Council votes to fund Carlyle

The Spokane City Council on Monday voted to spend part of its community development money to preserve the Carlyle Care Center as affordable housing for as many as 138 residents with severe medical and mental health disabilities.

The council voted 6-1 to spend $3.2 million to purchase a note held by C’est La Vie Inc., of Minneapolis, in lieu of foreclosure on the Carlyle, 206 S. Post St. The purchase price is being discounted $1.5 million by the lender.

Money in the city’s housing rehabilitation accounts would be used to make the purchase. The city would then put the property up for sale to qualified buyers who would have to continue to operate it as affordable housing.

But the city may not have to buy out the note. Carlyle Care Center LLC, the licensee for the facility, is seeking private financing to buy out the note at its current value and stop the foreclosure, said Jim Delegans, manager of the LLC.

Either way, the seven-story former hotel would continue to operate as a facility for people with severe mental and medical problems. If the Carlyle were to close, its residents likely would disperse to more costly treatment facilities, including Eastern State Hospital at Medical Lake. Some could become homeless. Currently, the Carlyle has 117 residents and a staff of about 40 caregivers.

Council President Joe Shogan said the city’s willingness to preserve the facility is one of the “highest actions” government officials can take.

He was echoed by Councilman Al French, who said, “There’s a humanistic aspect of this endeavor. I don’t think you can ignore that.”

The city also would preserve a $950,000 federal housing grant, which was part of the original $12.6 million package that went into the Carlyle Care Center. The grant requires the city to maintain about 50 units of affordable housing at the Carlyle or other locations. If the city fails to meet that obligation, it would be liable to repay the grant, city officials said.

Councilman Brad Stark, who cast the no vote, said he opposed spending $3.2 million to chase after a $950,000 grant. He also said it is the state’s obligation – not the city’s – to care for mental health patients. Stark warned that the Carlyle could fall into financial trouble again in two to five years.

But Delegans said that won’t happen because either through foreclosure or a direct buyout, the Carlyle will emerge with less debt and become a financially feasible project. Also, Delegans said he is in negotiations to improve public reimbursement rates for mental health care at the center.

Delegans and his wife, Fay, redeveloped the 1893 Carlyle by arranging a package of public and private investments. Health Dimensions Group manages the facility under the Carlyle Care Center LLC’s license.

C’est La Vie, a subsidiary of U.S. Bank, is the first lien holder on the project. The city and U.S. Bank are junior lien holders. In addition to the $4.7 million note, U.S. Bank has at least $4 million in additional money that would be lost in the foreclosure or refinancing, officials said.

Foreclosure is scheduled for Monday. An appraisal showed a minimum value of $3.2 million, city officials said.

In a letter to county mental health officials last year, Delegans said the building needed to earn an additional $25,000 to $30,000 a month through higher reimbursements to remain viable. Last year, the Hilltop Center closed its 21 beds, saying the county’s reimbursements were insufficient.