The Ketchum Urban Renewal Agency board of commissioners on Monday pledged to repay a $1.2 million debt to the city of Ketchum, though the matter could be resolved in a variety of ways.

The city initially provided about $1.5 million to the KURA about a decade ago, so the agency could acquire two downtown properties—the Starbucks building next to Town Square and a property on Washington Avenue and First Street that’s used as a parking lot.

At the outset, both property purchases were intended to be used for community housing developments. The City Council in 2007-08 provided the KURA with about $855,000 to purchase the Washington Avenue lot, and $640,000 to buy the Starbucks building property on Sun Valley Road.

The funds were provided out of the city’s in-lieu housing fund, which developers pay toward construction of community housing.

After the Sun Valley Road purchase, the city decided to use it as a coffee shop. The building hosts a Starbucks as well as a visitor information center for Visit Sun Valley and other public meeting space.

The housing obligation was transferred to the Washington Avenue property, though a proposed housing development never got off the ground there, either. The Idaho Housing and Finance Association rejected an application for tax credits to build the development.

The property is a public parking lot today. The KURA paid the city of Ketchum $1.5 million to acquire the parking lot on Washington Avenue and Second Street, and both lots have been combined into one.

The city provides a monthly lease payment to the KURA to use the properties as a parking lot. The KURA also transferred ownership of the Starbucks building to the city government.

The fact that such a large investment of dollars earmarked for housing ultimately never funded housing has been a black eye for city leaders as Ketchum was swallowed up by a housing-affordability crisis in recent years, though the decisions that set the process in motion were made more than a decade ago.

The KURA has been making annual payments on the debt in recent budgets, taking the amount owed from about $1.5 million to about $1.2 million.

The KURA board wrestled with how to resolve the issue on Monday afternoon.

“The city actually gave cash to the URA,” City Administrator Suzanne Frick said. “This issue does need to get resolved eventually. It could happen in a variety of different ways.”

Commissioner Jim Slanetz, who sits on the City Council, said his preferred option is to make an annual payment to the city and to seek ways to help development of an affordable housing project in Ketchum.

The KURA board agreed to include $90,000 in its current budget to repay the city government. It would need to pay slightly more than $100,000 annually for the next 10 years—after which the KURA sunsets and will cease to exist—to cover the remaining sum, though it could expedite repayment by funding infrastructure costs related to a housing project.

“In my mind, that could count as partially paying it back,” Slanetz said.

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