Eugene closes downtown housing project’s funding gap

The downtown Eugene mixed-income housing project at 1059 Willamette Street will get more than $8.6 million in urban renewal funds, closing a funding gap that had put the project at risk.

The city is working with deChase Miksis and Edlen & Company to redevelop the site of the former Lane Community College downtown center into a 133-unit housing project. City councilors agreed to close the project’s funding gap on Monday, June 22, unanimously voting to approve urban renewal funds to help cover construction costs and attract private investors. 

“That is a big gap,” Economic Development Manager Anne Fifield said.

The council gave developers more time to secure financing in January, after putting in roughly $1.8 million in urban renewal funding in 2024. 

But high interest rates, rising construction costs and limited returns for investors ultimately left the project unable to attract enough private financing, prompting developers’ request for more urban renewal funding, Fifield said. The cost to build the project, $38.7 million, is over 10% more than its appraised value, she said. 

“This project needs more public investment for it to move forward,” Fifeld said. 

Developers can’t charge much higher rents because of affordability requirements and other conditions attached to the funding. About half of the project’s units are for households earning up to 80 percent of the area median income, about $63,000 for a two-person home. 

Councilors agreed on Monday that the project was worth the investment. Had they not, the project would be scratched, and the city would need to find a new developer, who would likely face the same financing challenges. 

“I hate spending more money, like everybody does, and I hate seeing the starting date pushed back even further, but at the same time, that’s the cost of doing business these days,” said Councilor Randy Groves. “This isn’t going to get built on its own.”

1059 Willamette falls within the downtown Urban Renewal District, where the city’s Urban Renewal Agency can use future growth in property tax revenue to finance redevelopment projects. 

The 1059 Willamette project has consumed over $8 million from the downtown renewal district’s remaining spending capacity, reducing the amount available for future downtown projects from about $29.3 million to about $20.7 million. 

When the city councilors, which govern the Urban Renewal Agency, last discussed the project in January, the total project cost was about $33 million, with an estimated funding gap of between $1 and $3 million. 

But with more public funding, the project applies for prevailing wage law, which mandates certain pay and benefit standards for construction workers on publicly funded projects. That made the funding gap grow to $8.6 million. 

The total public contribution from the city and urban renewal agency is now $10.5 million. It will be fully electric, and has 10 units reserved for survivors of domestic violence through a partnership with the Hope & Safety Alliance. There are also plans for an “active ground floor” with “incubator retail space” and local art.

“If we want affordable housing, we need to pay for it,” said Councilor Alan Zelenka.

Councilor Eliza Kashinsky, who represents Ward 1, which encompasses downtown, was one of the few councilors to raise eyebrows at the project’s “substantial increase” in taxpayer investment. 

She asked if the city could get developers to extend the window of time in which they commit to offering subsidized rents, currently 35 years. 

By that time, the building’s wear-and-tear will bring down rents anyway, Fifield responded. 

“It’s very likely that this building will be offering more affordable rents to the middle of the market in 2060 just by virtue of its age,” she responded. 

That didn’t entirely alleviate Kashinsky’s concerns. 

“I feel like this pilot ended up being substantially more expensive and substantially less able to move forward than I think we had hoped,” she said. “That’s going to come up if we are proposing or looking at similar projects in the future.”

The city-owned building has been vacant since 2013. The development is on track to break ground in August. Councilors on Monday extended developers’ closing deadline to early October as a cushion. 

“We’ll be working diligently with the development team to complete the final pieces needed to close on the deal and start construction as soon as feasible,” said Development Programs Manager Amanda D’Souza.