While construction on the first phase of the redevelopment of Steel City Terrace, Farrell, is under way, developers are looking for funding for the second phase.

Ralph A. Falbo Inc., Pittsburgh, is preparing an application for tax credits that will go into the Pennsylvania Housing Finance Agency.

The application deadline is Monday, said L. DeWitt Boosel, executive director of Mercer County Housing Authority.

Falbo plans to ask for $466,000 in tax credits, which would be sold to an investor in return for credits on their federal income taxes.

Boosel said proposals would be sought from possible investors. "Whatever makes sense for us from a financial standpoint is what we'll go for," said Boosel, adding that officials believe the sale could raise about $4 million for construction.

If the credits are awarded, 34 apartments would be built for rent at just under the market rate, said Frank Gargiulo, the authority's HOPE VI coordinator.

National City Bank bought the phase one tax credits for about $5.6 million. Boosel said he did not know if the bank would be interested in the second phase credits.

Unlike phase one, where tax credits, a federal HOPE VI grant and a loan from the authority are being used, phase two will be funded solely by tax credits.

In phase one, nine buildings of Steel City containing 55 public housing apartments have been demolished and 13 buildings that will contain 31 apartments are under construction.

Another three buildings will be turned over to general contractor Rien Construction, Brookfield, for demolition by the end of the year, Boosel said.

Of the 100 Steel City apartments, only 20 remain occupied and will not be demolished until residents are moved into new homes, Boosel said

By the end of the multi-phase project, developers plan to have built 74 public housing units, 45 apartments for rent at closer to the market rate and 26 homes for sale.