Homeless shelter deal falls through

BY PRU SOWERS

KONK LIFE STAFF WRITER

When the Southernmost Homeless Assistant League (SHAL) came forward last October offering to not only continue managing the city’s homeless shelter but pay to build a required new one, it seemed almost too good to be true. But as Key West City Commissioners found out April 4, it was.

Directed last October to bring a formal proposal and budget to commissioners, SHAL struggled for months to put together a design for the new Keys Overnight Temporary Shelter (KOTS) on Stock Island and an accurate cost estimate. But when the proposed deal was submitted to city officials recently, it was about $300,000 higher than SHAL Executive Director John Miller had told commissioners back in October. In addition, it required the city to co-sign a $1.1 million bank loan to SHAL to build the new shelter.

The loan requirement was a deal breaker, according to Key West City Manager Jim Scholl. Under city regulations, it cannot provide loan collateral for an outside agency without a voter referendum and other required legal approvals.

“We just don’t have the ability as a municipal entity to do that,” Scholl told commissioners at their April 4 meeting.

Without the city’s participation, SHAL is unable to secure a bank loan, putting the responsibility for building a new shelter squarely back in the city’s court, something it had hoped it could avoid. Previous estimates on the cost hovered around $1.2 million and there had been no consensus on where that money would come from. Because of a 2013 lawsuit filed by next-door Sunset Marina condominium owners, Key West must move KOTS from its current location on College Road next to the Monroe County Sheriff’s Department. The new location will be just down the street in the city-owned former Easter Seals building.

SHAL’s Miller initially told commissioners his organization could build the shelter for $92,000. In return, he proposed, the city would pay SHAL $54,000 a month to cover its costs, up from the $44,000 a month the city currently pays to the non-profit. And the $54,000 could be cut in half, Miller said, if city officials could convince Monroe County to share the cost. The county owns the land KOTS is currently located on and leases it to the city at no cost.

But when the actual estimates began coming in, costs began to rise. Dar Castillo and Teri Johnston, owners of Affiliated Design and Construction Managers, a local contractor putting the budget together (Johnston is also on the SHAL board), had to add in expenses the city currently does not pay, including security, wind and flood insurance and builder’s risk insurance. Those costs pushed the budget up about $300,000 more than originally proposed to commissioners in October.

“There are a number of things in there that make it look higher,” Castillo said about the budget, adding that employee health insurance, something not currently offered to KOTS staff, was also included in the new financial plan.

“We were told in the September/October timeframe that we would be paying $27,000 a month. The new proposal has $68,000 a month. And we’ve had no commitment from the county,” said Commissioner Sam Kaufman.

Because SHAL is a non-profit, banks will not lend to it without collateral, which SHAL asked the city to provide along with a 10-year, $1 a year lease agreement to continue operating KOTS. But since the lease agreement allows either party to pull out with a 90-day notice, even the SHAL board of directors would not agree to the proposed deal without a firm commitment from the city.

“SHAL would have been left with a million-dollar loan with no way to pay it,” Castillo said, describing the risk if the city had exercised its 90-day option.

The next step, according to Scholl, will be to separate the construction and shelter operation projects and bid them out. Although no vote was taken at the meeting, commissioners agreed with the move. Mayor Craig Cates said that because SHAL currently manages KOTS at a low cost, it is likely it will be able to retain its position even if the job is opened to other bidders. As for the construction phase, Kaufman hoped that the shelter would be bundled together with a proposed affordable housing project slated for city-owned property next to the former Easter Seals building.

“This is the opportunity to look at, what, three or four properties out there, as one project,” he said.

Alan Teitelbaum, SHAL chairman, expressed disappointment that the deal had fallen through but pointed out that SHAL’s construction estimate was still $200,000 below the city’s original projection.

“The next step is to continue to work with the city to solve the problems. First you build the shelter, then you figure out who will run it,” he said.

SHAL is a local non-profit dedicated to helping homeless men and women find permanent housing.

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