When developer Darrell Vange couldn’t satisfy the critics of a $300 million big-box shopping center and housing development that he’s planning south of downtown, he turned to the Seattle Housing Authority for help and he got it: $20 million in special financing.

For the $20 million, SHA is creating — but may not manage — 200 units of below-market housing and a $1 million subsidy to help support small local shops at the site. The complex is slated to open in 2010 at a 10-acre property on South Dearborn Street owned by Seattle Goodwill, which is giving Vange the property to get a badly needed new building and retail store.

The financing deal, announced April 11, comes in the wake of community demands that the four-block complex, which is expected to include a Target, Lowe’s, and 550 units of housing, be scaled back to fit the neighborhood — and pocketbooks — of shops owners and residents who work in or live near Seattle’s Little Saigon, which the project will border.

Like Goodwill, SHA calls its deal a win-win for the community and the developer. The project’s opponents call it a ruse: The agency is tapping a federal low-income economic development program that could fund a lot of things, they say, besides a giant shopping center that stands to wipe out Little Saigon.

“It’s like injecting yourself with steroids,” says Quang Nguyen, director of Seattle’s Vietnamese American Economic Development Association. “You’ll get really fast growth and pump up, but over time that’s going to destroy the small business district.”

It’s a trade-off that Nguyen and other detractors at the Dearborn Street Coalition for a Livable Neighborhood call unfair. But it’s not unique: As housing authorities around the nation look to support their work with fewer federal dollars, many like SHA have not only engaged private developers to help rebuild housing projects like High Point and Rainier Vista, but are now moving in a direction that the agency calls a natural evolution — economic development.

SHA has built apartments with ground-floor retail in the past, but the Dearborn Street Project is the housing authority’s first commercial investment using New Market Tax Credits, a U.S. Treasury program created by Congress in 2000 to fund for-profit development in distressed areas.

In order to use the $20 million in tax credits, which SHA originally got for a development deal at High Point that fell through, the agency has set up a nonprofit bank called Seattle Community Investments. The bank’s five board members include SHA’s director, housing finance manager and the chair of its board of commissioners.

Up to now, the housing authority has not publicized the bank’s board meetings, but will start to do so, says SHA Director Tom Tierney, so the public can have input before the deal is finalized. Assuming the activists don’t succeed in killing the project’s permits, Paul Fitzgerald, SHA’s manager for the tax-credit program, says the bank would sell the tax credits to an investor or investors who would provide some cash up front in exchange for seven years of tax deductions.

Vange’s Dearborn Street Developers, he says, would then get the $20 million in a combination of cash and a market-rate loan.Though Vange says he’s not short on regular bank financing, Tierney points out that the developer could have gotten the tax credits from another bank without providing any public benefits. SHA’s involvement, he says, will guarantee 100 units of low-income senior housing at the site, 50 units of workforce housing for people who make at or below 80 percent of median income, and 50 units rentable to people with incomes up to 100 percent of median income of $54,500.

In addition, Vange has agreed to set aside $1 million of SHA’s financing to buy downthe rents of five or 10 owner-operated minority businesses over 10 years. But, at the estimated $25 per square foot they’d be charged, Nguyen says, they would still be paying a lot more than today’s rate of $15 a foot in Little Saigon.

Nguyen and others insist the tax credits don’t have to finance a shopping center. In the past, for instance, other groups have used the program to help fund the renovation of Pioneer Square’s Cadillac Hotel and the offices and dining room of the Compass Center shelter.

“It’s bad for them to be getting together and making these plans and twisting the intent of these programs,” says Bang Nguyen, a Vietnamese business owner with the Community Coalition for Environmental Justice. “They broker these deals and cheat needy neighborhoods and communities.”

cgillis@realchangenews.org