Publication Date: Friday Nov 14, 1997

HOUSING: City may sue over Sheridan contract

The 57-unit Sheridan Apartments will not remain as subsidized housing after the complex's federal contract expires in April 1999, a lawyer for a prospective buyer of the apartments says.

In a letter to the city of Palo Alto, the lawyer for developer Todd Spieker said the prospective owner "does not intend to renew the Section 8 contract" once it expires 18 months from now, Palo Alto City Attorney Ariel Calonne said.

Calonne said the city has learned Spieker plans to raise the rent to $1,200 per month when the HUD funding expires. Currently, residents at the Sheridan Apartments pay 30 percent of their incomes for the one-bedroom apartments, which can be as low as $250. HUD subsidizes the rest of their rent up to what federal officials determine to be a fair market price.

"The tricky part about Palo Alto is the HUD fair market rents aren't anywhere near (Palo Alto's market)," said Marlene Prendergast, PAHC's executive director.

Spieker could not be reached for comment.

Meanwhile, the city of Palo Alto is prepared to go to court to fight for its right to purchase the 57-unit Sheridan Apartments, a low-income housing project at 360 Sheridan Ave. near California Avenue, Calonne said Thursday.

Under the deed restrictions, the city has a 30-day right of purchase in the event that the building is sold to a third party. Spieker's offer of $5.8 million was delivered to the city at the end of October.

The Palo Alto Housing Corporation tried to buy the building over the summer, but its $5 million offer was rejected.

Although the city has not formally approved a decision to buy the apartments at the $5.8 million price, city officials say they have concerns about the way the deal was presented to them. So far, Calonne and other city officials have declined to offer details about the problem.

"City Council feels quite strongly that they want to enforce the city's rights under the deed restrictions," Calonne said. "Where we have a problem is (in) the way the purchase offer has been structured so as to interfere with the city's ability to purchase that property."

The city has retained Deborah Summers, a partner at the law firm of Wilson, Sonsini, Goodrich & Rosati to represent it. Although no lawsuits have been filed, Calonne said the city is "seriously looking at litigation." It is not clear yet what the city would sue over, although a letter has been sent to the current property owner, Sam Webster, asking for more details of the impending sale.

"To lose these units and their residents, to me, would be a tragedy," said Council member Lanie Wheeler. Up until Thursday, all details of the proposed contract had been discussed in closed sessions of the city council.

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