By KEVIN McCALLUM
THE PRESS DEMOCRAT
Santa Rosa last week approved the sale of nearly $30 million in bonds to help fund three affordable housing projects, including the sale and renovation of the city’s tallest building, the 14-story Bethlehem Tower.
The decision by the City Council last Tuesday will help the developers of the three projects — two remodels and one new development — get the financing they need to move forward.
The city says it isn’t incurring any debt or liability in the transactions, nor is it guaranteeing the bonds. The decision merely helps project lenders tap a tax-exempt source of funds and allows the developers to access other tax credits.
The bonds, known as multifamily housing revenue bonds, are commonly used in affordable housing projects. But three projects coming forward at the same time is unusual and a sign of the tight lending environment.
“A lot of the funding for affordable housing has been drying up,” said Marjorie Jackson, a program specialist in the city’s housing department.
The most visible of the projects is the sale and rehabilitation of the 40-year-old Bethlehem Tower, which has 159 affordable apartments for seniors.
The landmark Tupper Street tower opened in 1972 as a partnership between Bethlehem Lutheran Church, a local congregation that had its original church on the site, and the federal government’s urban development agency, which provided a construction loan.
The loan was paid off in March, which would have allowed the building to begin charging market rate for 58 of the units. But the board of the nonprofit that owns the building, Bethlehem Tower, Inc., was looking to increase affordability of the building, not reduce it, said Tom Torgerson, board president.
“Our mission has always been from day one to offer low-income housing to seniors,” Torgerson said.
The board was in the process of investigating how to extend the affordability of the complex when it accepted a purchase offer from Reiner Communities, an Irvine firm that specializes in the renovation and management of multifamily affordable housing, Torgerson said.
The sale and renovation of the building is something the federal Department of Housing and Urban Development supports as a way to keep affordable housing stock in a community, Torgerson said.
“For them it’s cheaper to keep an existing building in place than to go out and build a new one, so this was their way of doing it,” Torgerson said.
The bonds approved by the council will cover up to $19 million in project costs. The total purchase and renovation, including temporary relocation of the residents, will cost nearly $27 million, said Sean Burrowes, investment director at Reiner.
That includes a $15 million purchase price and $6 million for upgrades, with the balance covering various project and transaction costs. The sale is expected to close in November, with work beginning in early 2013. Construction is expected to take about eight months, he said. Typical upgrades would include new windows, cabinets and floor coverings, he said. Common areas and the exterior also will be spruced up.
“You shouldn’t see anything too dramatic other than everything just looking better,” Burrowes said.
Residents will be displaced for less than a week each, and they’ll be fully compensated for their trouble, he said.
If completed, the sale would extend the building’s life as an affordable housing complex for 55 years. About 80 percent of the units would be dedicated to low-income seniors, defined as those earning less than 60 percent of the median income for the area. The balance of the units would be for very-low-income seniors, or those earning less than 50 percent of median.
Some residents contacted Monday had no idea the building was being sold. Others were skeptical of the deal.
Retired commercial painter Sam Daw, 72, said he attended a meeting where a company representative said the only changes would be for the better.
“I’ve had sunshine blown up me before,” Daw said.
Daw pays $346 a month for a 14th-story studio apartment, with subsidies covering the balance. While he worries about changes, he would welcome the sale if it would oust current management, which he said banned poker games and potlucks and failed to fix his leaking ceiling for years.
Resident Mark Johnson, a 70-year-old tai chi instructor, said he doesn’t want any upgrades to his one-bedroom unit, which offers him sweeping views of Taylor and Bennett mountains. He built elaborate shelves when he moved in seven years ago and wants them left just as they are.
“I’ve told them to just leave me alone,” Johnson said.
He worries the buyer will raise rents to get a better return on its investment, but company officials say that can’t happen. The entire building will be covered under a HUD contract, instead of about 62 percent currently. That means everyone in the building will receive rent subsidies, which will help the new buyer afford the upgrades.
“Everyone gets to stay in their homes. Everyone is protected with rent subsidies,” Burrowes said.
City Council members unanimously supported the bond sales and urged the developer to be as sensitive as possible to the low-income seniors during the remodel.
“It’s fairly delicate what you’re doing. It’s very important that it be done right,” Councilman Jake Ours said.
The other rehabilitation project is for the 43-unit Sonoma Creekside project on Boas Drive off Highway 12 in east Santa Rosa. The project was built in 1996 and is managed by EAH Housing. The council authorized up to $6.5 million in bonds for that project.
The third project is North Village II, which proposes to build 31 new affordable units off Fulton Road in the city’s northwest corner. The project is being headed by developer Hugh Futrell, who built the adjoining North Village subdivision. The council qualified the project for up to $4 million in bond funding.
You can reach Staff Writer Kevin McCallum at 521-5207 or kevin. firstname.lastname@example.org.