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Homeless shelter owner seeking $21 million loan to avoid delays

Homeless shelter owner seeking $21 million loan to avoid delays

(Courtesy of Home4Change)



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SALT LAKE CITY — The nonprofit that owns the three future Utah homeless resource centers has become so strapped for cash it's now facing a $13 million past-due bill to pay for construction — and it's turning to Salt Lake County for help.

The nonprofit, Shelter the Homeless, already has early backing from county leaders. But first, it needs to get financial approval for the bridge loan, which could take weeks.

In the meantime, the South Salt Lake homeless center still under construction could face even more delays as Shelter the Homeless struggles to pay its bills. After multiple other delays, the center now isn't slated to open until October.

What led up to the budget shortfall? Preston Cochrane, Shelter the Homeless' executive director, told KSL.com on Thursday a combination of problems have contributed, from increased construction labor costs to a difficulty raising enough donations for the buildings.

"A lot of funders want to fund the operations and not the brick-and-mortar, and so that's what's led us to seek alternative financing to make sure we can finish these projects," Cochrane said.

News of the budget shortfall broke late Wednesday night, after South Salt Lake Mayor Cherie Wood (a member of Shelter the Homeless' board) circulated a letter from board member Lt. Gov. Spencer Cox calling on the board to quickly confront the funding issue and produce the needed financial documents so Salt Lake County could move forward with the bridge loan.

The Salt Lake County Council discussed Shelter the Homeless' $21 million loan request July 16 and approved a resolution declaring official intent to reimburse expenditures to its general fund or other county funds for the financing of the shelters — but hinged it on the requirement that Shelter the Homeless enter into a contract with the county to repay the $21 million, which would be financed through a sales tax bond.

"Salt Lake County will not provide funding to Shelter the Homeless until a contract between Shelter the Homeless and Salt Lake County is in place that requires them to make all annual bond payments until the bond is retired at no cost to the Salt Lake County taxpayer," Salt Lake County Deputy Mayor Erin Litvack said.

Litvack said the budget for the three homeless centers was originally $52 million but has increased to about $64 million due to rising construction costs related to "steel tariffs, increased labor costs, a long, wet winter and spring building season" and some slight changes to the buildings. Those included adding elevators for ADA access, and off-site improvements to the street, gutters and fencing for the South Salt Lake shelter, among other changes, Cochrane said.

State leaders allocated more than $16 million for the construction of the shelters — but that funding has only accounted for 27% of the projects' costs, Cochrane said. So far, Shelter the Homeless has only raised about 70% of the total capital for construction, he said.

Councilman Steve DeBry, indicating he initially had some "concerns" with the bridge loan, proposed legislative intent language stating that county leaders and staff will "perform all necessary due diligence" regarding the costs of the shelters and create a contract to hold Shelter the Homeless accountable for the cost of the bond.

"I just want some fail-safe to make sure that our taxpayers are OK with it and they're not left on the hook," DeBry said.

Councilwoman Aimee Winder Newton said she was "struck" by "how lucky we are to live in a community with so many generous people," and she had "no doubt that the board will be able to fundraise and be able to meet this obligation."

Councilman Jim Bradley said the council should support the bridge loan after county, city and state leaders have spent three years working toward the completion of the three new homeless resource centers that are meant to replace the downtown shelter and overhaul the state's homeless system.

"We have to be realists. We're not going to stop the boat from sailing. It's on," Bradley said. "We have an obligation, we've set course, and we're going to finish it."

The County Council voted to approve the resolution and its legislative intent.

But Shelter the Homeless still has a significant hurdle to cross to get the money.

Dina Blaes, associate deputy mayor in Salt Lake County Mayor Jenny Wilson's financial administration, said as of Thursday the county hadn't yet received all of the financial documents needed to complete the due diligence required for the bridge loan.

"But we're working closely with Shelter the Homeless staff, and they've been great about getting documentation to us," Blaes said.

Cochrane said he hopes the documentation will be sent to Salt Lake County "as soon as possible" in order to put the loan before the County Council for final consideration within the next two weeks.

"We're confident that we'll be able to get that approval," Cochrane said.

But will Shelter the Homeless be able to repay the loan?

"We're actively pursuing fundraising to close the gap on construction," Cochrane said, adding that he's confident Shelter the Homeless will eventually raise enough.

"It's a big heavy lift for this type of project, and we're reaching out to as many donors as we know," he said.

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Katie McKellar

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