuhl said. "There would be a great reluctance to propose a project on the scale the city did in 1985, especially with the memory of the HDC so haunting."