Dubuque City Council members are considering forgiving a $350,000 loan to spur the rehabilitation of a downtown housing complex.
Council members this week voted, 7-0, to set a public hearing for a proposed development agreement with Affordable Housing Network to redevelop the five-story building at 90 Main St.
The agreement states that Affordable Housing Network will make needed repairs and renovations to the property. In return, the city will forgive a $350,000 loan to the building’s current owner, Bishop’s Block Limited Partnership.
Alexis Steger, the city’s director of housing and community development, said the deal ultimately will benefit the city because the cost of the renovations that Affordable Housing Network will perform will likely surpass $350,000. The proposed development agreement requires that at least that much be put into improvements in the building.
“They are going to do a new roof and take care of all the issues that remain in that building,” Steger said. “It’s going to well exceed that $350,000.”
The original $350,000 loan was granted by the City Council in 1999 to Bishop’s Block Limited Partnership to redevelop the structure, built in 1873, to create affordable rental housing units and commercial space.
Bishop’s Block used the city’s funding to secure two loans from the Iowa Finance Authority, along with low-income housing tax credits. Steger said third-party loans also were issued for the project.
Officials with Bishop’s Block Limited Partnership did not return calls seeking comment on this story.
Since issuing the loan, the city reports that it has not collected a single payment from the company. Financial audits in 2011 show that the company was operating at an annual revenue deficit of $77,000. While the deficit fluctuated in the following years, Steger said the company never managed to generate enough revenue to cover operational expenses.
The company made efforts to increase revenues, including increasing commercial space lease costs by $250 per month. However, city staff determined that it was unlikely that the company would be able to pay back the loan.
“It was not anticipated that they were going to be able to make payments,” Steger said.
Steger added that since the structure was redeveloped, subsequent inspections of the building found numerous deficiencies with the property, including a deteriorating roof, water heaters and radiators.
In 2019, Iowa Finance Authority, after reviewing the financials of Bishop’s Block Limited Partnership, forgave one of the loans it issued for $240,000. The second loan, which had a remaining outstanding balance of about $172,000, had its interest rate reduced to 0%.
Tami Gillmore, chief operating officer of Affordable Housing Network, said her organization now is buying the building to make necessary repairs to ensure the property continues to provide affordable housing options to residents of its 32 rental units.
“We want to keep it as affordable housing,” Gillmore said. “We need to keep it affordable because that is the type of housing that the city needs.”
The proposed development agreement would require Affordable Housing Network to replace the existing roof, water heaters, radiators and covers and rehabilitate several areas of the building by Dec. 31, 2024.
City Council members are expected to decide whether to approve the development agreement on May 17.
Council Member Ric Jones said forgiving a $350,000 loan is not an ideal decision for the city, but it ultimately might be the best option to save the property.
“You don’t want to see people getting a loan and not paying it, but when you are on the end of the money trail, there aren’t a lot of options,” he said. “The best thing for the city is to keep the building from going into disrepair.”
Council Member Brad Cavanagh said he was undecided on whether he supports the development agreement, but he added that he supports sustaining and expanding affordable housing in the city.
“It’s an obvious priority for us that we want to increase affordable housing options in Dubuque,” he said. “If this fits with that, then it may be the best option to move forward with.”