After announcing a $4.5 million shortfall earlier this year, Chattanooga Housing Authority officials say they’ve had a positive cash flow since late summer.

And with that news, officials with the Mayfair on Market downtown condo project, still owed about $1.2 million misappropriated by the housing authority, say they’d like to get paid.

“We have about $697,000 in the general fund. That’s a $385,000 increase in the amount from last month,” interim Chief Financial Officer John Coxwell said this month while reporting on the housing authority’s budget at its October board meeting.

As of Aug. 31, the housing authority had $327,703 in available cash, and that more than doubled to $772,097 by the end of September, Mr. Coxwell said. The $772,097 includes $697,000 in the general fund and all other operating bank accounts, housing officials said.

During the shortfall, the housing authority used money for Mayfair on Market to pay employee-related expenses. The money, from mortgage lender Fannie Mae, was to be used only for the condo project, and Mayfair officials want the money back.

“I would like to have been paid over a year ago, but that didn’t happen,” said Trey Stanley of Trafalgar Development Corp., one of the developers of Mayfair on Market in the 700 block of Market Street.

Housing officials said they can’t repay developers of Mayfair with the newly acquired cash because, under regulations from the U.S. Department of Housing and Urban Development, the money must be used for housing authority operations.

“Those funds are restricted,” said Bill Lord, chief information officer for the Chattanooga Housing Authority. “We can’t use any restricted funds toward the investment in Mayfair or for any other non-HUD-approved expenditures.”

In August 2007, the housing authority borrowed $3.65 million from Fannie Mae for Mayfair, becoming a key investor. With the housing authority’s involvement, 18 of the planned 58 downtown condo units would be earmarked for more affordably priced units starting at $150,000 and up.

Over the summer, HUD spent several weeks investigating the Chattanooga Housing Authority’s finances to determine how the shortfall happened and what the authority could do to relieve it. One of HUD’s recommendations was for the authority to immediately begin negotiations with Fannie Mae to work out a resolution to the Mayfair on Market loan default.

The housing authority is trying to sell various pieces of property to help pay the money back. So far the authority’s building on Grove Street is the only one that has sold, going for $360,000.

Housing authority officials said they used that money to pay other past expenses but not the Mayfair on Market project.