Schenectady County

Demo loan to Schenectady has strings attached

Knocking down blight in Schenectady just got harder.

Knocking down blight in Schenectady just got harder.

The vaunted $3 million HUD loan slated for city this year is coming with a tangle of requirements that took city officials by surprise.

“This is just off the wall,” said Director of Development Richard Purga.

The city can only demolish properties with the HUD money if it acquires them after it gets the loan. Any properties it has already taken through foreclosure and abandonment are not eligible for HUD-funded demolitions, Purga said.

City officials couldn’t understand it when they heard about the restriction.

“It sounds kind of crazy to me,” said Director of Operations William Winkler. “What is the purpose?”

Luckily, the rule won’t affect the two biggest projects that involve demolition.

The eight properties that have already been acquired on Eastern Avenue for a major blight-removal program will be demolished with other funds, said Metroplex Development Authority Chairman Ray Gillen.

Also, because of a mistake, the city’s foreclosures were delayed this year, including properties it was trying to get so that it could demolish them with the loan funds. The city can delay those foreclosures until it gets the loan, officials said.

But that’s not the only rule HUD has for the loan. The city is also limited in what it can do with the properties after it demolishes the houses, Purga said.

The city can only sell the land to those of low or moderate income, he said. If the land is turned into a community garden, as has been suggested for some parcels, Purga said, the city would have to enter into an agreement with a nonprofit that would guarantee users would be of low or moderate income.

Likewise, the city could create a park — but only in the 70 percent of the city that is considered to have many low- or moderate-income residents, Purga said.

He sighed.

“So that’s where we are,” he said, adding that the loan will still be put to good use. The city has no shortage of blighted properties, and can carefully pick locations with uses that meet the requirements, he said. There are 78 privately owned buildings on the city’s demolition list now.

“It’s all good,” Purga said.

There’s enough money to demolish 50 buildings, plus the cost to acquire them, he said. That’s far fewer than the previous estimate of 80 demolitions, when the city was assuming it would pay for the cost of acquisition.

The city has not yet received the loan documents from HUD, so city officials don’t yet know the interest rate. That also means they haven’t signed the loan yet, but officials said they had not discussed backing out.

The question now is how the city will demolish the 65 properties that it already owns and has decided are too far gone to save. They are mainly old residences, long abandoned by their owners, as well as commercial buildings that have been vacant for years and burned-out structures. The city mainly took them through foreclosure when the owners stopped paying their taxes.

The City Council could vote to spend Community Development Block Grant funds on those demolitions, Purga said.

CDBG allows demolitions for city-owned properties, he said.

That has not been proposed for this year’s CDBG budget, but the council will not vote on that budget until May 12. Purga said it could also be added to next year’s proposed budget.

Other than CDBG, he said there weren’t any funds he knew of that could be used for demolition of city-owned properties.

“In general, it’s very difficult to get money for demolition. And that’s one of our greatest needs,” he said.

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