THIS STORY HAS BEEN UPDATED, WITH A CLARIFICATION ON THE NUMBER OF LOW- AND MODERATE-INCOME HOUSING UNITS THE CITY MUST BUILD.
LAKEPORT – An affordable housing project seeking financial support from the city received a cold reception Tuesday night.
The Lakeport City Council, sitting as the Lakeport Redevelopment Agency, voted to deny a request for a $600,000 deferred loan made by Sebastopol-based Terra Partners.
On May 1, the council and agency voted to set aside the redevelopment funds to assist Terra Partners in purchasing the five-acre property at the corner of Martin and Bevins, the proposed location of the 62-unit residential complex. The $18 million project, according to Terra Partners, was to have broken ground in late 2008.
Community Development Director Richard Knoll told the council that affordable housing projects such as this one have complex financing, involving local, state and federal funding sources.
Knoll and his planning staff have worked with Terra Partners for 16 months on the project. The Planning Commission reviewed the plans and encouraged Terra Partners to move forward.
There is risk in loaning the money, said Knoll, especially if the project fell through. But that would leave the city with the property’s ownership.
The city’s housing element calls for 367 housing units to be built between 2003 and 2008, said Knoll. Of those, 213 must range between very low income and moderate income.
“We haven’t quite got there yet,” he said, estimating that the city has about 150 housing units governed by affordable housing agreements.
Terra Partners was seeking a 55-year deferral on the $600,000 loan, said Knoll.
“We haven’t had a whole lot of willing and able developers in doing these kinds of projects in Lakeport, so I believe that’s a positive,” said Knoll.
Councilman Bob Rumfelt said the city should encourage developers willing to build low-income housing in Lakeport. “I think the risks that we have can easily be outweighed by the benefits,” he said. “I think we would be remiss if we let this opportunity go by, by not approving the loan.”
Plan meets council opposition
Councilman Jim Irwin said he was not willing to consider a loan with no payback for 55 years. “I don’t like the idea of putting all our eggs in one basket,” he said.
Irwin said he didn’t approve of putting all of redevelopment’s housing money toward one project, and questioned why Terra Partners hadn’t invested more of its capital in the development.
Councilman Ron Bertsch said he was concerned that full funding hadn’t yet been secured by Terra Partners. He said he believed only half of the five-acre property – which Terra reported was appraised for $588,000 – was buildable. In addition, with the cease and desist order on the city’s sewer system, there is no guarantee the project could hook up to the system once completed.
Councilman Buzz Bruns said he didn’t like the fact that the development company was coming with its hand out instead of its checkbook, and he wouldn’t support the project.
City Manager Jerry Gillham said they have an obligation under state law to do something about affordable housing, but there is a wide range of options.
The loan would require the city to use all of the redevelopment housing funds, plus funds earmarked for economic development. In light of the city’s current economic situation, Gillham said he didn’t believe it was a good idea.
The loan also would hamper the city’s $7 million Main Street revitalization, said Gillham. Every dollar of capital investment results in $10 of private investment.
“I would emphasize focus, focus, focus,” said Gillham – with the focus being placed on key projects that create jobs.
Terra responds to council concerns
Scott Johnson of Terra Partners, speaking to the council, seemed both surprised and confused by the council’s change of heart. “I’m a little bit confused, I must admit, with what exactly the formal action here is tonight by the council.”
Johnson said Terra Partners has been upfront from the beginning about the possible risks involved with the project. “There are no guarantees.”
He said the development company also has been very clear about the public-private partnership involved in setting up the project.
The company has invested risk capital in working on preliminary environmental mitigations and clearances, said Johnson.
In response to Irwin’s statement about Terra’s lack of investment, Johnson said that the city can’t expect the company to invest on a speculative basis in a project to benefit Lakeport residents considering the sewer hookup issues.
Johnson also explained that, for the project to get all the funding it needs, the city needs to make an initial financial commitment.
In light of the city’s limited finances, Johnson said Terra Partners was proposing fee waivers rather than requesting more money. “This was our effort to try to lessen the demand that this project was placing on scarce resources.”
Johnson said housing development is itself an economic engine, and said every dollar invested in housing has a fivefold multiplier across the economy.
Gillham interjected, saying Johnson was wrong “but that’s OK.”
The May 1 meeting during which the council made an initial commitment to loan the $600,000 was Gillham’s first, he said. He told the council that they weren’t locked into an agreement to make that loan.
“I’m not against this project. I’m against doing it now,” said Gillham.
Different opinions on city obligations
Knoll said affordable housing projects have to be looked at differently. State law motivates and, in some cases, forces redevelopment agencies to develop affordable housing.
He continued that the city has an obligation to produce an affordable housing project, a statement that caused Gillham to say, “That’s not true.”
Knoll continued, saying that the city has actively tried to encourage and particpate in affordable housing developments, primarily because of the mandated requirements in its housing element.
Gillham said that the city is not required to participate in such projects, but must use 20 percent of its redevelopment money for affordable housing. He said the city has not discussed how to spend those funds.
“Until you exhaust that discussion it’s not the time for us to jump in on the first opportunity that’s been brought to you,” said Gillham.
Johnson replied, “It’s clear to me the city does not consider this proposal a worthy proposal going forward.”
Gillham told the council he and Knoll had a difference of opinion on the issue, and asked Knoll if he wanted to offer another counterpoint. Knoll said no.
Bertsch moved to deny the loan request, which the council supported 4-1, with Rumfelt voting no.
E-mail Elizabeth Larson at This email address is being protected from spambots. You need JavaScript enabled to view it..
{mos_sb_discuss:3}