A split City Council denied the developer of a fledgling
homeless shelter permission to turn a grant into loan, a plan that
would have extended the time the developer had to build the shelter
and provided a guaranteed repayment to the city.
A split City Council denied the developer of a fledgling homeless shelter permission to turn a grant into loan, a plan that would have extended the time the developer had to build the shelter and provided a guaranteed repayment to the city.
A motion Monday night to allow South County Housing to assume and repay a $240,000 city grant that had been awarded to EHC LIfeBuilders failed with a 3-3 vote. The council also voted 3-3 to reconsider the issue in the future, effectively killing the matter on the local level and adding another headache to the nonprofits struggling to come up with millions to keep the housing project alive.
Councilman Perry Woodward, a real estate lawyer, recused himself because his law firm, Terra Law, has represented EHC in the past. Councilmen Dion Bracco, Craig Gartman and Bob Dillon voted against the motion both times largely because financial problems have beset the city and the project. So far, Gilroy has doled out about $181,000 of the $240,000 grant approved by a previous council in 2003, and Monday’s vote was a de facto decision to cut the city’s losses and collect the outstanding balance instead of letting South County assume the loan and resuscitate the project. City managers have not yet determined how exactly to proceed with the collection, according to Marilyn Roaf, Gilroy’s housing and community development coordinator.
Gartman also expressed dissatisfaction with the possible concentration of extremely low-income and chronically homeless housing at EHC LifeBuilders’ chosen site – 9389 Monterey Road in north Gilroy – known as the Sobrato Homeless Shelter. The general plan calls for the city to spread affordable units among market-rate homes, he said.
Unwilling to accept the first vote, Councilman Peter Arellano made a motion for the council to re-consider the loan transfer after City Administrator Tom Haglund asked council members if they needed more information to make a decision. Bracco and Gartman did not offer responses, but a visibly frustrated Dillon asked Arellano, “Didn’t the council just vote on this?”
South County Housing’s next stop to try to keep the project alive is the Santa Clara County Board of Supervisors, which will vote Sept. 29 whether to approve a similar loan transfer for the nearly $2.5 million the county gave EHC between 2002 and 2006.
South County Housing CEO and President Dennis Lalor pointed out the project has been in planning for the past decade, since Santa Clara County Supervisor Don Gage was still mayor. This latest financial request, he said, was just “one little piece of a much larger picture.” While Lalor is “very grateful” for Gilroy’s support until now, he said the council’s sudden “balking” confused him.
“The county has a lot going into this, and they want to know where the city of Gilroy lines up, just like all of us do,” Lalor said, adding he would reach out to Gartman, Bracco and Dillon.
“If (the Gilroy city council) is going to be fighting against this, we need to know,” he said.
The carrot the council failed to take is South County Housing’s promise to assume the seller’s financial obligation. Under the terms of Gilroy’s grant, EHC did not have to pay back the $240,000 if the Sobrato development was still functioning in its approved form by 2061.
If the county board approves the loan modification, South County Housing and EHC would be in a better position to keep the Sobrato project alive, albeit in an altered form that will require outreach to nearby residents and approvals from Gilroy’s planning commission and city council. Even if the development duo receives permission from country supervisors, Gilroy would still be in a legal position to collect the $181,000 it gave EHC between June 2006 and March 2007 to pay for architectural, engineering and soft costs for the building design.
The Sobrato site currently has 60 “transitional housing” units built and managed by South County Housing for residents rising out of poverty and homelessness. Those units were all occupied in 2006, before EHC LIfeBuilders improved the site’s infrastructure in preparation for its 140-bed homeless shelter. However, that shelter has never materialized because private donors have withdrawn funding and “changes in state and federal funding priorities have shifted funds from emergency shelters to permanent housing and services for (the) homeless,” according to a memo from Roaf.
Instead of a 140-unit homeless shelter, South County Housing imagines 35 studio apartments along with space for mental health and education services for about half of the planned residents thanks to a $3.4 million grant from the Santa Clara Department of Mental Health. South County Housing is also applying for $11 million from state federal agencies to finish the project and provide services for all residents.
“The site will be operated as a center to provide permanent housing for chronically homeless individuals,” Roaf wrote.
Realizing this site will be harder without the council’s approval, but Roaf speculated the council may reconsider its position if the county approves the loan transfer. Earlier this year, South County Housing sought a city loan to keep its mammoth downtown Cannery Project going but then withdrew its request after selling enough homes to raise the money on its own.
View Sobrato Homeless Shelter in a larger map
