Council appears headed for pause on HealthSouth redevelopment plans

Members of City Council suggested Tuesday they’re inclined to hold off on selecting any redevelopment plans for the former HealthSouth site, in part because of the current real estate pipeline in the surrounding area and continued high interest rates that make new projects difficult for developers.

Tuesday’s work session included a presentation on the four development scenarios assembled by the Housing Department and the Economic & Planning Systems consulting firm. Those four options are centered on Council prioritizing the creation of affordable housing on-site and off-site while also incorporating factors such as Capitol View Corridor restrictions and incentives such as the Downtown Density Bonus Program.

After a detailed explanation of the four scenarios, Mandy DeMayo, director of the Housing Department, said city staff expects the improvement of lending conditions and more certainty about other projects planned for the area, contributing to the belief that the redevelopment should be put on hold until at least this summer.

“We have about 14 acres vacant to the north of us owned by Central Health and we are awaiting some redevelopment decisions by the Central Health board. We also have some property that is developing adjacent to this property, a hotel at the … northeast corner of 12th and Red River, and then we have market considerations and market realities that we want to take a deeper dive into,” DeMayo said. “Our recommendation at this point is to pause and take this up again summer or fall when we have a better idea of both the budget for FY 25 as well as some of the ongoing market conditions that we are contemplating.”

Darin Smith, a principal with EPS, explained that the first “hybrid” scenario was the most complex of the four options and would provide the most on-site affordability but would also require an upfront $17 million subsidy from the city. The other scenarios would bring both more total units to the site at market rate prices and provide long-term tax revenue the city could use to fund several hundred affordable housing units elsewhere in the city.

DeMayo added the caution that the hybrid scenario would need to wait until at least 2028 to move forward because of solicitation requirements and the time needed to assemble financing for the project. She also said any off-site units projected from the other three scenarios would likely take 10 to 20 years to materialize because they would require the city to gradually leverage tax revenue and ground lease income from the site.

Council members expressed a variety of thoughts on the potential for the site, with Council Member Zo Qadri asking DeMayo to forecast the financial models for adding community benefits such as a day care center and creative space businesses in addition to affordable housing.

Council Member Ryan Alter suggested a variety of alternative options for a “payment in lieu of taxes” model in which the city could partner with another entity such as Central Health to exchange their taxing authority potential revenue for affordable housing units. Alter also noted that the $17 million subsidy required for the hybrid scenario would take city money away from other affordability efforts.

“You mentioned in your memo that this project would also require tax credits, which means a project that would have otherwise received tax credits,” he said. “Tax credits are a finite pool, so someone else is not getting those tax credits. And so while we might be bringing that 445 units to market here, we are taking hundreds of units away somewhere else.”

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Posted In: Planning, District 9