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The AT&T Building in downtown Santa Rosa
By KEVIN McCALLUM
THE PRESS DEMOCRAT
Replenishing city coffers by making the Redevelopment Agency repay $6.6 million in loans is a shortsighted idea with “minimal benefits” to either organization, the Santa Rosa City Council will be told on Tuesday night.
In response to a proposal floated by City Council candidate Jake Ours, city staff studied the idea and concluded it doesn’t make a lot of sense.
“Immediate repayment of these loans by the Agency, without the benefit of replacement financing, would create financial problems and minimal benefits to the City and the Agency,” states the staff report on the subject.
But Ours, who sat on the Redevelopment Agency and Housing Authority boards from 2003 until he stepped down in July to run for City Council, said the council shouldn’t be so quick to dismiss the idea.
The city General Fund needs a cash infusion now, not smaller loan repayments spread out for years to come, Ours said.
“It’s like the Lotto — would you like $250,000 a year for 10 years or $6.6 million today?” Ours said. “I’d take the $6.6 million given the situation the city is in today.”
The Redevelopment Agency of Santa Rosa, which was founded in early 1960s, works to revitalize blighted areas of the city. Major projects include the construction of the Santa Rosa Plaza Mall in the late 1970s, the development of the Vineyard Creek Hotel in Railroad Square in 2002, and the proposed transformation of the former AT&T building downtown into a mixed-used mid-rise called Museum on the Square.
The projects undertaken in the city’s five redevelopment areas are funded by increased property taxes from higher property values that result when disadvantaged areas are cleaned up and new businesses take root.
To jumpstart such projects, the agency has traditionally borrowed money from the city at an interest rate of about 6 percent. As of July 1, the agency owes the city about $6.6 million, and makes interest payments of about $250,000 per year.
Soon after stepping down from the redevelopment agency board, Ours suggested the city take a closer look at requiring the agency to repay the loans.
“They say they’re broke, but there’s $6 million over there,” Ours said.
The biggest chunk is $3.7 million in loans to the downtown redevelopment district, called Santa Rosa Center. These should be immediately repaid because the money is no longer needed now that a deal has been struck to sell the AT&T building without public subsidies, Ours said.
But Dave Gouin, director of the city’s Department of Economic Development and Housing, said the sale of the AT&T building is on track but has not been completed, and the agency would rather keep its options open in the event the project needs additional financing.
“We really want to make sure that AT&T (project) launches successfully,” Gouin said.
Bruce McConnell, the city’s interim chief financial officer, said he will advise against immediate repayment of the loans, which he said are “high-quality” and generating above-market-rate revenue for the city.
Recalling those loans would generate a one-time cash infusion but also would eliminate millions in future interest payments to the city, McConnell said.
The agency could raise replacement capital to keep its projects going by selling bonds, but there are additional costs and risks associated with that, McConnell said.
“In the short term, if you pay back all the money immediately, you start to have some problems,” McConnell said. “I think that right now the best thing to do is to stay the course.”
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REDEVELOPMENT IS THE PROBLEM
The following was sent to the City of Santa Rosa on 2/ 2 / 2009
“to SUE, cmoffice, ernesto, gary, jane, john, marsha, susan, veronica,
It is good that the Council has stated its intent to review the redevelopment agency, focusing on the financial report for 2008. Towards that end I offer these questions:
The agency intends to draw down a 14.7 Million dollar line of credit at the Exchange Bank. Why is this draw down necessary? For what will it be spent ? {p6 08}
In 2008 agency expenses were $12.8 Million revenues were $9.8 Million. How was this deficit covered ? {p3 08}
Who got a grant or grants from the agency [ names, dates, amounts] ? How much of the bond proceeds was give out in grants ?
Why did agency payroll increase from about $ 0.5 Million in 2007 to $1 Million in 2008 ?
Why were redevelopment areas combined ?
Are property taxes from all properties in a redevelopment area used to pay off the bonds ? Even properties which have not received redevelopment funds ?
How are bonds to be repaid if projects in redevelopment areas are tax exempt ? {p4 08}
The AT&T property pays no real property tax. How will the bonds be paid off ? How much property tax was being paid before the agency/city bought the property ?
Hyatt hotel pays no real property tax. How will the bonds be paid off ?
Hyatt got a $ 2 Million loan form the city in 2008. On what was it spent ? Agency has spent $ 12.5 Million on Hyatt. How much has been returned/repayed ?
Agency stated in email of 2-29-2008 that city did not loan money to Grace Bros/Hyatt project. But Financial report shows a $ 2 Million dollar loan to this project. Please clarify. {p33 08}
Which redevelopment projects need planning, design review, or cultural heritage approval ? Redevelopment projects are generally exempt – right ? Why ?
Who manage the agency, who is the management of the agency [ names, titles] ? Who are the “we” on page three ? {p3 08}
City claims redevelopment pays for sewer and water improvements. But $ 6 Million of sewer and water rate payer’s funds were spent in redevelopment areas. Please clarify.
City claims agency is separate from city and therefore city/tax payers are not liable for agency debt. But statements in finical report indicate otherwise. Please clarify, stating case and statue law. {pvii, 18, 23, 25 08}
Is the present Council bound by previous Council decision. May the present Council cancel or alter Gateways or other projects ?
How much does the agency owe the city ? When will it be paid back ?
What happens if agency can not meet bond payments ? If there is no tax increment, what happens ?
Yours for good government, Richard Canini”
Electing anyone to the city council who has served on this redevelopment board is absurd, unless he can explain away its and his failures. Lets hear the explanation.
Sorry Jacob for the typo with your name.
Jabob – You can’t declare a fiscal crisis to raid Measure O funds and be doling out loans. I would bet the Measure O commitee and voters would have a real problem with that. Possibly even a legal problem.
And to make 6% on a loan absolutely justifies cutting city services, destruction of parks, closures of pools and senior centers, etc… (that’s sarcasm if you didn’t catch it)
Sounds to me like Whitmore works for redevelopment. (Just putting that out there)
@Grey
You misunderstood my comment. The regulatory takings are not paid for. I said there’s been a huge increase in eminent domain seisures, about 4 fold since KELO. Hope that clarifies it for you. I accidentally put in an extra coma.
@Kay
I challenge you to substantiate this claim:
“there’s been an enormous increase in eminent domain seizures and regulatory takings, which under the law are not compensated.”
This is an out-right lie! Governments cannot seize private property in these United States without fair, market-rate compensation to the property owners!
This is the type of inflammatory remark that has followed Kay and this group since the inception.
@ Cannini,
Your math is correct Mr. Cannini. As I sat watching the city council meeting, I also did the math. I think I heard something about financing charges that pertain to redevelopment loans. I believe I heard at one point that financing charges for redevelopment agencies are in the neighborhood of 30%. Could you shed some additional light on the finance charges?
As mayor Gorin stated at the meeting, Mr. Cannini pointed out the 6.6 million outstanding debt on several occasions at city council meetings. The big issue now is whether not the city of Santa Rosa should ask us for increased sales tax when they could get their hands on 6.6 million. Not taking the money, while claiming to be broke, is disingenuous.
While I’m no fan of redevelopment, Jake Ours has come forward with an idea to solve the city’s budget problem. I’m voting for him and the other business promoting candidates.
I’m not sure who Grey Whitmore is, but I can guess. While hundreds of local business owners contributed to the lawsuit to defend themselves from redevelopment, there were people going around trying to break up our meetings and spreading lies about the organizers, myself included.
Many , if not most, commercial properties in the Gateways’ project area have already been downzoned by the passage of the Santa Rosa Downtown Station Area Plan. The city just rezoned over 1,000 properties. These property owners now have non-conforming status which means that they cannot significantly alter or expand their uses. And if their use lapses for more than 6 months, they cannot re-occupy with the former use. In redevelopment areas, property owners that do not conform to the redevelopment plan can be taken by eminent domain. That is the hammer.
To be fair, Grey Whitmore should be attacking all the small business owners that paid into the lawsuit. Because our leadership did not disclose the identities of the contributors, we’ve taken all the heat. Since the KELO decision, there’s been an enormous increase in eminent domain seizures and regulatory takings, which under the law are not compensated. If you watch city council meetings, large groups of property owners have recently been appearing before the city council to protest the loss of their property rights. This city has been no friend to property owners and they have used eminent domain to take private property.
Sometimes they can accomplish the same thing, driving people off their property, by passing new regulations which they don’t have to pay anything for.
@Grey
My reading of Kay’s original post indicates nothing more than her objection to the agency having the power of imminent domain. Reasonable people can differ about that, no?
You are probably right about the city not planning to seize property. But we live a a world in which more than 60% of Healdsburg is classified as blighted for redevelopment purposes. When the original intent of the law can be abused to that extent, some fear of “what next” seems plausible to me.
Regards
Quotes are from: ‘Santa Rosa council urged not to call in redevelopment loans’
“…making the Redevelopment Agency repay $6.6 million in loans…a proposal floated by City Council candidate Jake Ours…who sat on the Redevelopment Agency and Housing Authority boards from 2003 until he stepped down in July to run for City Council…”
Why have we not heard of this from Mr Ours before? Is this some kind of political campaign ploy?
“…would you like $250,000 a year for 10 years or $6.6 million today?” Ours said.”
He is missing something here because $250,000 times 10 is only $2.5 million. What did he leave out? Why did he leave it out?
“…Ours said. “I’d take the $6.6 million…”
I believe he would.
“…an interest rate of about 6 percent. …about $6.6 million…makes interest payments of about $250,000 per year.”
However 6 percent of about $6.6 million is about $396,000 not about $250,000. What is this all about?
Is someone with such poor math skills a good choice for city council?
He is not ours? Is he yours?
@ Lyn Cramer
Agreed Lyn. And I would say lie by inference.
Kay continues, as she has all along, to throw out eminent domain seizure as one of the primary goals of Gateways.
No where, NO WHERE, have I read that the City of Santa Rosa has plans to start seizing property.
Now, it certainly is an available means, but it is last resort for most governmental actions. By continuing to throw out the fear that the City of Santa Rosa is going to start seizing properties left and right is a lie.
As I understand it, the City can call in the notes to redevelopment whenever it wants… Redevelopment borrows from the general fund, and the CITY receives a good interest rate from these notes to OUR OWN redevelopment agency. It is ALREADY a win/win/win!
Now, if we decided to take “the lump payment” as candidate Ours suggests, what we’re going to be doing is sending this loan interest off & away to Wall Street. Am I right?
As it stands, I think we have a pretty darn good system – absolutely not perfect – but one that serves to put money and infrastructure into core Santa Rosa, in order to benefit everyone who uses the core of the City.
I think to suggest that the loans should be shipped off to Wall Street for a ONE-TIME and NEAR TERM cash infusion to the General Fund is LUNACY! …certainly not something a candidate should run their campaign on.
Go Local – keep the money, the debt, the interest, the benefit and the risk RIGHT HERE. It’s a risk worth taking.
And lastly: @Jason Valez – I suspect you are not a person, but a figment of a misguided campaign’s imagination. Please show me wrong. Provide us all with a link equitable to this one: http://goo.gl/GbeU
~jake
@ Grey Whitmore
Jake Ours appeared before the City Council last night. He made complete sense, unlike Bruce McConnell, the city’s interim CFO. Here’s the story, The city’s reserve fund has been used to fund the five redevelopment areas to the tune of about 6.7 million. Of the five, two can either refinace or easily pay back the money representing about half of the debt. Gateways could refinace, but McConnell kept saying that the redevelopment agency would lose tax increment if they paid the 1.7million back. That’s not true, they can refinance. Jake Ours made this perfectly clear when he addressed the council. Also the Santa Rosa Center project can give back 1 million now because the ATT project is ready to proceed. McConnell said that the deal may not proceed but could still fall apart. Maybe, maybe not. In any event, it’s not good for the city’s reserves to drop so low. Our credit rating drops as a result of low reserves. Our credit rating is ‘a’, that’s pretty low.
Then, McConnell said that the reserves could be taken back from the Agency if and when they needed the money. That’s not a sure thing because it would require that first, the money isn’t spent and that alternative financing can be arranged. It’s not really going to be readily available. That 6.7 million belongs to the General Fund which is experiencing unprecedented shortfalls and low reserves.
Councilmember Olivares asked a good question, how much money does the Redevelopment Agency have now? McConnell skirted the question and would not answer him. This information, which I’m sure is available would be very important to know in determining whether or not the city’s funds could be restored. Olivares should have held their feet to the fire. Let’s get the money back. Good work, Jake Ours.
@ Grey Whitmore,
My facts included that the lawsuit did not succeed. I directed people to a publication to learn more about redevelopment. The lawsuit challenged the validity of the Report to Council, the document used to ‘prove’ the area was in fact blighted. I’ve spent years studying redevelopment and I do know what I’m talking about. Did you read the entire Report to Council? If you did, you would know that it’s riddled with false information.
The lower court ruled that we had exhausted our legal remedies, a hurdle that’s difficult to clear. Our efforts and written objections satisfied that requirement even though we had no legal representation at the time. If we had legal representation throughout the process the outcome may have been different. If you would simply read Redevelopment, The Unknown Government, then maybe you would know what you’re talking about.
@Grey
Since you accuse Kay of lying, don’t you have an obligation to point some of the lies out?
As I read Kay’s post on Gateways, it offers only 2 statements of fact: its size (1,100 acres) and location, and that the SR business assoc fought a 3-yr battle to prevent its creation. Where is she wrong?
The rest of her post is opinion, which you may not like but does she not, like you, have a right to one?
Sorry Kay, you can’t continue to spread lies about Gateways. You lost repeatedly in court. None of your “facts” were found to be true by any court in the State! Time to move along.
Why take back a loan when the city is having difficulty maintaining core functions of government? Does that question really need an answer?
Oh, one other answer occurs to me. The city is not a bank. What is it doing lending money in the first place? If it has money to loan, why does it need a tax increase?
Ours doesn’t know how to run a city. Why on earth would you buy back a loan that is paying 6 percent interest when the treasury bonds and other safe investments are at best generating 3.5%?
What a waste of taxpayer money. Lousy financial instinct on this guys part.
Wow-a constructive idea rather than a destructive, “stifling to business and economic development” idea like another sales tax initiative! bravo Jake Ours!
Lyn Cramer is right again. The city should grab the 6 million if they can. Everyone should read ‘Redevelopment, The Unknown Government’ to see how the property taxes are shifted away from generals funds into the redevelopment slush fund to grease the skids for private development. Redevelopment Law was developed by the State and the State could take it away. It’s part of the health and safety code whereby it exists to remediate blighted areas. That’s really a joke though, most of the money and benefits go to private developers.
The Santa Rosa Area Business Association sued and tried to stop the creation of the new 1,100 acre Gateways Redevelopment Area which covers most of the center of Santa Rosa. Our 3 year court battle was unsuccessful but we did at least shave 3 years off the time period in which they can use eminent domain to take private property. Redevelopment is a truly unsustainable endeavor which voters could seek to eliminate by ballot initiative.
Sorry Ours, you have a bit more explaining to do. Sound very similar to the Governor’s plans to sell state buildings for a quick cash infusion.
The goal is not quick infusions of cash to solve problems today. It is long term financial sustainability that takes thought and work, not a quick fix that is popular with voters hurting from the economic crisis.
So the Santa Rosa Plaza Mall was one of the redevelopment agency’s major projects to revitalize downtown. I should have figured that private money couldn’t be found to build such a monstrosity. It will surely merit special attention when the history of the 1970s school of concrete-bunker architecture is written.
Seriously, grab the $6 million while you can, before more money is wasted. Redevelopment agencies should sunset after no more than 20 years, long enough to revitalize any area if the plan has merit. That Santa Rosa’s is ongoing after 50 years is simply a tragedy. How many millions would have gone into the general fund, to schools, to the county?
Jake Ours, a redevelopment expert says that the redevelopment agency has the $6.6million it owes the city and could pay it off. That’s good enough for me. He’s got my vote. The city’s general fund needs it more right now so they don’t have to cut as many vital services for the public. Let’s get some new people on the council who can make the right decisions.