TRAVERSE CITY -- City commissioners rejected a plan to renovate a historic downtown Traverse City building into affordable and low-income housing, a proposal that hung on more than $2 million in state and federal funds.

On Monday, the city commission voted 4-2 to oppose the Whiting Hotel project after listening for about an hour to public comments. The commission's vote effectively kills the project, the developer said.

Commissioners Deni Scrudato, Barbara Budros, Jim Carruthers and Mayor Michael Estes voted against the project.

"I support affordable housing, but downtown may not be the best place," Carruthers said.

Traverse City developer Gene LaFave said the project is over.

"It's dead in the water. I will not be pursuing it at all," he said.

LaFave said the use of public dollars would have driven rental rates down to affordable levels and the project would not be possible without them.

"Without public funds, nothing like this would be done in downtown Traverse City," LaFave said. "There's nobody in line."

Commissioners Ralph Soffredine and Jody Bergman favored the project, while Commissioner Chris Bzdok recused himself because his law partner represents a public board that had ties to the project.

"I can't understand how we can say, 'no, we can't do that,'" Soffredine said.

Soffredine touted the lack of required city tax dollars, the possibility of affordable housing in the city's core and the creation of jobs, all part of the defeated proposal.

The $7.4 million Whiting Hotel project was meant to create 27 affordable housing units and 11 low-income apartments. Proponents said the project would have provided additional taxes for Traverse City, plus created 190 new construction jobs and fit in line with the Grand Vision land use study in which participants said they want to see public investment in this region's downtown areas.

But that public investment is the very thing that raised concerns among some local elected officials.

Estes said he could not support a project that used public dollars and eliminated housing for the existing 54 possible tenants at the Whiting, in exchange for 11 low-income units.

That also was a concern for Carruthers.

"That's my struggle. The Whiting Hotel currently provides housing for 54," he said.

Bergman, though, said while the project had no plans to use city tax dollars, she was hoping to see a return in Traverse City on her state and federal taxes.

"If we don't spend it here, it will be used in another community," she said.

The split also existed among members of the public, although more spoke in favor of the project than against.

"I am in favor of affordable housing, but I do not think the Whiting Hotel is the place and this is not the time," said Marcia Hughes, city resident.

She worried about displacing the hotel's current residents and suggested the city create a citizens committee to consider alternative areas for low-income housing.

On the other hand, city resident Andy Smits said he supported the plan because somebody took the lead to create affordable housing in Traverse City.

"I support affordable housing, workforce housing, in downtown," he said.

The historic building on East Front Street would have had exterior restoration and energy efficiencies built into the work.

LaFave was ready to walk away from the project several weeks ago, but chose to wait until city commissioners decided whether to support the project. He adopted development plans once local businessman Bob Sutherland backed out.

Sutherland owns Cherry Republic, a gourmet cherry product and gift store housed in the Whiting's Front Street commercial space.

The Whiting is owned by a company headed by Traverse City real estate investor Mike Anton, and in May the Grand Traverse County land bank approved borrowing $800,000 to help complete the $2.65 million purchase. The land bank was supposed to repay the loan by capturing state school taxes paid on the renovated property's value.

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