City plans for the Auburn Community Center on the south end of the Les Gove Park community campus call for a 20,100-square-foot building and a parking lot.

Those plans include a new activity center-gymnasium on the park’s north end east of the Auburn Senior Activity Center, which the Auburn Boys & Girls Club has agreed to lease for $1.9 million.

So far so good.

But paying for an $12.7 million building project in the middle of a recession is a tough proposition and it has been the focus lately of a lot of hard thinking at Auburn City Hall and in the Auburn Community Center Committee.

The solution, said Auburn City Councilman and committee chair Rich Wagner, is to draw from multiple sources but leave untouched the taxpayer supported general fund that pays for most of Auburn’s daily operations.

“At the beginning of this process, we said we were going to try and do this without spending any general fund money that could be used for salaries for employees or to fix streets,” Wagner said.

Here is the funding plan:

• $3.3 million real estate excise tax. Anyone who sells real estate in the city pays this 0.25 percent tax, and the City can only use it for construction. It can’t be used for salaries. Sellers must pay additional elements of the tax, some of which have fewer restrictions on their use but most of that goes to the state. The City has received about $1,000,000 in revenue each year for the past 10 years, but during the recession it is receiving about half of that. The City has put most of that $1,000,000 per year for about the past eight years into a savings fund targeting it for a Community Center project.

• $500,000 from solid waste utility fees. For decades, the City maintained a $1,000,000 reserve in the Solid Waste Fund in case the contracted garbage collection company failed to perform, for example because of labor strikes. The City kept the reserve so it could operate its own collection service for a period of time if necessary.

“It has been determined that $500,000 is sufficient to allow for this contingency,” Wagner said. “Since all Auburn citizens have paid into this solid waste fund through their garbage bills over the years, and all of the Auburn citizens will benefit from the community center, it was determined that this fund transfer made sense to return value to the citizens rather than keep an abnormally large reserve fund.”

• $3,500,000 new market tax credits (NMTC). This is a complex federal “grant” process where a bank makes a loan for the community center project that the City does not have to repay, Wagner said. Instead, the federal government allows the bank seven years worth of income tax credits so it can recover the cost of the loan plus a reasonable amount of interest. Through the terms of the NMTC program, the City and or a newly created NMTC ownership entity will own the property and build the community center and activities center.

“We expect that this will come together by early in 2010,” Wagner said. “This method has been used by many entities over the past several years, and this year has a $1.4 billion allocation in the federal budget. The City’s partner in the Activity Center, The Boys & Girls Club, recently used NMTC to build a facility.”

• The $1,900,000 Boys & Girls Club contribution to the Activity Center, which is 50 percent of the cost of the building. The City is negotiating this agreement, which will allow the club 50 percent of the use of the Activity Center.

Michael Wilson, grant coordinator for the City of Auburn, described at Monday evening’s Council meeting the final piece of the puzzle — the City’s plans to apply for a Housing and Urban Development (HUD) Section 108 loan of up to $2,033,715. The City would repay the loan at $150,000 a year over 20 years using the $400,000 it receives through annual community development block grants (CDBG). The CDBG funds must be used for construction of community facilities. Based on population, CDBG has been a source of about $450,000 per year for the past 10 years and is expected to be about $600,000 when the federal government takes into account Auburn’s newly annexed population. This allows $150,000 to be used for the loan repayment without reducing the amount that local non-profit agencies like Auburn Youth Resources that have historically received in funds from the City’s CDBG allocation.

“After adoption of the resolution at the next Council meeting, the intent would be that the City will apply for this loan around the middle of the month,” Wilson said. “The City does have the option even after the application is submitted and the loan is authorized by HUD to accept or not accept it based on what your final plans of the communityand activities center.”

Wagner recognizes that building a community center in the middle of a recession may seem wrongheaded to a lot of people.

“And the Council may still decide that when the time comes,” Wagner said. “As Michael said, applying for the HUD loan doesn’t mean we have to accept it. Down the road we could say, for instance, that the new market tax credit doesn’t work, which could happen with this sort of loan. Or we could say, ‘All right, we can’t do it for other reasons.’ But we’ve got a plan here, and if we get this extra $3.5 million through the new market tax credits, it will make this work.”