The Palo Alto City Council will decide Monday whether to demand back $5.82 million it loaned the Palo Alto Housing Corp. to develop senior housing on Maybell Avenue -- a proposal that was defeated by referendum last month -- or wait for the organization to pay back the loan after finding its own buyer.
The Housing Corp. purchased the site at 567-595 Maybell Ave. for $15.6 million with the help of the city's loan, as well as loans from the Local Initiative Support Corporation, the Low Income Investment Fund and the county.
Now, after the defeat of Measure D in November -- which was a referendum on a City Council decision to rezone the site to allow 60 apartments for low-income seniors and 12 market-rate homes -- the development won't proceed, according to a staff report.
The report states that the Housing Corp. is looking to sell the land, which has gone up in value since it was purchased. The report estimates the site could be worth as much as $18.7 million.
One of the city's options, terminating its agreement with the Housing Corp., would effectively force the organization to sell the property to allow the city to recoup its loan. However, the city could also potentially buy the property from the Housing Corp.
If the city were to terminate its agreement, it would get the same results that it would have if it had done nothing (the option staff recommends). It would recoup its $5.82 million loan, which could then be used for another affordable-housing development somewhere in the city.
But if the city were to purchase the site for the purposes of developing it for affordable housing, it would be on the hook for the $10 million in loans the Housing Corp. took out from the other organizations, including $8 million from Local Initiative Support Corporation and the Low Income Investment Fund, and $2.8 million from the county.
The city would then have to decide how to develop the site, which is zoned for a maximum of 46 homes, with the addition of a state density-bonus inclusion.
Staff estimates that developing the site could cost $15.6 million and probably wouldn't have the advantage of generating revenue from tax-credit subsidies, which were to have made the Housing Corp. $13 million for its more dense development.
The council will decide which option it will take on during its meeting, Monday, Dec. 9, in City Hall at 250 Hamilton Ave.