A local workforce housing project that appeared to be a deal already struck late last year has been scrapped, as Santa Clarita City Hall officials said earlier this week that changes in the bond market made it more feasible.
The project, which had been a topic of discussion and a handful of City Council action items over the past year, would have resulted in the city’s purchase of the 264-unit Skycrest apartment complex on McBean Parkway and the transition of residences to rental-controlled housing for income-eligible residents.
The city has defined income-eligible households between 80% and 120% of Santa Clarita’s median income of $80,000 per year, with rent levels specific to each resident and placed on a sliding scale based on said area median income. . The regulatory agreement on the project would also have limited annual rent increases to 4%, prevented the displacement of current tenants who do not meet the requirement, and given preference to professionals working in Santa Clarita, residents with a local school, first responders, teachers and medical professionals.
The deal was reportedly made possible by the purchase of $164 million in government revenue bonds, which city staff initially reported as having a 35-year repayment period. However, the recent surge in inflation – the rate reached 7.5% in January, its highest level in four decades – which was then reflected in the bond market, led to the cancellation of the contract of the program.
“Bonds and funding for this project are not moving forward,” City Manager Ken Striplin announced at the Santa Clarita City Council meeting Tuesday night. “The bond market has changed and it’s no longer financially feasible.”
The decision was met with cheers from some members of the public who were present at the meeting and opposed to the project. In a particularly heated speech, one of those critics of the plan, Steve Petzold, said that the deal had not been properly reviewed and that the cost of the bonds and their actual maturity period were longer than what which had been previously announced.
“Nobody followed up, and then it comes down to why nobody saved the right proper document,” Petzold said in a public comment. “Someone needed to follow up on that. I did. It was a 40-year bond, it was very expensive and you had no reason to approve of it.
However, while reporting that the project was not moving forward, Striplin disputed claims made by Petzold at the meeting, saying that the original deal, if completed, would have been good for the city in terms of increase in the amount of affordable premises. housing while providing the city with a future asset on the road.
“It’s an investment in affordable housing. It’s a significant investment in a future asset,” Striplin said. “That being said, again, this deal is not moving forward because of the bond market and is no longer financially feasible.”
Striplin also said a key reason the deal was pulled was that the city was actually doing its due diligence and the city’s analysis showed the numbers were no longer favorable given the recent economic trends.