Unique Housing Project’s Cost Rises : Pacoima: Price of low-income apartments for mentally disabled is adjusted to $5.6 million, 30% higher than had been estimated.

A unique low-income apartment building for the mentally disabled in Pacoima will cost 30% more than anticipated because of increased construction costs and financing fees, causing concern Friday among Los Angeles officials who agreed to help to bankroll the project.

The nearly completed 50-unit Hillview Village project on Van Nuys Boulevard will cost a total of $5.6 million--or $112,000 per unit--up from the original estimate of $4.3 million two years ago, city officials said Friday.

“This is way higher than normal,” said Barbara Ziedman, the city’s housing director. “We just didn’t do a good job initially estimating the cost.”

Although city officials concede oversights in financing the project, they say it is too late to back out of the venture. “We are already so deep in it to let it die,” Ziedman said.

City Councilman Richard Alarcon, who represents the Pacoima area, said he is not happy with the increased costs but agreed that it is too late to end the city’s participation. “It’s not the way I would have done this housing,” he said.

The council voted unanimously Friday to waive $409,000 in interest on one of two city loans totaling about $3 million to the Valley Housing Foundation, a nonprofit developer that is building the project. The council also agreed to increase the amount of one loan by $131,000 to help pay for the mounting costs.

When the project is completed by the end of October, it will provide 50 small apartments--ranging from 280 square feet for a single with a bathroom and use of a community kitchen, to 550 square feet for a one-bedroom unit with its own kitchen. The rents will be low, ranging from about $266 to $351 per month.

Residents of the complex, on a hill near the intersection of Van Nuys and Foothill boulevards, will have access to counseling, medication, assistance with day-to-day living and other help--a combination found nowhere else in the San Fernando Valley.

The counseling will be provided by staff from the private Hillview Mental Health Center in Lake View Terrace, one of the partners in the project.

Part of the reason for the increased cost is that the project is to be partially funded through a state program that issues tax credits to developers of low-income housing, which then may in turn sell to investors. To participate in the program, the developer must pay fees to consultants, lawyers and others.

According to a city report, the project was estimated to cost $4.3 million in February, 1992, when the city approved a $816,000 loan for the developer to buy the property. Later, that loan was increased to $1.57 million to cover expected construction costs. A second loan for $1.5 million was approved when the state turned down a request to help back the project.

But that was not the end of it. In March, 1993, after building had started, city housing officials reported that the developer faced unforeseen construction costs of $100,000. On Friday, housing officials said the cost had increased by yet another $1.2 million, partly to provide reserves in case federal housing funds are not available to finance the project in the future.

Also increasing costs were fees to consultants who drafted proposals to gain participation in the state tax credit program. Then there was the $409,000 in interest on the $1.5-million city loan, which the council agreed to waive.

In the end, the city will only lose a maximum of $409,000--in interest it waived--because the developer is expected to pay for most of the increased costs through the sale of tax credits to investors, according to a city report.