The tax credits are needed to sell to investors to raise cash to fund the renovation project, which would galvanize reinvestment into the complex and that part of downtown, officials said.
“This really is the crucial piece of funding … it will be the primary funding source, along with future state and federal historic tax credit funding requests,” said Pete Schwiegeraht, senior developer with MV Residential Development.
On Wednesday, the Ohio Housing Finance Agency will announce the recipients of the 2016 housing tax credit awards.
The finance agency received 93 applications for various tax credits, which are highly competitive.
The state has about $27 million to distribute, but it typically only awards credits to about 20 to 30 percent of applicants.
The developers of the Dayton Arcade requested $1 million annually in low-income housing tax credits for a period of 10 years.
The state has about $4 million in annual tax credits to award for new family housing projects. But the Arcade is competing with about 16 other projects from across Ohio that have applied for the same funding.
The developers also applied for an exceptional development funding award, which would provide up to $1 million more in additional tax credits for 10 years. Projects are required to meet a variety of special criteria to receive a secondary allocation.
The development team has announced plans to convert the 10-story commercial building and the adjacent five-story apartment building on West Ludlow Street into affordable housing for artists and creative people.
The project would create about 66 housing units, consisting mostly of affordable apartments that offer one to four bedrooms. Developers also would construct some market-rate apartments.
The apartments would be on the upper floors, and the first floor spaces will be reserved for retail and hospitality usage. The apartment building has about 77,800 square feet of space, and the commercial structure offers 35,900 square feet.
The project also would create amenities such as gallery and studio spaces, common areas, cyber cafe, business and mixed-media space and a theater area. Other attractions could include a rooftop deck and outdoor area.
The affordable housing project is the launching off point for the larger redevelopment of the interconnected Arcade buildings, Schwiegeraht said.
Developers plan to pursue state and federal historic tax credits later this year, with a goal of starting construction on the first phase around spring of 2017, Schwiegeraht said. Developers hope to open the housing in the spring to summer of 2018.
The next phase of redevelopment would likely focus on rehabbing the rotunda area and the Ludlow Street building.
Last month, Miller-Valentine presented a snapshot of its vision of the Arcade. The proposal calls for creating 73,000 square feet of retail space, 66,000 square feet of office space, 165 housing units and 50 hospitality rooms as part of a hotel component.
Dave Williams, vice president of urban development for Miller-Valentine, said the redevelopment strategy is designed to drive activity to the complex.
The Arcade hopefully will become a community anchor and destination that sparks redevelopment in that part of downtown, officials said.
The low-income tax credits will help put the financing in place to assemble the historic tax credits need to transform the complex, Williams said.
“This is a big way to get the financing in place for phase 1,” he said.