The Santa Ana City Council Tuesday night unanimously decided to pursue nenegotiations with St. Joseph Health and its affiliate, Taller San Jose, to turn the historic but decaying downtown YMCA building into a neighborhood fitness and wellness center.

The Mission-Spanish Colonial Revival style building was built in 1923 and housed the first YMCA in Orange County. But it has been shuttered since 1991, when the YMCA closed its doors. Broken and boarded up windows scar its aging facade, and much of the building’s infrastructure isn’t up to city code.

St. Joseph Health and Taller San Jose, which helps troubled and unskilled young adults train for work and find jobs, have proposed to spend nearly $18 million renovating the building. It would then open as a much-needed 19,000-square-foot fitness center including a gym and programs such as nutrition counseling for residents and workers in an underserved part of the city.

The council chose the fitness and wellness center over a hotel project proposed by downtown property tycoon Michael Harrah and his company, Caribou Industries.

Under Harrah’s proposal, his company would have purchased the building from the city for $1 million, renovated it and then built a 12-story hotel on an adjacent parking lot. The YMCA building would have served as a lobby and historic arts display, with a basement gym open to residents with memberships.

Some council members said they were hoping for a project that would generate tax revenue, such as a hotel that could have been charged room taxes, but opted for the fitness center because of the community health benefits.

“At the end of the day, the dividends are going to be much greater than the TOT [transient occupancy tax],” said Councilwoman Michele Martinez, referring to room taxes that would be levied on hotel guests.

St. Joseph and Taller San Jose plan to finance the project with a mix of cash, fundraising and tax credits, according to a city staff report. The construction and operation of the wellness center will also produce jobs at “socially just” wages, according to the report.

Councilman Vincent Sarmiento expressed concern about that financing plan, asking St. Joseph and Taller San Jose representatives how the organizations plan on paying for the project. Sarmiento and Martinez also asked that the gym be open to the general public.

The representatives noted that St. Joseph is a multibillion-dollar organization that could secure funding for the project if fundraising is sluggish.

As it looked increasingly likely that the building would go to St. Joseph Health and Taller San Jose, Harrah said he was happier refocusing his “time, energy, money and efforts” on redeveloping the downtown Artists Village.

But Harrah also asked that the organizations renovate the façade within 120 days and said the building had become an “eyesore,” with other council members making similar requests.

Representatives with the organizations said they weren’t opposed to that.

Such deal points are subject to negotiations, and ultimately an agreement for reuse of the building would come back to City Council for approval. The council action Tuesday night approved a reimbursement agreement, with St. Joseph and Taller San Jose paying for the staff time to draft an exclusive negotiating agreement.

Mayor Miguel Pulido noted that the city has tried to find a tenant for the building in the past, with UC Irvine proposing a use ten years ago that ultimately failed.

“This is a difficult building, and we’re not done yet,” Pulido said.

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