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HUD demanding city move on East 12th street properties

Friday, June 22, 2012 by Kimberly Reeves

The Urban Renewal Board has to make decisions on property it owns on East 12th Street today.


Late last month, the federal Housing and Urban Development Department told Austin’s Neighborhood Housing and Community Development Department that HUD was about to pull its option on two properties on East 12th Street.


Only months after a group of investors offered to develop one of the properties – and was rebuffed because state law prohibits unsolicited bids – the Urban Renewal Board must make decisions on how to dispose of the parcels that make up 1120 E 12th and 1320-1336 E.12th St.


City officials took approximately $205,000 in HUD money when those lots were bought as part of the then-blighted urban renewal zone. During a board meeting on Monday, NHCD Manager Gina Copic and Assistant Director Rebecca Giello explained that HUD now wants action on the parcels from the city by the end of September.


Just what HUD would do if those parcels are not in the process of being sold in three months is unclear. Under its agreement with HUD, the board must either produce HUD’s contribution or turn the profit of the final sale over to the federal housing agency when the properties are sold.


The board has never been known to move swiftly on its decisions. Choices that should have taken months have sometimes taken years. But foot dragging on this action appears to be out of the question.


“I hesitate to speculate,” said Giello when asked what would happen if the lots are not sold by the end of September. “In the discussions that we are having with HUD, I do not feel like we are in a position to call their bluff, if you will. I don’t want to speculate on the ‘what ifs.’”


All the city has right now is a warning delivered during a conference call; nothing has been committed to paper. Neither Neighborhood Housing and Community Development nor the Urban Renewal Agency, however, has $205,000 to spare to pay HUD. Nor did NHCD think to budget the money for next year.


NHCD, however, is tied to federal funding. Department staff was fairly certain that HUD could withhold some, or all, of the city’s federal money in the coming year if Council does not take acceptable action on the property.


According to law, the Urban Renewal Board, on behalf of the Urban Renewal Agency, has three options: post the properties for competitive sealed bid; post a request for proposals for competitive sale for development; or sell the property at a fair market value in a non-competitive bid to a group that includes a local non-profit.


That proposition certainly stirred the interest of a number of parties, including a group that made an unsolicited proposal on one property two months ago and, yes, the Austin Revitalization Authority. ARA, of course, was stripped from the tri-party agreement just last year.


A member of the city’s Real Estate Department was on hand at this week’s meeting to provide input about what it would take to immediately post and sell the properties. A straight sale or a sale to a non-profit group would take about 12 weeks. A competitive sale could take up to 20 weeks.


NHCD, constrained by law and dependent on the board’s decision, has not made any move to solicit interest in the properties. Nor did they indicate whether Council might be amenable to finding an extra $205,000 in order to reap the profit on the properties.


“We don’t have funding in this fiscal year, but certain we can make the ask before the budget is formalized,” Giello said. “We have spoken to the city manager about the issue, but we certainly have not asked for a loan.”


Commissioner Darwin McKee was clearly uncomfortable with the vote, especially since it would have such permanent repercussions. HUD might want action now, but efforts to develop the property have been going on for 50 years.


“Waves and waves of people have tried to get development in this area,” McKee said. “Now we’re being asked to move it along.”


The board could put some strings on the property under a request for proposal – for instance, suggesting that a piece of property serve a particular use – but Real Estate staff warned that too many strings might make the property unappealing to potential developers.


“If we make it too complicated, we do risk a hiccup,” said Real Estate Manager Lauraine Rizer. “It throws their cost and profit margins off.”


The property is in the process of being appraised and a market study has been completed on the corridor. Giello said those efforts, combined with the urban renewal plan, provide a solid platform of established development guidelines.


An initial motion to move forward with selling the property did not make it to a vote. Instead, commissioners agreed to call a special meeting to vote on an option today.


Rizer was confident the two properties could be posted for sale by July 1.

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