PORT TOWNSEND – After a more-than-two-year partnership, Homeward Bound and the city of Port Townsend are recommending the Cherry Street affordable housing project be handed over to another nonprofit housing developer.
On Monday, the City Council will consider authorizing City Manager John Mauro to negotiate a transfer of the 1.5-acre property and the unfinished apartment building that’s been sitting there since May 2017 to Bayside Housing and Services.
That comes as Homeward Bound faces not only an Oct. 1 deadline to make a $23,000 loan payment to the city but also steeper project costs than expected in May 2018 when the city loaned the nonprofit $925,000 to be repaid over 40 years.
“The project’s original budget had never been adequately vetted and was missing key improvements, such as wiring, plumbing, and insulation,” the nonprofit said in a statement issued Friday.
In that statement, the nonprofit notes that in November 2019 it presented the city with detailed architectural designs by Terrapin Architecture, an updated budget of more than $1.3 million and plans to seek additional funding to finish the project by the end this year.
“However, with no staff to write grants, the volunteer board was extremely limited in its ability to seek the additional funding,” the nonprofit’s statement says.
In May and June, Homeward Bound and the city met to talk about how its existing funding would fall short of the increased project costs and delay the project’s completion.
“The city went on the hook, originally,” Mauro said, referring to a 20-year, $834,000 bond the city took out in May 2018. “That is was meant to fund the engineering, design, permitting and other pre-construction costs. Then we authorized a loan with the expectation that it would be repaid.”
Homeward Bound used that $925,000 loan, in part, to repay a $250,000 loan it had received from the city in April 2017 to cover the cost of barging the 1920s-era Carmel building to Port Townsend from Victoria, B.C.
Of that $834,000 bond, $307,606 remains unspent and available for Bayside Housing, if the City Council agrees to transfer the project. However, Bayside would not be required to make loan payments, meaning the city would need to budget for bond repayment using money from its general fund.
“The downside here is that this would require the city to continue to budget and pay for the loan payment as an investment toward affordable housing,” Mauro said. “That’s an unfortunate negative to this.”
Beyond authorizing a transfer to Bayside Housing, the council has three other options: do nothing, develop the project itself or sell the property for the highest possible price.
“We could also sell the property, which would be less of a hit to the city,” Mauro said, “but we would lose the opportunity to turn this property into affordable housing.”
Bayside Housing was formed in April 2016 alongside the opening of the Old Alcohol Plant adjacent to the Port Hadlock Marina. It draws revenue from the renovated hotel and accompanying restaurant, and it uses rooms in the renovated hotel for transitional housing for low-income and homeless families and individuals.
According to the city, Bayside Housing has expressed a willingness in meetings to take over the Cherry Street project, the goal of which from the outset has been to begin to address the city’s critical housing shortage by creating eight units of affordable housing.
Since June 2019, the three-story Carmel building has been sitting on a permanent foundation on city-surplused land next to Grace Lutheran Church and across from the Port Townsend golf course. The existing structure featured two stories, each with a pair of two-bedroom apartments. That sits atop a first floor that will offer four studio-size apartments of just less than 400 square feet each.
In its statement, Homeward Bound said it hopes the project’s goal of providing affordable housing units is preserved.
“… We have full faith in Bayside Housing … to bring the Cherry Street project to completion if the Port Townsend City Council chooses to transfer the project.”
Jefferson County senior reporter Nicholas Johnson can be reached by phone at 360-417-3509 or by email at [email protected]