CLEARLAKE – The Clearlake City Council on Thursday voted to use redevelopment funds to purchase 61 vacant city-owned parcels and get rid of a fund surplus that could shut down the Redevelopment Agency.
“We have a very serious financial problem with the Redevelopment Agency's housing fund,” City Administrator Dale Neiman told the council Thursday.
Neiman said the state requires the city to use 20 percent of its tax increment revenues to help low- and moderate-income families with housing.
The state also mandates that the Redevelopment Agency's Housing Set-aside Fund can't exceed $1 million for four years, reported Neiman. If it does, the state can shut down the agency and only allow debt service to be paid.
Clearlake's Housing Set-aside Fund has now passed the four-year mark of being over $1 million; Neiman said the fund balance was estimated at $2.3 million as of July 1.
Some of those housing funds may have been transferred to the city's general fund over the years, said Neiman.
If the agency is shut down, the city would have to cut $230,000 out of its general fund, because the city was expecting the agency to pick up that amount in administrative expenses.
Neiman and his staff came up with the plan to solve the problem, which involves the city selling the Redevelopment Agency 61-city owned parcels throughout the city's boundaries.
The 61 lots would cost $1,531,100. Neiman's staff report said the city arrived at that number by looking at sales of comparable properties, with sales prices of lots of similar size averaging $25,100.
The sale would reduce the Housing Set-aside Fund to $459,920, said Neiman, which would solve the overage problem.
The Redevelopment Agency would then use the 61 parcels in developing a first-time homebuyer program, the guidelines for which would be developed over the next year, Neiman reported. That prospective use adheres to the city's General Plan for the properties in question, he added.
The city and the Redevelopment Agency would enter into a loan agreement to cover the purchase price, but the agency would not be able to begin paying back the loan until 2010, reported Neiman. That would give the city $602,770 in interest earnings over the next three years.
Neiman said there are still a number of procedures that need to be fulfilled before the sale can be complete, including going before the Planning Commission for a finding that the property disposition adheres to the city's General Plan.
The only person to speak out against the plan was City Councilman Roy Simons, who has made redevelopment one of his key issues.
The Redevelopment Agency, he said, has “been a total disaster for 16 years, and now you're going to burden it with this?"
Instead, he suggested putting the parcels on the market immediately and using the money for road repairs and development.
Neiman explained that selling the property on the market wouldn't address the fund overage or the Redevelopment Agency's obligations to provide low- and moderate-income housing. He said the plan was beneficial for both the Housing Set-aside Fund and the city, and solves a problem he originally didn't think had a workable solution.
Councilman Chuck Leonard agreed. “We've got to look a the bigger picture here and not just take these narrow views of things," he said to Simons, adding that they can't continue to focus on how the agency was operated in the past.
City resident and Supervisor Jeff Smith, who was in the audience, said as part of public comment that the solution was a “win-win” for the city.
“If you didn't take this opportunity you'd be nuts,” Smith said.
When the council – which also sits as the Redevelopment Agency board – makes decisions on redevelopment issues it must pass separate resolutions on behalf of both the city and agency.
Four separate motions – two on the city's behalf and two for redevelopment – were necessary to approve the property sale plan. Leonard moved all four items, all of which were approved 4-1, with Simons voting no on all of them.
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