Are island’s mixed-income developments over?

By Amanda Casanova
The Daily News

GALVESTON — The Galveston City Council will consider a resolution Thursday that could threaten the Galveston Housing Authority’s plan to build mixed-income developments on the island.

Council members Elizabeth Beeton and Steve Greenberg are asking the council to consider a resolution that asks the state to suspend tax credits for low-income housing developments for three years.

If tax credits are suspended, the developments, a blend of market rate, tax-credit and public housing units, could be less economically feasible.

But supporters of the proposal said the resolution could not only set back the plan to rebuild some of the 569 public housing units destroyed during Hurricane Ike in 2008 but also stonewall other developers from investing on the island.

Housing Demand

The proposal for the mixed-income development, which would be managed by St. Louis-based McCormack Baron Salazar has drawn criticism, with opponents pointing to Galveston’s already-saturated housing market.

Critics are concerned about 500 rental units planned at Marina Landing Resort apartments, 7302 Heards Lane.

The renovations of the waterfront units are being paid for with $16.5 million in disaster housing recovery tax credits and $10 million in Community Development Block Grants.

More rental units are planned for the Jean Lafitte Hotel, 21st and Church streets. The restoration is funded by $3 million from the sale of historic tax credits, $5 million in Community Development Block grants and a $2.8 million Federal Housing Administration-backed loan from Davis Penn and equity from The ITEX Group.

Tax credits already awarded to those developments would not be affected by the resolution.

Another swell to the island’s housing market, Beeton said, is a federal conversion from the Disaster Housing Assistance Program to the Section 8 housing choice voucher program.

Nearly 1,000 families will continue to receive federal housing help after the change.

“If there’s a demand on the island, then the market will meet that demand,” Beeton said.

“There are new apartment complexes being built in Houston, Austin and elsewhere in the state where there is demand and Galveston is not immune to the free market. If there is a genuine need, then the market will fit.

“We’ve just been subsiding residential construction and our neighborhoods have suffered from it. We need to start using our tax dollars to improve that instead of subsidizing new residential construction.”

‘Threatens Other Development’

The plan for the mixed-income development to rebuild public housing calls for the federal government to fund for the public housing units and McCormack Baron Salazar to finance the market-rate units. The tax-credit units could be funded with either 4 percent or 9 percent tax credits.

But without the city council’s support, receiving tax credits from the state could be difficult for McCormack Baron Salazar. New market tax credits, which could bring in grocery stores and other services to the housing developments, also could be harder to receive.

“It is a resolution that is certainly detrimental to the work that the housing authority is doing to return public housing to Galveston in a progressive, mixed-income development,” said Betty Massey, chairwoman of the housing authority board of commissioners.

“It threatens other potential development in Galveston over the next three years. It’s as though these council members who asked for this item want to hang a sign at the edge of the causeway that says ‘Galveston is not open for business.’”

Divided Council

The council has been divided in support for the mixed-income developments with proponents arguing the development is a way to pull residents out of poverty and opponents arguing the additional units would flush out local apartment and rental owners.

In November, the city council voted 4-3 to release $25 million in federal funds to the housing authority with stipulations that public housing not be built in a mixed-income community and that work start in six months and finish in 19 months.

Council members Beeton, Greenberg, Chris Gonzales and Rusty Legg voted for the agreement change. Mayor Joe Jaworski, council members Linda Colbert and Dianna Puccetti voted against.

Under the Texas Open Meetings Act, the housing authority could not call a public meeting in time for a state deadline to accept the changes to the contract.

The money was returned to the state and about six weeks later approved for direct allocation to the housing authority.

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At A Glance

WHAT: Galveston City Council discussion of resolution to suspend tax credits

WHEN: 4 p.m. Thursday

WHERE: City council chambers, City hall, 823 Rosenberg, in Galveston