Plan to turn former Spa City school into housing advances

HOT SPRINGS — The Hot Springs Housing Authority board of commissioners authorized the agency to negotiate with the Florida developer that presented a plan last month to convert the abandoned old East Side School into affordable housing.

The enabling resolution commissioners adopted earlier this month allowed Executive Director Nadine Jarmon to start discussions with Smith & Henzy Advisory Group, the only developer that responded to the request for proposals the housing authority issued this summer.

Jarmon told the board earlier this year that she worked with the company when she ran the housing authority in Deerfield Beach, Fla. The board hired her to head the Hot Springs agency last fall.

The 109 Oklahoma St. property has been vacant since the Hot Springs School District donated it in 2017. According to the deed, the donation was conditioned on the property being used for “educational opportunities, social enrichment programs or after school programs for the housing resident population” of the city.

The deed returned ownership to the school district if the property wasn’t being used for those purposes within five years of the donation, but the housing authority still owns it more than six years after the deed was recorded.

Jarmon told commissioners that squatters and illegal dumping have made the property more of a liability than an asset. Returning it was one of the options she presented earlier this month.

“We’ve had it this long,” she said. “I do not think [the district] is jumping up and down to get it back.”

Jarmon noted previous redevelopment plans were never realized. The city of Hot Springs considered it as a location for its community resource center for homeless and indigent people but said renovating the building was cost-prohibitive.

She recommended exploring a development agreement with Smith & Henzy.

“I personally think this is the best option,” she told the board.

The board also authorized a solicitation for an attorney to negotiate an agreement with the developer. Several commissioners have said the board entered into the limited partnership that converted all of the city’s public housing stock to project-based Section 8 housing without understanding the full implications of the transaction.

Jarmon said the housing authority would be responsible for attorney costs during the negotiation, but subsequent legal fees could be included in the project cost if an agreement were reached.

“Most development attorneys make their cost part of the project, which means that we would have minimum upfront costs, probably $5,000 to $10,000, to get a development agreement down,” she told the board. “Once you sign it, everything then becomes project costs.”

She said Low Income Housing Tax Credits would likely be used to provide equity for the project. Developers apply to the Arkansas Development Finance Authority for the credits and sell them to investors seeking to offset federal tax liabilities. The proceeds reduce the developer’s investment and make rents more affordable.

Four percent tax credits were used for the Rental Assistance Demonstration project that converted the city’s public housing stock to the Section 8 program. The state said the credits provided more than $19 million in equity.

According to the tax credit application the state provided in response to a records request, a syndicate managed by Royal Bank of Canada agreed to pay $1.06 for every dollar of tax benefits the credits provided.