AUBURN – Housing authority officials have until February to work out a plan to turn the former Webster Intermediate School into an assisted living housing project.

Councilors on Monday agreed to an option agreement with the Auburn Housing Authority for the old building, north of Union Street on Hampshire and Willow streets. The housing authority will have until February to work out designs for the project and acquire tax credits to make the project feasible.

Plans call for renovating the old school and making it a 24-unit residential complex with one- and two-bedroom units.

“Basically, they would be buying the building as a shell,” said Economic Development Director Roland Miller. “They have a substantial amount of work to do and a lot of the interior will have to be removed.”

Webster closed in June 2006. It and Lake Street Elementary were replaced that fall by the newly built Park Avenue Elementary. The building is one of five school properties destined to be turned over to the city for reuse or sale, including C.P. Wight, Lake Street, Chamberlain and Merrill Hill.

Miller said the city has met other potential developers for the building, but none submitted proposals. Under terms of the option agreement the city can continue showing the building to other potential developers in case the housing authority plan doesn’t work out.

Miller said the project would rely on tax credits from the Maine Housing Authority. The project would be owned by investors who purchase the tax credits, and would be required to pay property taxes to the city. Miller said the housing authority is investigating a housing tax increment finance district as well. Under that arrangement, a portion of property taxes paid would be used to help residents pay rent.

“But we don’t know how much that TIF would be until the project moves along a little further,” Miller said. According to the option agreement, the housing authority will pay the city a minimum of $300,000 for the project.

“But it could be more than that,” Miller said. “It depends on how the project develops, what the occupancy looks like and how they qualify for the tax credits.”

Miller said the authority has until December 2009 to complete the sale.

“There is a critical need for affordable housing for families in our community, and this project helps address that,” Miller said. “It reuses an existing building and makes it a taxable, contributing asset. It’s good for the neighborhood and it will provide some much needed revenue. It’s a very good project.”