A former fraternity house owned by the State College Redevelopment Authority for the past three years is poised to become the new home for Centre Helps.

State College Borough Council on Monday discussed — and generally supported — loaning $1.5 million to the Redevelopment Authority to renovate two floors of the former Alpha Chi Sigma house at 406 S. Pugh St. for the local nonprofit human services agency.

The loan would come from the borough’s cash reserves and the authority, which is an independent government entity, would pay it back over 15 years at 5% interest. The interest would match what the borough is currently earning on investment of the reserves, Borough Manager Tom Fountaine said.

The total cost for rehabilitation is $1,959,834 plus a $500,000 contingency for any unexpected issues that may arise resulting from the requirement to install an elevator in the century-old historic structure. The authority and Centre Helps, which will rent the space, will pay for the balance not covered by the loan.

The council will vote on approval at its October 7 meeting.

A separate project currently in development would also convert a space at the back of the first floor and the entire third floor into four ADA-accessible affordable housing units. Planning Director Ed LeClear said the borough is pursuing grant funds “to help pay for a significant portion of that,” including an upcoming application to a Pennsylvania Housing Finance Authority program specifically for affordable units in mixed-use facilities.

The Redevelopment Authority acquired the building in 2021 using borough loans totaling $1.67 million. It was offered to State College by the fraternity organization “at really a bargain price,” Fountaine said, with the condition that it must be preserved for housing or human services purposes.

A request for proposals was issued to the State College’s nonprofit housing partners — with the understanding that the borough would assist in seeking grants for the rehabilitation — as well as low-income tax credit housing developers. No formal proposals were received, with organizations citing the cost and low financial return.

Several low-income housing developers “took a pretty hard look at the building,” and Housing Transitions had an architect “do extensive work looking at how to redevelop it for affordable housing,” borough Planning Director Ed LeClear said.

“They came up with a rehab cost of over $5 million and they would only be able to yield nine units total out of the entire building,” LeClear said. “So that just gives you an idea of trying to convert a fraternity building from single-room occupancy with very small rooms to something that would work for a family in affordable units is really challenging.”

With no development partner and costs for maintaining the vacant property, the Redevelopment Authority began identifying potential tenants from among local human services agencies. Centre Helps indicated a need for significant additional space, but must be out of its current offices on South Fraser Street by April 2025. So the Redevelopment Authority contracted with architectural firm Weber Murphy Fox to design the renovations and solicit bids for converting the first two floors of the house into office space.

“We are going to be right up against the deadline to get to final occupancy by April 1,” LeClear said. “This is going incredibly fast. It’s because we have a great tenant who has a significant need. It’s one of our partners that consistently works within the community. They are expanding a service that I think we all [recognize] that there is a need for.

“At the end of the day if we aren’t able to get the financing to move forward with the rehab, we’ll lose Centre Helps as a tenant and we’ll be sitting at a vacant property without resources to rehab it.”

Because the building is owned by a government entity, installation of an elevator is required as part of the work, LeClear said. Work associated with installing the elevator added $400,000 to $450,000 to the project cost, according to Anna Childe of Weber Murphy Fox.

“The benefit is we’re going to have all three floors with an elevator,” LeClear said. “The drawback is obviously the cost associated with that. So that’s a significant aspect of the cost of the project.”

While council members expressed support for the project and the loan, some said the money could be better used if the authority was not already bound to converting the property.

“If we weren’t completely locked in and we could use this money as freely as we wanted,” Councilman Matt Herndon said. “We could have the Redevelopment Authority build a brand new affordable housing complex that could house more people for the same money. We can’t do that right here, so this is the best thing we can make out of a difficult situation.”

Solicitor Terry Williams said that when the fraternity organization was first deciding what to do with the property, some wanted to sell it to a developer to be torn down for construction of student housing. The council at the time understood the conditions of acquiring it and wanted to preserve the building, so it agreed to the loan to the Redevelopment Authority to purchase it.

Since then, the authority has had to pay for upkeep and the building has been vandalized multiple times.

“It costs us money having this property be vacant because people are coming and wanting to relive their old whatever times,” Herndon said. “We should be careful if in the future we are offered what seems like a plum deal and it has these strings attached and then it’s going to lead up to us spending millions of dollars in the future in a way that maybe we could have spent them better.”

Others said that while it may not result in a large number of affordable housing units, the project will provide a community benefit.

“I do think the use this is going to be put to is something the community definitely needs,” Council President Evan Myers said. “We can afford to do it. We also need more affordable housing but I think we can spend the money on affordable housing more efficiently…than rehabbing this for housing. I think just because we have it doesn’t mean we should jam money into it for something that doesn’t fit. So I think using it for what has been specified here makes sense while we continue to look for more opportunities to efficiently work on affordable housing.”

Added Mayor Ezra Nanes, “Regardless of whether we would like to have the choice ourselves, we have a really great project that we can support with a loan and we’ll be proud of what ends up happening with this facility. But I think Mr. Herndon’s point is well taken as we look at big opportunities like this that have complexities we ought to consider all these potentialities that could come down the road.”