Downtowner Updater 

By the beginning of next year, the Downtowner Motel, Eureka's polarizing icon of political favoritism, economic melancholy and neighborhood infertility, could be on its way to a revitalization.

Of course, talk of rehabbing the neglected edifice has been bandied about for years — but this time, say pending property owner Danco and the city of Eureka, something could really happen.

That something is a proposed senior living center, consisting of 50 units to house low-income residents.

To fund the project, Eureka and Danco have applied for millions in taxpayer money and tax credits.

Danco is well-experienced in these kinds of projects, having secured funding and built similar communities in Arcata and Fortuna, as well as cities around the state. Danco's website lists 15 "communities" funded by tax credits and federal, state and local government grants that serve senior and low-income residents.

First, a little background: The Downtowner has been abandoned for more than a decade, slowly becoming more and more boarded up and run-down. Kevin McKenny, a developer who owns multiple properties and investments around the county, acquired the property in 2005, and told the Journal in 2010 he was planning to turn the Downtowner into a "nice" hotel before the economy tanked and investors pulled out.

For years, the property went on and off city nuisance lists, without much in the way of material action to get the property razed or rebuilt. The Downtowner sat fallow, much to the consternation of nearby residents who complained about the negative effects to the neighborhood.

The blight of the Downtowner again became a hot topic early this year, when 4th District Supervisor Virginia Bass, who represents Eureka and surroundings, announced she would appoint McKenny to the county planning commission, a move that angered people who blamed the languishing Downtowner on McKenny's inactivity and disinterest in the neighborhood (and who see a recurring theme of political favoritism directed at the developer community). That became a political football when Chris Kerrigan announced he would challenge Bass in this year's election. Defending her appointment, Bass assured the public in February that if McKenny didn't show impetus to revive the Downtowner within six months, she would ask him to step down. Bass beat Kerrigan in June, and Downtowner chatter died to a whisper.

Meanwhile, quietly, Danco and McKenny were arranging a purchase agreement in which the development company would buy the property and pay McKenny $170,000 for design, demolition and abatement work already conducted there.

This agreement, signed in June, is contingent on the approval of a city of Eureka application for state funding. Everyone's waiting to hear what the state will say about the city's application for $3.7 million — money that the state would award to the city, and the city would in turn loan to Danco. The city's chief building official Brian Gerving thinks Eureka has a decent chance, as it's been awarded state HOME funding for similar projects in the past. He said the city has been communicating frequently with the state and getting "more and more hopeful" that they'll receive approval at the end of the year. Half of the total HOME funding allotted this year — an amount that hasn't been fully calculated yet — is awarded to rural areas, which includes Eureka. The city's application gained enough points to pass the initial review stage, and is now under feasibility review by the state Department of Housing and Community Development.

Another large chunk of income necessary to complete the Downtowner remodel is nearly $3 million worth of housing tax credits requested by the Danco group. The credit program is designed to incentivize development of affordable rental housing. If the plans qualify, Danco could sell the credits to investors to finance the project. The credits require 10 years of compliance with state guidelines.

Danco is also seeking a private loan — Chris Dart, the company's vice president of operations, says that's pretty much a given if the state funding comes through — and will receive nearly $1 million in Eureka "program income." That money, Gerving explains, is interest earned from previous loans of state HOME funds. A stipulation of state approval of this project is that the city exhaust the earnings from loans being paid back from previous developments — an amount that Gerving says is in the high-$900,000 range.

Dart says these types of private-public partnerships are good for residents, ultimately, because they hold developers to a higher standard of building and maintenance. "One of the good things about the structure is we are motivated to keep [the building] intact and keep it filled up," he says.

And he says Danco is committed to the project — if HOME grant funding falls through, they have backup plans. "We would apply again in March for a different set of grants," he says, and "continue to do that until we're successful."

Dart says Danco began applying for funding for Yarrow Village, a senior housing project in Fortuna, in 2008, and closed financing just this November. "It's a long process."

Danco has sketches of the Lodge at Eureka's floor plans, which the city's design review commission has approved (you can follow a link to the company's presentation to the commission at www.northcoastjournal.com). Actual building blueprints will take approximately six months post-funding approval, Dart says.

If funding comes together, Gerving says, Danco will be on the city's fast-track to get final construction documents in to the city.

Linda Mitchell, a neighbor of the Downtowner who shared her concerns about blight with the Journal back in 2011, said not much has changed, practically speaking. Graffiti and vandalism pop up, but someone comes by once in a while to clean up and cut the grass. "As long as it's empty it's going to be a problem," she said. But she's happy to hear that the city and Danco are finally moving forward with a project. "We're just really happy that McKenny's finally letting it go. Because he hasn't done anything for a decade."