A proposal to turn the former Washington Elementary School into affordable housing won't move forward this year.

“I was very hopeful I’d be here today with good news,” Matt Gillam, vice president of development for Overland Property Group, Lenexa, told the Hays USD 489 school board at its regular meeting Monday night.

“However," Gillam said, "we were informed very recently that we did not receive funding. We’ve got a bit of a unique situation in front of us right now."

The Kansas Housing Resources Corporation urged the project be pushed to 2020, as it did not have enough federal tax credits to allocate for it this year, Gillam said.

“I’ve never seen this happen before in the 16 years we’ve been in business,” he said.

“Rather than just being told a straight 'no' and given a denial letter, we were given a letter that I don’t think anybody else has ever received before, which to me shows the strong nature that the state believes there’s an affordable housing need in Hays,” he said.

OPG, which has offices in Salina, has plans to invest $4 million to renovate the building into one- and three-bedroom apartments.

The housing would add to OPG’s 63 units of Stonepost Apartments on and near south Main it has built in the last 12 years.

The developer has financed those projects through the federal Low Income Housing Tax Credit program, which stipulates residents have income at or below 60 percent of the area’s median income.

The project received full point scoring on its application for location and city-community funding, Gillam said, but lost points on income targeting.

"They wanted to see a little bit more discounted low-income units based on the community’s needs," he said.

“They are strongly suggesting we come back in 2020," Gillam said. "I will tell you, I’ve never received a letter like this, nor have I talked to any other developers in the state of Kansas that have received a letter like this."

The property is under contract with OPG until December. The school board took no action Monday, but superintendent John Thissen asked Gillam to return to the next meeting July 1 to address questions and concerns from the board. He agreed.

The 93-year-old building was closed as a school in 2015, and the following year, Early Childhood Connections, which includes Head Start and other early childhood programs, moved in.

Last year, ECC received a $1.4 million federal Head Start grant to renovate the former Oak Park Medical Complex, 2501 E. 13th, with the school board agreeing to purchase the property for $2 million.

The Oak Park facility is undergoing renovation and is scheduled to open in August.

The board entered the option contract with OPG in January to sell the building and land at 305 Main for $500,000 with $5,000 earnest money.

Gillam encouraged the board to consider a new contract with OPG.

“If you were to allow me to continue, I would need site control again starting Oct. 1," he said. "That gives me time to go back and refresh my numbers with consultants."

He proposed a new contract starting on that date, with an additional $5,000 down payment as a good-faith gesture.

The 2020 tax credit allocations should be known by June 1, he said.

“If I am funded, what I would want to do is give you guys $4,000 per month to extend that contract basically every month that I need past June 1 to close,” he said, with a fall closing date likely.

Gillam acknowledged the board could cancel the contract and seek another buyer.

A second offer on the property was made to the board Jan. 9 from Turn-Key Property Solutions, 412 Autumn Lane, for $180,000 and $20,000 earnest money.

“Just for your information, up until today I spent roughly $30,000 pursuing this," Gillam said. "Hopefully, you guys understand that I’m very serious about this."