PORT TOWNSEND — The Port Townsend City Council has moved toward selling a property on Cherry Street the city had hoped to develop into affordable housing.

Since 2017, the city had been trying to create affordable housing units at the site and had gone so far as to acquire$834,000 in municipal bonds in 2018, but the project ran into cost overruns. On Monday, council members signaled they were ready to move on.

“I’ve been Team Sell It for a long time,” said Council member Aislinn Diamanti. “I just don’t think it pencils out really at these numbers. We could make changes that would make it more valuable but we shouldn’t sit on it until that point, so I think we should sell it as is and let someone else sit on it.”

The project has been fraught with issues, and many of the people involved at the project’s inception are no longer with the city or the affordable housing group that initially was a partner.

In 2017, the City of Port Townsend began working with housing nonprofit Homeward Bound — which has since been renamed the Olympic Housing Trust — to create several units of affordable housing. The city loaned the organization $250,000 to have an apartment building shipped from Victoria. The building arrived in Port Townsend but costs to rehabilitate the building soon proved to be far higher than the organization predicted.

In 2020, Homeward Bound told city officials that the cost of rehabilitating the structure would be much higher than expected.

“The project’s original budget had never been adequately vetted and was missing key improvements, such as wiring, plumbing, and insulation,” the organization said at the time.

Jesse Thomas, president of the Olympic Housing Trust board, came into the organization after the building had been shipped to Port Townsend. In an interview on Friday, Thomas said the organization had gone through a change in leadership at the time and did not have the organizational capacity to complete the project.

With updated projections Homeward Bound told the city an updated budget of $1.8 million would be required to finish the project.

“The old board was moving forward on the project and we tried to move the project along but deemed it infeasible for us at the time,” Thomas said.

“We weren’t saying (the project) wasn’t feasible; $1.8 million was divided by eight units is $225,000 per unit, that’s a good price for affordable housing. We probably didn’t have the capacity to do it at the time.”

Thomas said the plan to have a building shipped from Canada was made before he arrived at Homeward Bound, and could not say why the project wasn’t properly vetted, but said the city at the time was under a lot of public pressure to take action on affordable housing.

“It was in a time, this was 2017-2018, there was like a panic in the community about affordable housing, and ‘why is it taking so long?’” Thomas said. “There was pressure for the city to act and you can’t really blame them for trying to make something happen.”

The city started looking for other affordable housing groups that might be able to take the project over and entered into talks with Bayside Housing and Services in Port Hadlock.

Bayside’s director Gary Keister told PDN constructions costs jumped during the COVID-19 pandemic, and trying to find contractors to take up the project became “almost impossible.”

“Our idea was to renovate the Carmel building,” Keister said. “Unfortunately, the cost doubled during the pre-and-post pandemic time. We’re all about putting heads in beds, it just became a very difficult challenge and we decided it probably wasn’t the right project for us.”

Of the $834,000 in bonds the city raised by 2018, according to the city’s Aug. 8 meeting materials, $524,000 has already been spent on the project, including roughly $250,000 for shipping the building from Canada as well as the design and installation of a foundation at the site.

At the meeting, city staff presented the council with six options for the property, ranging from trying to continue with the project to simply selling the property as it is.

Option A would’ve had the cityseek another affordable housing provider to complete the project with units at 80 percent of the Average Medium Income (AMI).

Option B would sell the parcel on the market as is “with adjusted project scope to be middle-income housing priced to serve up to 120 percent AMI households.”

Option C would sell on the market with not affordable housing requirements but with density requirements of between eight and 14 units.

Option D would sell the site on the market without restrictions

Option E would demolish the structure, create two lots and sell as residentially zoned property.

Option F would have the city demolish the building but keep the property.

Council members didn’t make a final determination at the meeting but instructed City Manager John Mauro to explore the city’s options along the lines of Options C and D.

The city has $310,000 in bond funds remaining, with annual debt payments of $61,896 until 2040, according to the city’s Aug. 8 presentation.

At one time ownership of the land was transferred to Homeward Bound under the loan agreement, but City Attorney Heidi Greenwood said Friday that the city fully owns the site and no longer has a legal relationship with Olympic Housing Trust.

According to the city’s projections, Option D —selling the site as is — would net the city about $320,000; $350,000 for the sale of the site minus $30,000 in costs to prepare the site for sale. Option C would net the city less, an estimated $225,000, but some council members reasoned a density requirement, regardless of affordability would help ease the city’s housing supply problem.

“If there’s eight units there,” said Council member Libby Urner Wennstrom,” and there’s eight well-heeled senior retirees that buy those, that’s eight other houses on the west end that they didn’t buy, that maybe remain on the rental market.”

Mauro told PDN the whole process of preparing the site for sale would likely take six months to a year. Once the property is sold, the council will have to decide how to use the proceeds.

“One of the options was if the council desired we could take the remaining funds that are there and the proceeds from the sale and pay down the debt on the loan,” Mauro said.

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Reporter Peter Segall can be reached at psegall@soundpublishing.com.