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City moves to extend loans
York City Council is scheduled to vote Tuesday on what to do about a pair of 20-year-old loans that have resulted in a loan company owing the city more than $600,000.
The York Area Housing Group has asked the city to extend the two loans, which were issued in 1996 with money from a federal grant in order to create low-rent housing.
Organizations that have since coalesced to form that group did so, maintaining cheaper rental housing at 37 E. Philadelphia St. and 312, 314 and 334 E. King St. for the past 20 years.
Those loans are now due. The Philadelphia Street one, now worth more than $390,000, is actually a couple of weeks past due, having come up on March 22, and a second loan for the King Street properties comes up in June, now worth $231,000.
The group asked the city in February to extend the loans until 2031 and drop the interest rates to zero in exchange for annual payments of several hundred dollars on each note.
In Tuesday's council meeting, council will vote on whether to extend the loans until June 2017, a move the city says will give it and the property management group time to better formulate what to do next.
If council doesn't extend the loans, the city will end up owning the property.
It should be noted that even if the organization were to be able to pay, city officials said, the money wouldn't go into the city's general fund — it would go back to the Housing Authority to put into another affordable-housing initiative. The city isn't down any money either way; if the funds weren't going into this low-rent property, they'd be doing the same for another one.
"City taxpayer dollars were not being spent on this," said councilman Henry Nixon, who, as the chair of the council's economic and community development committee, introduced the bills to temporarily extend the loans.
Therefore, council members expressed little concern about extending the East King Street loan until 2031, but had different thoughts about the Philadelphia Street property — not because of the money, but because of where it is and what it is.
"It’s right in the core of the redevelopment area," Nixon said, referring to the area around the middle of town. "We have the opportunity here to make a decision about the future of downtown."
If the city were to close on the loan and take control of the property before selling it off to a developer, those six low-rent apartments in the middle of town would become market-rate ones, where, in theory, people with more disposable income would live, Nixon said.
"If you have people living downtown, businesses will follow if those people are able to spend money," he said.
So he said he's "leaning toward" that — not extending the loan for that property, he said.
"There’s a lot of pressure for apartments in the immediate downtown area," he said.
Shilvosky Buffaloe, the city's derector of economic and community development, said he understands Nixon's thought process, and said it's not inaccurate — that logic has worked in many places. But he said he thinks the current and upcoming additions of more than 100 market-value apartments around the city provide already a good supply for the demand for them.
He said the two ideas at play here are at the root of his job — revving the motor of economic development as well as trying to keep conditions good for the city's residents of all incomes. And they're goals that aren't always directly in parallel.
"I'm hoping over the course of this year there’s a balance that can be struck," he said.
Buffaloe's office in March recommended to council that they extend both loans, but on Monday he said he was glad council had granted at least the temporary extension to help everyone figure out what's best.
"I'm very appreciative they’ve at least given another year to the housing group," Buffaloe said., calling it a wise move.
Something similar to this happened a few years ago, under a different economic development director and council. The city had issued similar federal loan to these in 1995 for the creation of affordable housing in the form of the 22-unit Pullman Apartments in the 200 block of North George Street. After a couple years' negotiations, the city took over the building and then sold it to a developer who eventually turned it into market-rate apartments.
But comparing the two situations isn't quite apples to apples, Buffaloe said. According to the York Dispatch's archives, the Pullman Apartment loan, which ended up around $700,000, came due in 2010. City officials said at the time that the company simply never repaid what it owed when the loan came due; the city then entered into litigation to collect the money, and eventually the organization negotiated the building over to the city two years later.
Buffaloe said that's what's different here — York Area Property Management came to the city before the loan was due to try to work out a way to keep things going.
Debbie Loucks, the director of York Area Housing Group, didn't return a call for comment Monday afternoon.