Friday, April 24, 2009

Ketchum defends housing fund use

City transfer of money to URA causes flap

Express Staff Writer

In public meetings during the past month, the Ketchum City Council has faced a number of queries over its in-lieu housing fund and how the cash is being spent. Both past expenditures and the original intention of the fund have come under close scrutiny from a handful of residents and City Hall denizens.

Last month, former Planning and Zoning Commissioner Annie Corrock and resident Phyllis Shafran asked the council to clarify the in-lieu fund's balance sheet. But the matter truly came to a head at a City Council meeting on Monday when Ketchum Mayor Randy Hall cut off another accuser, James Donoval, when he said that money transferred from the fund to the city-affiliated Urban Renewal Agency was poorly handled.

The in-lieu housing fund was set up in 2004 to give developers the option of paying cash instead of building affordable housing on site. According to Ketchum code, any developer building a structure with a floor-area ratio of more than 1 must reserve 20 percent of the gross floor area for deed-restricted affordable housing.

The ordinance states that when a developer's community housing requirement calculation results in a fraction of a unit—an unusable space—an in-lieu payment may be made.

The ordinance permits the housing requirement to be satisfied through cash. The amount is determined using a formula that includes the square footage of housing owed and the cost of construction as recommended by the Blaine County Housing Authority—currently $337 per square foot.

"The city's goal is to encourage the construction of whole units and not to create a program for fee in lieu for whole units," the ordinance states. "However, the City Council may consider a request by the property owner to pay a fee in lieu of constructing a complete community housing unit or provide other considerations as the City Council deems appropriate. The City Council has full discretionary power to determine said request."

That discretionary power has been used several times. Examples include a $1.05 million payment from the Chilali Lodge condominium development on west Sun Valley Road and an agreement for $1.2 million for the Residences at Thunder Spring, a fractional ownership project that has yet to be constructed.

Donoval, the husband of Sun Valley City Administrator Sharon Hammer, found fault with the nearly $1.4 million that passed from the fund to the URA to help buy a piece of property on the corner of Washington Avenue and First Street and the former Mountain West Bank building on Sun Valley Road.

The URA was created by the city in 2006 to take advantage of a state law that allows the agency to receive a portion of property taxes, which would normally go to the county, for public improvement projects.

Donoval, who was the president of an affordable housing charity in Illinois before he moved to Ketchum in October, said the money should be returned to the city because no affordable housing has been built.

"I know community housing is hard, but it can be done," Donoval said in an interview. "The city needs to recognize that it's not working (on the purchased property) and the URA should give the money back to the city. Everyone thinks affordable housing is important, but there has to be an alternative plan."

Donoval, who is also strongly against the proposed merger between Ketchum and Sun Valley, said Ketchum needs to clarify how that money has changed hands.

"(The $1.4 million) should be specifically classified as a loan to the URA from the housing fund or that those funds be specifically designated as restricted-purpose funds for community housing purposes within the URA," Donoval wrote to Mayor Hall in a letter on April 13.

City officials think Donoval has created a mountain out of a molehill.

"You need to purchase land in order to develop affordable housing. It's not complicated," Ketchum City Administrator Gary Marks said. "The money was not a loan and was expensed out as a payment for property which will be used, at least in part, for affordable housing."

Though Hall is on record as saying the transfer was a loan, he said on Monday that he misspoke and that the money would only be repaid if no housing is ever developed on those properties.

"People can argue the philosophy of whether or not developers should be allowed to pay an in-lieu fee, but every decision we have made has been in full view of the public," Hall said in an interview. "There is no man on the grassy knoll here. This issue has been reviewed by two separate auditors and attorneys and no one found a problem."

Hall said the city is considering putting together a resolution that will clarify the agreement between the city and the URA, and the intention of the expenditure from the in-lieu fund.

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