COSTA MESA : SRO Hotel Finance Arrangements OKd

Last-minute financing arrangements for the county’s first single-room-occupancy hotel were approved Monday night by the City Council, despite some members’ concerns that the project may be in jeopardy.

In a 4-0 vote, with Councilman Peter F. Buffa abstaining, the council agreed to allow the bank that is financing the project, not the city, to get first chance at all the assets if developers Butler-O’Bryon Associates default on their loans. The council also approved final management plans for converting the Travelodge Motel at 2450 Newport Blvd. to the single-room occupancy, or SRO, hotel.

City Manager Allan L. Roeder said officials in the redevelopment department anticipated the financing request and were comfortable with it, adding that the city would be able to recoup its losses if the project failed.

But despite the reassurances, the action made some council members nervous.

Saying he feared the city might be “throwing money down the drain,” Councilman Joe Erickson asked the developers to assure him that the project was going to be finished. “My concern is that the city has much more invested than the developer,” Erickson said.

Merrill Butler of Butler-O’Bryon Associates told the council that the company had invested thousands of dollars developing the low-rent hotel and was just weeks from beginning work.

“We have had some extreme difficulties with the sellers of the project,” said Butler. “I think we are just about there.”

Costa Mesa Village, a 96-unit SRO, is designed to provide housing for the working poor and is the first of its kind in Orange County. Anyone who earns less than $18,450 a year is eligible for the rental units, which are like tiny furnished apartments. The units are expected to be rented for $460 a month.

Last year, the city agreed to help finance the SRO by lending the developers $500,000. The Board of Supervisors added a $1.7-million loan, a portion of which went to Costa Mesa to help fund the project.

During the last few years, the project has had several delays, which has caused some impatience on the part of the City Council. In order to speed up the process, the council on Monday gave the developers 30 days to obtain financing.