The development of a proposed project that could provide more than 70 downtown housing units just got one step closer to reality.
On Wednesday night, the City Borough of Juneau’s Assembly Finance Committee OK’d a motion to send an ordinance to the full Assembly, which would appropriate $700,000 — pulled from the city’s Affordable Housing Fund — to fund a predevelopment loan for the proposed Gastineau Lodges project which, if developed, would create a 72-unit apartment building in downtown Juneau.
However, City Manager Rorie Watt said he likes the project in “concept,” but it does not come without significant risks.
“If there was no risk it would already be built, but there’s more risk than a bank would entertain, and that’s why we’re here,” he said. “We’re on the edges to spur housing activity.”
The project, which was proposed by a private development group during the 2021 Affordable Housing Fund solicitation period, requested a predevelopment loan of $700K for a 72-unit apartment building in downtown Juneau but the land it plans to develop on is based on the two very different assessed values of the property.
On one end, the city assessor valued it at $134,100, on the other end, a recently provided appraisal valued it at $795,000 — meaning a more than $650,000 gap between the two assessments.
Due to the “tricky issue” of the wide range between the two values, the city determined the loan would include a phased loan disbursement with benchmarks and also include private matching, and will be split into two $350,000 pre-permitting and post-permitting loans.
If the city decides to go through with this proposal, that would mean the Assembly needs to be “confident” in the decision and be prepared to face a possibility of financial loss from the risk it takes, Watt said.
Assembly member Wade Bryson was skeptical of moving the motion to the full Assembly at first and said it “really worries” him that the city has to loan the developer just for the permit, which is a very early stage of the millions of dollars needed to fund this development.
“Does he have enough money? Can he actually build 72 units? It really worries me that we have to loan him permit money. How is he going to come up with $1 million for materials?” he said.
Watt said the city appropriation would go toward preliminary work to “see if HUD financing is possible” and said the “market isn’t going to support private capital taking this kind of venture.”
“I want housing as bad as anybody, but we’re starting to get past a level of risk I think the community would expect us to be aware of — it’s a larger stretch than I’m comfortable with,” Bryson said, but in the end he OK’d the motion to pass.
Assembly member Michelle Bonnet Hale said she agrees that taking this project on comes with risks, but said she thinks it’s a “calculated risk” that is necessary.
“I am coming to the point that we are not going to fix this unless we take risks — we really need to step out there and take some risks,” she said. “I do believe this is an area that it’s important for us to step into. There are definitely some risks but we need to take them.”
That sentiment was echoed by Assembly member and Finance Committee Chair Carole Triem
“Nothing else we’re doing is moving the need the way we want it to,”Triem said, in agreement with Hale and the motion passed unanimously.
• Contact reporter Clarise Larson at firstname.lastname@example.org or (651)-528-1807. Follow her on Twitter at @clariselarson.