Santa Ana to Ask for HUD Loan to Finish City Jail : Finances: The $13.9-million payment would be reimbursed through future grants that the city receives each year.

Facing the loss of millions of dollars in the county’s investment pool, the City Council on Monday decided to ask the federal government for a $13.9-million loan to help build the new city jail.

The council voted unanimously and without debate to apply to the U.S. Department of Housing and Urban Development for a loan against future HUD grants. Each year, the city receives millions of dollars from HUD, including about $9 million this year. Under the proposal, it would return $2 million of that money each year for nine years to repay the loan.

Police Chief Paul M. Walters said the new jail is urgently needed because the current one only holds 72 people, and is filled to capacity by 6 p.m. each Friday, prompting police to cite and release suspects who otherwise would be jailed.

The $107-million jail is under construction on an eight-acre site near Civic Center and Shelton Street. The project includes a 236,000-square-foot administration building and a four-story jail that will be able to accommodate 420 inmates. It should be completed next year.

The federal loan is needed to “fund the gap created by the county bank pool problem,” Cindy Nelson, executive director of community development, said. “If we don’t receive the loan from the federal government, we’ll have to look at deferring other capital projects in the city so we can finish the police facility. . . . It’s the highest priority capital project in the city and one we feel is necessary to serve the community into the future.”

The exact cost of the federal loan won’t be known until an interest rate is determined.

But Jim Ross, director of public works, said stopping the project would trigger substantial penalty payments to the contractor and other expenses. As a result, the city is expected to save millions of dollars by borrowing money from HUD and repaying it with interest because it would keep the project on schedule, he said.

Repaying the loan with $2 million of the HUD money each year will mean postponing some street renovation projects, Nelson said.

“It’s a challenge. We’ve had better times,” she said.