Rather than loan $4M to a developer, SLC Council votes to buy North Temple motel and hold public bid process

(Steve Griffin | The Salt Lake Tribune) The Overniter Motel at 1500 west North Temple in Salt Lake City Monday October 23, 2017. Salt Lake City's Redevelopment Agency has proposed a $4 million loan to buy the and replace it with a development that includes affordable housing, part of a broader plan to create more than 750 affordable units using $22 million set aside by the City Council.

Salt Lake City is about to be in the motel business — though its City Council expects a short stay.

Rather than approve a $4 million loan requested by an affordable housing developer for the Overniter Motel, council members chose Tuesday to buy the 2-acre, 1500 W. North Temple property and put the project out to bid.

“That was unexpected,” said Redevelopment Agency Chief Operating Officer Danny Walz after the council’s unanimous vote. “We certainly understand [their] concerns and their motivation for doing it, but we felt we had a project in place that could address that.”

Before making its first purchase with nearly $22 million that it set aside last year for affordable housing, the council — acting as the RDA board — shared qualms about the request from the Western Region Nonprofit Housing Corporation.

Those included uncertainty about financing or the expected percentage of units that would be affordable, as well as the council’s preference for a public process.

“This is $4 million of public money,” said Council Chairman Stan Penfold. “There’s a reason we want to see a process, because it’s unfair to every other developer in this community to say, ‘Well, we just did a deal with this developer because they came to us with a good proposal.’”

Council members also voted Tuesday for a bid deadline of Jan. 1, 2018, and to require that no more than 50 percent of the location’s housing units be limited by tenant income levels — based on a desire to avoid high concentrations of poverty in the city.

An administrative memo to the council had said that a “majority” of the proposed development’s housing units would have been rented to households earning 60 percent or less of area median income.

Council members also acknowledged that, as Walz said, “we would become the proud owners and operators of a motel,” and voiced their support for future funding to relocate an estimated eight to 10 residents who live at the motel long term.

The discussion became heated momentarily when Penfold took issue with Walz’s earlier comment that the RDA needed to “put skin in the game” by acting at least somewhat on faith in a willing developer.

“That is a really inappropriate accusation to this board,” he said. “We‘ve been waiting for a recommendation from the administration [on how to spend $22 million] for over a year now.”

Mayor Jackie Biskupski said, “Wow!” from her table at the back of the room.

Leaving before the council’s curveball vote to buy the property, Biskupski said council members risked missing an opportunity, given that the city’s housing department only had the property under contract until Nov. 3.

“They’re in there all flustered, not sure what to do and trying to point fingers,” she said.

Councilman Charlie Luke, who made the surprise motion, said the bidding process won’t slow the development, given that the proposed developer had yet to do much of the work required for a bid. It might even speed it up, he added.

“There may be a developer that does have funding in place that is able to break ground much quicker,” he said. “My goal is not to slow this process down. My goal is to make the process move as transparently and as smoothly as possible, and I felt that the direction we were going didn’t do either of those things.”

Marion Willey, executive director of Western Region Nonprofit Housing Corporation, said of the bid that “we‘ll see if it still works for us. I think it was wise for the RDA to buy the property, at least, because property is so expensive.”

The property was recommended by the city’s informal “blue-ribbon commission,” a collection of local investors, developers and city officials who convened at Biskupski’s request earlier this year to provide solutions to the city’s affordable-housing crisis.

The commission also proposed spending $4.1 million to buy the Capitol Motel at 1749 S. State St.; both projects are part of an RDA proposal to help create more than 750 affordable units. Of those, more than 400 would be rented to those earning 40 percent of AMI, or about $25,000 per year.

Salt Lake City has a shortage of about 7,500 rental units for households making less than $20,000 per year, according to the city’s housing plan.