After more than four years of delay, Sacramento city officials and developers appear to have a financing plan in place for a pivotal housing and retail project on downtown’s blighted 700 block of K Street.
If the plan is approved by the City Council next week, the development team behind the proposal said it expects to begin construction on the $52 million project early next year.
State and city officials settled a lawsuit this summer that allowed for redevelopment properties on the block to be transferred to CFY Development and D&S Development. That transfer had been blocked for months after the state’s Department of Finance determined the city and the developers had not agreed to a financing plan for the project before the state closed down redevelopment agencies in 2011.
The lawsuit settlement required the city to forgo $2.6 million in redevelopment subsidies it had approved for the project. That shortfall, combined with an increase in construction costs, left the project with a financing gap of nearly $7 million, according to city officials.
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The city is proposing to contribute $2.1 million toward the shortfall, most of it from property tax dollars that had previously gone to redevelopment agencies. The developers will make up the difference and are contributing roughly $40 million of the project’s total cost. Most of the public’s total contribution of nearly $13 million is coming from affordable housing subsidies.
“We’ve come a long way in the last year, and we’re excited to have a deal in place that should enable us to start construction in early 2015,” said Ali Youssefi of CFY Development.
Leslie Fritzsche, a senior project manager with the city’s economic development department, said construction permits for the project have been approved.
The 700 block of K Street is widely viewed as one of the most vital redevelopment projects in downtown. The block has stood mostly vacant for years and borders the site of a new Sacramento Kings arena under construction.
The city spent years – and millions of dollars – acquiring properties on both the 700 and 800 blocks of K Street in hopes of redeveloping the area. CFY and D&S were granted control of the 700 block in 2010. A separate plan for the 800 block has stalled.
“Our development team has been 100 percent committed to the 700 block for nearly four years now, so we are excited, to say the least, that it appears to finally be coming together,” said Bay Miry of D&S. “The project is a unique, mixed-use, mixed-income development that emphasizes local businesses and quality, amenity-rich housing.”
The developers plan to construct 137 affordable and market-rate housing units on top of a row of stores, restaurants and a music club. The plan also calls for the preservation of several historic buildings on the block.
“(The block) is a critical piece to the puzzle,” Youssefi said. “It is one of the central city’s most underutilized properties, and it is at the doorstep of the new (arena). This development will bring much-needed housing to K Street, along with an exciting mix of restaurant and retail space within existing structures.”