A $316 million project to renovate the state's large public housing property and add affordable and market-rent units at Kuhio Park Terrace is moving ahead, with a development company taking out a $1.7 million loan with the state to help cover planning and design costs.

The Hawai'i Public Housing Authority has also agreed to enter into a formal agreement with Michaels Development Company, which allows the New Jersey-based firm to start the work of seeking financing, including state tax credits, for the 10-year redevelopment project.

"We made a very definitive commitment," said HPHA board Chairman Travis Thompson.

He said the agreement "is one step forward for public housing."

KPT and Kuhio Homes, built in 1965 and 1953, respectively, have 748 units combined.

Some 2,500 people call the projects, which are on the same property, home.

Housing officials foresee the redevelopment at KPT becoming a template for addressing dilapidated public housing projects statewide. The work is set to include the renovation of the twin towers at Kuhio Park Terrace and the 14 low-rise buildings that make up Kuhio Homes.

The developer will also add 276 market-level and affordable rentals.

Adding a mix of incomes to the property is designed to deconcentrate poverty while increasing revenues so maintenance needs don't back up. The state says the redevelopment will require little in the way of state funds, since Michaels will seek other financing options for the work.

Michaels will lease the land at the public housing project, in part to keep costs down. It will buy the existing public housing buildings, however, including the towers.

WORK STARTS IN 2011

Public housing units are designed to be affordable for the poorest families.

The state has stressed that no public housing units will be lost in the redevelopment.

Michaels did not return calls on the project.

HPHA has said construction at KPT will start in 2011, and wrap up in about 10 years.

Thompson said the renovation of the towers will be in the first phase of work.

The U.S. Department of Housing and Urban Development still has to approve the construction project, but there are no concerns that they won't. Mixed-income redevelopment has proved successful on the Mainland, especially in projects in need of major repairs.

At its Feb. 18 meeting, the HPHA board agreed to provide Michaels with a $1.7 million pre-development loan. The funds will come out of HPHA's capital improvements budget.

Thompson said the money will in part help Michaels seek financing and draft plans.

It also signals how far along in the process Mich- aels has moved, and reassures housing officials that the redevelopment of KPT is possible — though still a huge undertaking.

The housing authority has long fretted over the state of KPT. In 2001, HPHA failed to secure federal funding for a plan that would have replaced the towers with low-rise buildings.