SANTA ROSA -- As a 13-year project to transform the historic yet vacant cannery area around a planned downtown commuter-train station reaches a critical point to start construction next year or lose critical funding, the city of Santa Rosa plans to plead its case in Sacramento later this month for the release of redevelopment funds considered key to starting the $200 million-plus project.

What's urgent about the city's request is a looming early 2013 deadline for significant progress in construction of the first phase of the Santa Rosa Cannery project west of the railroad tracks between West Third and West Sixth streets in the central Railroad Square district, according to David Gouin, city economic development and housing director, and John Stewart, a lead developer of the project.

At stake is a $11.3 million grant from the state's Proposition 1C redevelopment project program, which is predicated on $5.5 million in local matching funds being released from reserve and affordable-housing funds of the Santa Rosa Redevelopment Agency, Mr. Gouin and Mr. Stewart said.

The state dissolved the agency in February along with more than 400 others statewide under Gov. Jerry Brown's 2011 budget-balancing legislation package, which is aimed at redirecting agency funds to state-funded local services and other purposes.

"The time clock is running, because we need to use it or lose it," Mr. Stewart said about the grant money.

The Proposition 1C funds, the matching funds and other sources amount to $24 million in backing for the first phase of the project and would allow it to be built, according to Mr. Stewart. His San Francisco-based The John Stewart Co. is managing partner of the cannery project and has an option to buy Sonoma-Marin Area Rail Transit's adjacent 5.3-acre project.

The cannery project would have 93 units of one- and two-bedroom apartments for seniors in five stories inside the preserved south and east outer walls of the former 1.3-acre brick cannery along West Third Street. A parking structure would be built inside outer walls of the northern portion of the former cannery building. That element would be critical to the success of the housing and retail future phases of the two projects, totaling 279 dwellings and 88,000 square feet of commercial space, according to Mr. Stewart. The city approved entitlements for the first phase in 2009.

Under laws related to the dissolution of the redevelopment agencies, local governments can request to have agency funds released to pay obligations related to its projects, such as those related to Santa Rosa's downtown Transit-Oriented Redevelopment Project Area, created in 2004 around the train depot projects. In August, the city of Santa Rosa filed its "recognized obligation payment schedule" for the first half of 2013, claiming $24 million in agency-related obligations for that period, including the $5.5 million for the Railroad Square projects.

In an Oct. 6 letter to the city, the state Department of Finance said $34.3 million of $126.4 million in outstanding agency debts and obligations were not "enforceable obligations," including the $5.5 million for the cannery project. If those obligations were deemed enforceable because they involved deals between a local government and a third party rather than the corresponding redevelopment agency, those obligations would be eligible for payment from what had been agency property-tax increment revenue, bonds and reserve accounts, according to the four-page letter from the department.

State law allows local governments to contest such conclusions in five days, which the city did. Local officials have a Nov. 19 date to "meet and confer" with department.

The John Stewart Co. has spent $7.3 million on the Santa Rosa project so far on soil studies and site environmental cleanup, which took three years, according to Mr. Stewart.