Chattanooga Housing Authority's board of commissioners agreed to give a $2.1 million to $2.6 million loan to a development company that wants to renovate Jaycee Towers I.
In exchange for its loan commitment, CHA gets 35 units in the 190-unit, 18-story apartment complex that will become public housing.
"It's a great deal," said Betsy McCright, CHA's executive director.
CHA will get 35 units of public housing at $65,000 to $75,000 per unit. It would cost twice that to build new public housing, said Naveed Minhas, CHA's vice president of development.
CHA's loan commitment will enable Dominium Corp. of Minneapolis, Minn., to apply to the Tennessee Housing Development Agency for tax credit funding. If it is awarded, Dominium will get $15.9 million that will be used for the renovation and acquisition of Jaycee Tower I.
Dominium, a developer of low-income housing tax credit projects, has 23,000 units in its portfolio at 214 sites in 20 states, according to CHA officials.
The site was built in 1974 to serve low-income seniors and is structurally similar to Dogwood Manor, according to CHA's executive summary report.
If all goes as planned, CHA gets more public housing, Dominium gets the tax credit money for renovation and the community gets a renovated building instead of a building in need of repairs, Minhas said.
The tax credit application is due next month. Renovation would begin in 2014 if the application is approved.
Just over a year ago, the CHA was just getting back in good standing with the U.S. Department of Housing and Urban Development after being listed as a troubled housing agency for two years because of financial accountability problems.
McCright said the housing agency now is able to make the loan.
CHA plans to purchase Dogwood Manor from Chattanooga and convert the 136-unit senior high-rise building into public housing.
"We've worked out the financials," she said. "My only concern was if we could commit to doing Dogwood and Jaycee Towers at the same time. We spent many hours running the numbers, and we are financially secure enough to do both projects," McCright said.
The housing authority anticipates closing on the Dogwood acquisition within the next couple of days, Minhas said. After closing, CHA plans to submit an application for 9 percent tax credits to the Tennessee Housing Development Agency on Feb. 1. CHA plans a $4.5 million renovation for Dogwood.