The city hopes to put the first of its 12 affordable-housing complexes up for sale next month as it moves forward with a plan to sell the properties, which house more than 1,000 families but currently account for $3.5 million in annual losses.

While preparing for the sale of the 160-unit Kulana Nani complex in Kane'ohe, the city spent $2.8 million for repairs and maintenance, including replacing an elevator and re-roofing. The city is planning on issuing a request for proposals starting March 1.

City officials hope the sale of Kulana Nani will provide a roadmap for future sales.

"It has taken a little while to pull it together, but we're getting close," said Cindy Aylett, the mayor's project review manager. "We're not experts in this arena and it's costing us more to maintain them. There is no current revenue, and the city loses money because the rent does not cover the upkeep, the repair or the management that these buildings require. We would like to see someone who knows what they're doing do this."

The city decided to divest itself of its affordable-housing complexes, some of which were built in the early 1970s, after two advisory panels recommended their sale.

The city's housing department was abolished more than a decade ago following a $6 million theft scandal, yet the city continues to operate 12 apartment complexes with nearly 1,300 units, splitting responsibilities among several departments. The agencies involved in managing the properties are Budget and Fiscal Services, the Department of Community Services, Department of Facility Maintenance and the Department of Planning and Permitting.

Councilman Charles K. Djou said the city should not be in the business of developing and maintaining affordable-housing projects. He supports the sale of the existing facilities, but said the council and administration need to focus on establishing legal guarantees that the properties will remain affordable after they are sold.

"I'd like to see it remain affordable, and we can do it in the form of covenants or through a contractual relationship, but I don't think the city government per se should be managing the city property," Djou said. "I don't think its good public policy."

Councilman Todd K. Apo said the city may have to discount the price of the properties in order to find the right kind of buyer: an entity that will keep them affordable in the long term.

"I don't think people are overly concerned (who it goes to ), as long it remains affordable, and because they are city-owned properties, we have the ability to ensure those types of conditions are complied with," Apo said. "Government is just not good at operating affordable-housing projects, and it makes sense for us to get out of the ownership."

Council members Ann H. Kobayashi and Donovan M. Dela Cruz have proposed resolutions that provide incentives and encourage developers to build and maintain affordable-housing units.

The legislative propositions include "density bonuses" allowing developers to build a greater number of units in exchange for putting in more affordable-housing units in new developments, and an affordable-housing rental tax exemption approaching $80,000 for qualified developers and owners.

"Government obviously isn't doing a good job (managing the properties) so we have to focus on how government can ensure that more units are built and properly maintained," said Dela Cruz.

The city administration has declined to say what their affordable-housing portfolio is worth, citing a need to maintain a competitive advantage when the bidding process begins next month.

Companies have made offers in the past, but sales have never gone through.

Kevin R. Carney, vice-president of EAH Inc., said the company put in offers in 1998 and 1999 to buy portions of the city's affordable-housing portfolio to no avail.

The city has "some good properties and some not-so-good properties, and if the city wants to sell them, they should package them, because if they sell them off piecemeal, they may sell the good ones and get stuck retaining the not-so-good ones," Carney said.

Reach Peter Boylan at pboylan@honoluluadvertiser.com.