Step Up On Second, an organization that helps provide support and opportunities for people with mental illness to reintegrate into the community, was denied a $456,000 loan by the City of Santa Monica to help fund a transitional housing facility triplex.

As a result, Step Up On Second pulled out of a deal to purchase the property on which the facility — to have been called “Daniel’s House” — is located.

The proposed Daniel’s House, a Daniel’s Place program (which is a project of Step Up On Second), was planned at 1826 Pearl St. to provide housing for adults 18 to 28 years old who are in the earliest stages of mental illness — for example, depression or schizophrenia.

“We’re very disappointed,” said Tod Lipka, chief executive officer and executive director of Step Up On Second. “We invested really quite a significant amount of time not only in the loan and application process, but we held community meetings. We actually invested about $25,000 of our money in this project up until this point.”

The plan was for Daniel’s House to be a two-year transitional living program, where participants would be closely monitored, receive training for inde- pendent living skills and learn how to manage their mental illness.

Step Up On Second was also planning to help participants find permanent housing after completion of the program.

“We’re very disappointed, but I think we will continue to look [for another location],” said Daniel’s Place family service coordinator and parent advocate Gloria Fox, who has been with the organization since its opening in 1998. “Of course it’s a disappointment. We just have to keep moving on.”

“One thing is clear,” Lipka said. “This is a much-needed and valuable project and even our critics agreed with us during this process.”

Lipka says that Step Up On Second had been “fairly positive” it would secure the $456,000 loan from the city.

“You never know until you’re actually formally told,” he said.

Initially, Step Up On Second applied to the City of Santa Monica for a $1.7 million dollar loan, the cost of the entire project, but it was denied the loan because the amount exceeded funding guidelines, Lipka said.

Several months ago, the proposed Daniel’s House project caused a stir when some residents expressed concerns about the proposed facility being in a residential area where children and young adults travel the streets daily. Some thought safety was an issue.

The city listened to residents’ concerns and looked into them, said Bob Moncrief, the housing manager for the Housing Division of the City of Santa Monica.

But Moncrief says neighborhood concerns played no role in the city denying Step Up On Second the $456,000 loan.

The loan wasn’t granted because of “an administrative and technical decision.” The proposal did not meet the city’s Housing Trust Fund Guidelines, Moncrief said.

“The property they were going to buy was comprised of one single-family house and two private apartments above the garage in the back,” said Moncrief. “We found that this group home, which is basically what was being proposed, was certainly entitled to exist there as far as zoning for the city, but funding the proposal was not possible because the definition of the group home in the guidelines was not consistent with the project.

“‘Group home’ in our guidelines is defined as a single unit, such as a single-family house, where unrelated people live in a congregate fashion using the same facilities, getting services, eating together and related group activities. This project [proposed by Step Up On Second] contained three units and, therefore, did not qualify.”

Evaluating the proposed project was an “iterative process,” and a decision to deny the loan to Step Up On Second was made on November 6th, Moncrief said.

“The increased concerns of the residents caused people to look more closely,” Lipka says of not meeting the guidelines. “The increased attention makes you focus more closely on all the details. That’s a very natural process.

“As the city looked at the technical issues more and more, I think they discovered that with the strict reading of the guidelines, it [the project] didn’t fit.”

Still, Lipka thinks working on the project was worth it, even though it didn’t go through.

“I think it was a very valuable experience, because we got a chance to dialogue with the community about mental illness and what mental illness is and help to reduce some of the stigma and misinformation about mental illness,” Lipka said, “So I think this was a very, very positive project in that sense.

“This was an opportunity to talk with people we normally don’t get to dialogue with. I think there were a lot of people who changed their minds about the project or furthered their understanding of mental illness, and for us, that was a valuable outcome.”