East Lansing was awarded a $1.5 million Community Development Block Grant, or CDBG, loan guarantee on Wednesday to redevelop the 600 block of Virginia Avenue.
The loan guarantee means that the U.S. Department of Urban and Housing Development, or HUD, will act like a co-signer on a loan from a private investor to East Lansing, said Brian Sullivan, a spokesman for HUD.
This allows a city to get a better interest rate for projects that are often high risk because the city guarantees its future community development funding to repay the loan, Sullivan said.
"It makes it a risk-free proposition for the lender," Sullivan said.
The Virginia redevelopment idea has been in the works for some time, but the city was waiting on approval of the loan to move forward with the plan that would replace the current property on Virginia Avenue with new townhouses, condominiums and single family homes, said East Lansing City Manager Ted Staton.
The Virginia area is attractive to new homes and homeowners because of its close proximity to local schools, Staton said.
He said some of the new developments would be geared specifically toward moderate income families.
Since the guarantee has been established, East Lansing Mayor Sam Singh said the redevelopment process could move forward pretty quickly.
"Now that the loan is there the work becomes much more real," Singh said.
The city has to buy the property from its current owners before it can begin to hear proposals from developers, Staton said.
He said the city will not use eminent domain in order to secure any of the property.
"It's our hope that we can acquire all of the properties," Staton said. "If we can't we will redevelop what we can."
Federal regulations make the process of finalizing the loan and purchasing the properties very complex, Staton said.
He said the city is hoping to have the property acquired by the end of this year or early next, so the city can begin to focus on redevelopment plans.
The city has already been guaranteed about $600,000 this year to use for community development, Staton said.
While Staton said this money is put to good use, it is not enough to do a big project, like the Virginia redevelopment.
Instead, the city can use the loan guarantee process to secure larger amounts of money which the city can repay later using its future block grant funding.
In this case, the city will repay the money over the course of 20 years — long enough that it will not require the city to pledge all of its yearly block grant money in repaying the debt.
U.S. Rep. Mike Rogers, R- Brighton, announced the loan guarantee Wednesday.
"For the city of East Lansing and its residents, this is a major step toward meeting housing needs for the families who chose to live, work and raise their families in a vibrant, growing community," Rogers said in a press release.
Staton said the city is grateful for the work of Rogers, as well as Michigan senators Debbie Stabenow and Carl Levin for their roles as advocates in Washington for the city.
