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North Bay Business Journal

Monday, February 11, 2013, 6:20 am

Cities, county battle state over project funds

At stake: 101 widening, Santa Rosa transit village

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    The battle between local and state governments over redevelopment funds earmarked for construction projects is intensifying as Santa Rosa, Petaluma and the county of Sonoma take legal action after state finance officials repeatedly rejected claims that the funds are legitimately committed to projects in advanced stages of progress.

    The county of Sonoma sued the state of California at the end of January, partly to keep alive projects to upgrade Highway 12 and prepare for a replacement of a shuttered shopping center in the Roseland area of southwest Santa Rosa. And Santa Rosa itself is joining a multiparty lawsuit to unlock funds considered key to kick-start a $200 million transit-oriented redevelopment around the former downtown train depot. Petaluma is preparing to file its third lawsuit against the state over major upgrades to a Highway 101 interchanges related to widening of the freeway through the city.

    New and forthcoming lawsuits from Santa Rosa, Petaluma and the county of Sonoma join more than 50 others filed in Sacramento Superior Court by governments and proponents of in excess of 120 projects, contesting the state’s disbanding of 400-plus local redevelopment agencies statewide a year ago. The lawsuits are part of the remedies included in legislation in the past couple of years that established and corrected the agency-dissolution system.

    Yet, major points of contention in these legal actions are provisions in that law that discount as an “enforceable obligation” project commitments that involved a redevelopment agency and its associated local government and that give the state retroactive “clawback” authority to require funds from commitments not deemed enforceable.

    Road work left half-done

    “We really need to have the state to agree to leave our cash on hand alone if we are going to move forward,” said John Haig, county redevelopment manager.

    The county of Sonoma was half-done with a left-turn lane and new sidewalks along two miles of Highway 12 between the Sonoma city limits and the community of Agua Caliente when the state shut the lid on the county’s access to $7 million in collected and future redevelopment funds for the project. Though the maintenance part of the project passed muster with state finance officials, the redevelopment agency’s contract with the county public works department to do the work was considered unenforceable.

    The redevelopment agency has $2.2 million in bond money restricted for use on this project, but that’s barely enough to fund reburying utilities brought above ground for the project, according to Mr. Haig. The other money was to go toward other improvements such as acquiring land and creating parking lots needed to replace on-road parking removed with the new sidewalks.

    The county board of supervisors approved $450,000 from the general fund to move the Highway 12 project along while the legal action progresses.

    Another high-profile county redevelopment project turned down for access to funds is the former Albertsons-anchored shopping center in an unincorporated area of Santa Rosa’s Roseland area. About $1.5 million is needed just for demolition and environmental cleanup.

    By March 1 the county will be approaching the state again for access to funds to complete cleanup work mandated by the N0rth Coast Regional Water Quality Control Board.

    Hwy. 101 widening threatened 

    Petaluma is preparing to sue the state to access $7.5 million in redevelopment funds earmarked for the long-planned Highway 101 interchange at Rainier Avenue, according to Ingrid Alverde, city economic development manager. In late November, the city filed suits over the Old Redwood Highway and East Washington Avenue interchanges and is awaiting its first day in court.

    Freeway widening through the city can’t happen until the interchanges are widened, and the city entered contracts with Caltrans and other outside parties on the interchanges, she noted.

    “This is a regional benefit and really tragic,” Ms. Alverde said. “Highway 101 traffic is the No. 1 reason city why people won’t move this far north.”

    For the Old Redwood project, $40.8 million has been committed, $19.6 million from the county’s Measure M sales tax, $15.5 million from the redevelopment agency, $4.6 million from Caltrans and $1 million from the city. On the East Washington project, $21.3 million is committed, $14.5 million from federal funds, $4 million from the redevelopment agency and $2.85 million from Measure M.

    Last year, the City Council lowered development fees to attract businesses and replenish city funds through taxes they generate. Yet late in the year, the council had to significantly hike traffic-mitigation fees on projects under construction and seeking significant changes in building use to recover $18.8 million in redevelopment-related costs shifted to city coffers from the Old Redwood and Rainier projects. City contributions to affordable housing and nonprofit service organizations also had to shrink.

    If the city prevails in court, payers of the higher traffic fees would get a refund and those fees would drop by about 10 percent, according to Ms. Alverde.

    “We’re trying to put ourselves in a position to encourage more development to bring more jobs,” she said. “It could be a negative impact on the economy, because investment can’t occur. It hurts everyone in the long run.”

    City seeks transit village kick-start

    In Santa Rosa, San Francisco-based The John Stewart Co., lead developer on the Railroad Square train depot project, was set to sue the state early this month with the city and Santa Rosa-based nonprofit developer Burbank Housing as real parties of interest to access $5.5 million in city redevelopment funds, according to John Stewart.

    Because of the delay in accessing that money, project proponents are under the gun to complete at least the first part done, such as 93 affordable housing units for seniors, environmental review and infrastructure such as roads by the February 2016 deadline for use of $11.3 million in Proposition 1C money the state Department of Housing and Community Development granted the project. That funds commitment is key to the legal case against the state, Mr. Stewart said.

    If work starts soon, perhaps $4 million of that could be tapped, said Mr. Stewart, who said his company has invested $7.3 million in the project already over the past several years.

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