Developers behind a delayed Broadway-area redevelopment believe they have found a possible funding source for the project — if they can convince public entities to support their effort to revitalize the blighted neighborhood.
Soren Simonsen, architect, planner and minority partner in Broadway Heritage LLC, said the group has found financial backing to get the first part of their plan to turn the Hotel Tooele and some surrounding lots into an affordable housing development.
But to secure that funding, he said, the venture needs proof of the community’s support in the form of financial agreements with local taxing entities.
“Lenders we are talking to want to see a public-private partnership because it gives them more security, because they know there’s buy-in if they see that the community’s behind it,” Simonsen said.
In 2006, Broadway Heritage LLC purchased the historic Hotel Tooele at the corner of Date Street and Broadway, as well as several other surrounding buildings and vacant lots with the intention to turn the area into an affordable housing development.
It seemed like a worthwhile project with the potential to save a historic structure and improve a blighted Tooele neighborhood, Simonsen said, even though the cost of the revival project would be much higher than simply building a suburb on the outskirts of town.
“We think there is a real upside to this,” he said. “Redeveloping a blighted area is more difficult than more suburban development … but it would have a real positive impact on the neighborhood.”
The Great Recession of 2008 greatly reduced the availability of financing and left Broadway Heritage underwater on the project, Simonsen said, delaying the dream of revitalizing the Broadway area. But with the recent slow but steady recovery of the real estate market, Simonsen said Broadway Heritage is again moving forward with the project.
To begin the first phase of the project — a series of townhomes to be constructed on some of the vacant lots owned by Broadway Heritage — Simonsen said the partnership needs roughly $500,000 in gap funding. Because they don’t need the money up front, Broadway Heritage hopes to use local tax increment financing to fill in the gap when the project’s first tenants begin to move in.
Tax increment could be used in a variety of ways. It could come in the form of a loan or a bond, but could also take shape as a tax credit, depending on the agreement with the taxing entity.
On Tuesday night, Simonsen’s partner Kevin Peterson brought a proposal before the Tooele County School Board that would allow Broadway Heritage to keep the taxes on any increased value their improvements bring to the properties as a tax credit. That credit would be used to pay down debts related to the construction of the first phase of the redevelopment.
The proceeds from that first phase would then be used to develop additional properties and, eventually, to renovate and restore the Hotel Tooele.
Members of the school board expressed lukewarm support for the project and asked Peterson to give them some time to consider the proposal, but said they may make a decision on the issue next month.
Broadway Heritage made a similar pitch to the Tooele City Council last year, to similar effect. The city council expressed some interest, but never made or signed any official agreement.
Simonsen said that he thought Broadway Heritage could raise enough money to make the project’s first phase possible if all three of the property’s taxing entities — Tooele County, Tooele City and the Tooele County School District — agreed to participate in some form of tax increment funding.
There have been some changes to the project plan. A year ago, Broadway Heritage proposed selling the first phase townhomes to raise funds for subsequent phases of the redevelopment. But Simonsen said a feasibility study found that homes sell for 10-15 percent less in Tooele than in other areas on the Wasatch Front, leading Broadway Heritage to its current plan of marketing the townhomes as rentals.
Rentals would start at $550-$600 for one-bedroom units, $600-$650 for two-bedroom units, and $750-$800 for three-bedroom units. Applicants would have to claim a household income of roughly $40,000 or less to qualify, because part of the Broadway Heritage financing package includes Federal affordable housing tax incentives.
Potential renters would include public employees such as police officers or teachers, young families with a single breadwinner, older residents with fixed income, or workers in the service industries — a fast-growing sector of Tooele County’s economy.
If the school board agreed to participate, Peterson said Broadway Heritage would agree to set aside some units as designated specifically for first-year teachers to help the school district’s recruiting efforts.
“We know there’s a market for this,” Simonsen said. “That’s the frustration. Market feasibility studies say there is a pool of renters in the area looking for rentals in this price range, but it’s just the location. Investors are unfamiliar with Tooele, and the neighborhood is not in good condition.”