Clearwater wants affordable housing, but at what cost?

The City Council will decide Thursday whether to award $1.8 million in housing dollars to a developer to build 81 units downtown.
The Clearwater City Council will vote whether to budget $1.8 million for an affordable housing development proposed for the site of former Fire Station No. 45, foreground, on Franklin Street downtown, with the Church of Scientology's Flag building to the west.
The Clearwater City Council will vote whether to budget $1.8 million for an affordable housing development proposed for the site of former Fire Station No. 45, foreground, on Franklin Street downtown, with the Church of Scientology's Flag building to the west. [ TRACEY MCMANUS | Times ]
Published Dec. 1, 2021|Updated Dec. 1, 2021

CLEARWATER — City officials want to attract more affordable housing, but how much are they willing to pay for it?

In 2019, the city agreed to sell a former downtown fire station at 610 Franklin Street to Tampa-based Blue Sky Communities for an 81-unit affordable housing project. It then took the developer two years to secure $17.5 million in state tax credits through a competitive program.

But due to soaring construction prices during the coronavirus pandemic, Blue Sky CEO Shawn Wilson said, the project’s cost has risen by $4.6 million to $28.5 million. He is now asking local government to help fill the gap.

The Clearwater City Council will vote Thursday on whether to award the project $1.8 million from its pot of state and federal housing money on top of the original $610,000 commitment made in 2019. If the city approves the funding, a loan that would be paid back over 20 years, the developer will ask Pinellas County for $2 million from the Penny for Pinellas affordable housing program.

Blue Sky is covering the remaining cost increases through additional bank financing and deferring part of the fees it would receive at closing.

“If these cost increases are due to building material increases, then every municipality is experiencing these kinds of things,” council member Kathleen Beckman said during a Monday work session discussion. “If we want more affordable housing in our community, then this is what we’ve got to do to make it happen.”

But the council is split on whether dedicating $1.8 million to an 81-unit project is a wise investment, especially as the land could be a strategic parcel for future redevelopment.

The former fire station sits in between the Clearwater Police Department to the east and Church of Scientology’s Flag Building to the west. When the city put the land out to bid in 2019, three developers responded.

“I’m conflicted,” council member Hoyt Hamilton said Monday. “It’s an awful lot of money for 81 units, but it’s a difficult property to do anything else with. Somebody said, ‘Well, we could get a brewery in there.’ Well I don’t think anybody wants to put a brewery right next to the police station.”

Council member David Allbritton noted the site’sv ideal proximity to public transit for housing, as it is catty-corner from Pinellas Suncoast Transit Authority’s Park Street bus terminal and near the Pinellas Trail.

“We just don’t have enough of this in Clearwater, so this is a great start,” Allbritton said.

And one downtown affordable housing project has already been derailed due to increased costs. In October 2020, the city began negotiations with Tampa-based Southport Financial Services for 171 mixed income apartments on city-owned land at 306 S Washington Ave. But in April, developer Peter Leach told the council the project was on hold due to soaring construction prices, environmental remediation costs and property tax issues.

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Chuck Lane, assistant director of Clearwater economic development and housing, said local government subsidy is in many cases required for affordable housing projects to be financially feasible. All 81 units in the Blue Sky project would go to residents with incomes between 30 percent and 80 percent of area median, or up to $59,050 for a family of four.

“It really takes subsidy,” Lane said in an interview Tuesday. “If you’re going to reduce rents to a level that people at 80 percent of area median income can afford, that’s a lot less rent that the property manager is going to get over time.”

But Mayor Frank Hibbard said Blue Sky’s 81 units “would not move the needle” on affordable housing needs and that the city would be making “a terrible mistake by funding” it.

The city is still finalizing plans for where to build a new City Hall. And with the land located near the city’s Municipal Services Building, garage and police station, it could be a piece of the puzzle needed for a government campus, Hibbard said.

That option may be needed since another potential City Hall site, the transit authority’s bus terminal on Park Street, may no longer be viable. The transit authority has proposed vacating its Park Street site to build a new transit center on city-owned land at Court Street and Myrtle Avenue. But the authority did not receive a federal grant needed to build the new facility, meaning it will take longer to finalize an alternate funding strategy and move off Park Street.

And with Scientology’s control of an increasing number of properties downtown, the Franklin Street parcel could serve as a bargaining chip, Hibbard said.

The mayor has floated the prospect of trading less important city properties for prime real estate owned by the church.

“I think if you approve this, you’re playing checkers and we need to be playing chess,” Hibbard said. “I think we will look back and regret this decision.”

If the project moves forward, Blue Sky will pay the city’s Community Redevelopment Agency $2 million to buy the land, according to director Amanda Thompson. The deal will include a $305,000 grant from the redevelopment agency.

Because the city’s $1.8 million contribution would come from state and federal dollars required to be spent on housing, Wilson said, it makes sense to look at “what is the most important (project) on the table right now.”

“It’s an overall benefit to the city because it makes it so residents can live more productive and happy lives and have a better chance for success,” Wilson said. “That’s why it’s good public policy.”