DVD maker may add jobs, but displace poor

Fifty-one low-income residents of a downtown Spokane building face an uncertain future as a company considers converting the building into a high-tech, environmentally friendly factory.

BlueRay Technologies Inc., of Valencia, Calif., has made a deposit on the three-story Commercial Building, 1115 W. First Ave., as a potential site for a $12 million plant to manufacture next-generation DVDs. But the company hasn’t decided whether to close the deal on the historic building, which sits adjacent to the Otis Hotel in an area of downtown once well-known for prostitution and skid-row housing.

The possibility of displacing residents concerns BlueRay representatives, local government officials and the building’s former owner.

BlueRay wants to do what’s best for the community, and it is trying to determine whether the building’s residents and the planned Blu-ray disc factory can coexist, said Lon Gibby, CEO of Spokane Valley-based Gibby Media Group, which would oversee the plant. BlueRay executives have said the facility could open by late June. “We’re looking into the best way to work with the people, that if we do proceed with that location, we’re concerned about how the people that are there are treated,” Gibby said. “We even thought about keeping them in there. We haven’t decided anything yet.”

If asked to move out of the federal government-subsidized housing, the building’s tenants, many of whom have mental disabilities or drug and alcohol dependency issues, may struggle to find alternate housing, said Steve Cervantes, executive director of Northeast Washington Housing Solutions.

“They come in from a homeless environment with special needs and other issues,” he said. “It’s not only a funding issue; it’s going to be a case-management issue. I hope it doesn’t lead to more mental health issues that are on the street.”

Blue-Ray representatives are working with the U.S. Department of Housing and Urban Development and local officials to address the situation.

Built in 1907, the Commercial formerly was an annex to the Otis Hotel. Single-occupancy rooms, subsidized by the U.S. Department of Housing and Urban Development, fill its second and third floors, and Hope Partners, a nonprofit mental health agency, is on the ground level.

BlueRay’s plans call for a “clean room” and disc-making equipment in the basement and possible facilities on the first floor. That might allow residents to remain upstairs, Gibby said.

The plant might employ 10 to 20 workers at first, and expand to as many as 150. It would run nonstop and is expected to produce 100,000 discs a day at first.

The building was owned until recently by Otis Associates Limited Partnership, headed by Jim Delegans. US Bank foreclosed on the property; through a series of transactions Pacific First West LLC, a newly formed corporation, acquired it last week for at least $1.2 million, county records show.

Another of Delegans’ former projects, the Carlyle Care Center downtown, accrued more than $12 million in debt while caring for people with mental disabilities. The city of Spokane bought that building in November for $3.2 million in an attempt to save it from closing. The Commercial Building was used as collateral for the Carlyle, Delegans said.

Delegans said he recently bid to get the Commercial Building back and wasn’t aware of BlueRay’s plans until informed by The Spokesman-Review.

Gibby said of the building’s availability, “it’s not our fault that it went into foreclosure.” With the renovation of the Fox Theater, the downtown core is changing, and the Commercial likely won’t be the only building to be revamped, he said.

Building resident Ricardo Meza, 49, said he heard through a friend that the building might be sold.

“I do think we’re at risk of losing our houses somehow,” said Meza.

Although residents aren’t allowed to have alcohol, drugs or weapons in their rooms, Meza cracked open a large can of beer as he talked. He said residents there take care of one another even though life can be rough. Several residents have died during the three or four years he’s lived there, he said, including one recently – Roger – whom he considered a friend.

Delegans said he thinks BlueRay has other options.

“I think it’s absolutely wonderful that a company like that would look to Spokane to locate its new facility,” he said. “But I would hope, and I would think, that they could find a much better location than a housing facility or housing district near the downtown core.”

BlueRay representatives have said they were lured to Spokane by its helpful officials, and they may receive business tax breaks. They appreciate the historic look of downtown’s brick buildings and see Spokane as a location to promote U.S. manufacturing.

BlueRay’s plant would be the first U.S.-owned and operated manufacturer of high-definition Blu-ray discs in the nation, and it would be the first to cater to independent filmmakers, the company says. The plant is part of a joint effort between DVD pioneer Erick Hansen and movie producer John Daly to manufacture and distribute the discs.

“I feel this magic, and it’s like it’s fueling us now,” Hansen said in Spokane Valley while visiting last week. BlueRay employees have made dozens of trips to Spokane, and Hansen likes Spokane so much that he’s considering living in the upper floors of the building, should BlueRay buy it, he said.

Spokane Mayor Dennis Hession, who is featured in a BlueRay promotional video, said it was “a challenge for (the company) to locate a building downtown that they could purchase” because people are buying and holding buildings.

“I don’t see a trend in trying to get rid of low-income housing,” Hession said. “It is very important to us that if any of our residents, particularly low-income residents … are displaced, that we do everything from the city’s perspective that they are well cared for and provided with alternative housing in a fair and sensitive way.”

Marty Dickinson, president of Downtown Spokane Partnership, said relocating low-income downtown residents in the process of development is a larger issue that the city is just beginning to address.

“We want companies like BlueRay in downtown, and we want those jobs in downtown, but we are also very much aware of needing to come together on a broader scale,” she said.

Relocating tenants would be time-consuming and difficult, Cervantes said. Residents would need time and transportation to look for comparable units elsewhere in the city. The Commercial, purchased by Otis Associates Limited Partnership in 1993 and opened after renovation in 1994, is unique because it combines low-income housing with social services, Delegans said.

The Commercial’s practices came under HUD scrutiny in 1995, when some people complained its anti-alcohol and anti-drug policies were too strict.

“The results, I think, have been excellent,” Delegans said.

“We’ve been able to take people who do not have a stable living environment and enable them in some cases to go back to school, in some cases to get stable to the point where they could then keep a job, get another apartment or rent a house or buy a house. It’s been a unique program.”

Gibby said ultimately, BlueRay wants to do what’s best for the community.

“It’s not like this is a case of, hey, let’s displace people or something,” Gibby said.

“For anything to get better, it’s like a scab or having a wound that has to be healed. There usually has to be some pain in the process. But if everybody pulls together, it could work.”