After discovering significant foundational and structural issues, the Bend City Council backed out of an agreement to buy a motel property and turn it into a homeless shelter, but intends to find a new site.

On Wednesday, the council voted to withdraw from a purchase and sale agreement to buy the Old Mill & Suites Motel at 904 SE Third St. for no more than $5 million. But the council made it clear it intends to find another motel to turn into a homeless shelter quickly.

“I know how important it is to this community to get that work done,” Mayor Sally Russell said Wednesday night.

The money to buy the motel comes from a state program called Project Turnkey, wherein the Legislature allocated $35 million to be given to governments that applied last year to buy hotels to turn into homeless shelters.

The council entered into the agreement in February and ever since then has been evaluating the property. The property was initially attractive because it had 68 rooms, including a couple of apartments, Economic Development Director Carolyn Eagan said Thursday.

But after weeks of looking at the property more closely, city staff found structural issues that necessitate high-cost renovations. The foundation is a key issue for the building, which was built in 1950, Eagan said. It has needed repairs for a long time, and while some repairs had been done they were “not complete,” she said.

“As we began to uncover and then understand the type of renovations and the degree of renovations, our timeline for opening began to get really pushed out,” Eagan said.

Because the issues are with the foundation below ground level, it was hard for the city to get contractors on the ground to estimate what renovations would cost in total, Eagan said, but the city’s best guess was around $2 million.

The type of work it would take to renovate the motel would also push up against a timeline provided by the Oregon Community Foundation, which is the organization distributing the Project Turney money. Per the Legislature, the foundation is charged with distributing this money before June 30, with the assumption being the city would need to make an acquisition by this date as well, Eagan said.

“With concrete you can’t just pour it and just build the next day,” Eagan said.

Eagan said  the city might reconsider an agreement with the owner of Old Mill & Suites Motel if the owner decided “selling the hotel is a priority” and if he understood “the condition of his building.”

There are other hotels the city is considering purchasing, Eagan said, though she declined to name them. The council will be considering new purchase and sales agreements at its meeting April 21, she said.

When asked whether the city feared running into a similar issues with entering a new agreement with a new hotel, Eagan said she thinks there is a healthy understanding of what the challenges are, but that this was not a reason not to do it.

“It’s genuinely in my personal interest to see this be a successful project,” Eagan said. “We are doing everything we can to deliver on this front.”

In Redmond, a similar project is moving forward. The Bethlehem Inn, which operates a homeless shelter in Bend, has entered a purchase and sales agreement with the Greenway Motel in Redmond on Birch Avenue, near U.S. Highway 97.

Gwenn Wysling, the executive director of The Bethlehem Inn, said the motel has 30 rooms, which will be able to host up to 30 people amid COVID-19 health guidelines and up to 90 people when those capacity restrictions are lifted. Wysling would not disclose how much Bethlehem Inn is offering to pay for the motel. 

“It’s a motel in good condition and certainly we’ve been appreciative of the owners working on this,” she said.

The goal is to get the shelter open by June 30. The Bethlehem Inn is looking to hire staff for the new shelter, and Wysling is asking those who are interested to visit the shelter’s website.

“We have done the due diligence to pick a property we feel will serve the Redmond community and the community at large for many years into the future,” she said.