The Lakeport City Council – sitting also as Lakeport Redevelopment Agency and Lakeport Public Financing Authority – voted 4-1 to authorize the issuance and sale of tax allocation bonds this year. Councilman Jim Irwin was the lone dissenting vote, citing concerns over the city's current list of projects.
This will be the second bond sale issued on behalf of redevelopment, Lakeport Redevelopment Agency Director Richard Knoll told Lake County News on Wednesday.
The previous bond sale, which took place in 2003, was for just over $2 million, which was roughly split between taxable and tax-exempt bonds, said Knoll. Roughly $1 million went to pay off city debt generated in creating the redevelopment plan, with another $200,000 benefiting the Soper-Reese Community Theater's extensive renovation.
Knoll said the bond funds will be combined with other agency resources – in particular, tax increment revenue generated yearly – to stimulate new development in the project area and respond to blight issues.
Tax increment revenue is a primary funding stream for redevelopment. According to redevelopment protocols, it's the increase in property taxes due to higher assessed values, usually resulting from property improvements.
Last year, the city received just under $900,000 in tax increment revenue, which increases annually, said Knoll. The city shares about half of that amount with local agencies such as Lakeport Unified School District, Lakeport Fire Protection District, Mendocino College and the cemetery district.
Redevelopment is proposing to use the nearly $4 million for several projects, including $750,000 in infrastructure improvements, $1 million in streetscape and building facade improvements, and $500,000 in business attraction and incentive programs, according to Knoll.
A portion of the proceeds also will be used for updating the city's five-year redevelopment implementation plan and for agency operations, Knoll told the council Tuesday.
Mark Northcross of San Rafael-based Northcross, Hill and Ach, a firm that financially advises public agencies, and municipal bond law attorney Charles Adams of the San Francisco law firm Jones Hall helped explain the bond issues to the council.
Councilman Ron Bertsch asked what would happen if the city's bonds couldn't be sold. Northcross said the municipal bond market in California has adapted well and weathered the larger economic issues brought on by the credit crunch. “I'm very confident that your bond issue can be sold.”
Northcross said his confidence was high because the city had achieved an A- rating. That, essentially, puts Lakeport's redevelopment agency on par with larger agencies. “When a community in rural Northern California gets a credit rating the same as major cities in the Bay Area, pat yourself on the back,” Northcross said.
He told the council that the higher rating resulted, in part, because the redevelopment agency's bond covenant held its debt service to a specific amount. The result, he said, will be lower interest rates for the city's debt service on the bonds over the 30-year term.
Bonds remain a good way of doing business for cities, said Northcross.
“I'm going to be real blunt here,” he told the council. “Redevelopment is about other peoples' money.”
It's also about the real estate development business, and using other peoples' money for development projects to improve a community. In order to take those steps, Northcross said a redevelopment agency needs as much cash on hand as it can get. To maximize the amount of money the city can receive, it needs to be able to collect tax increment revenues over the longest period of time possible.
Adams said the theory behind redevelopment is that, by improving a downtown area, more sales tax is generated, and that benefits the agency.
Irwin asked about putting off the bond issuance for several months or a year. Northcross and Adams both said that would delay the city's ability to pursue projects. The city also would have to reapply for a rating, and it may not be as favorable.
During the public hearing, downtown business owner Leslie Firth of the Kitchen Gallery, who also spoke as a member of the Lakeport Main Street Association, asked for a favorable decision on the bonds.
The funds, Firth said, will be key for a downtown transformation project, which includes facade and sidewalk improvements, and other enhancements. The goal, said Firth, is for Lakeport to be a resort and retail destination.
The city's downtown, said Firth, represents “who we are and what we do here.”
Businessman Bill Brunetti gave a knowledgeable explanation of redevelopment based on his own financial experience.
“I think redevelopment is one of the most exciting things that can happen to a city,” he said, because it allows a city to maximize its funds while also offering flexibility to how those funds are used.
With the city's good bond rating and a good list of projects at hand, Brunetti urged the council, “The time is now.”
Lakeport Chamber Executive Director Melissa Fulton said the downtown Lakeport transformation project and the redevelopment opportunities before the city have resulted in a lot of excitement about the potential and possibilities.
However, Irwin said he wasn't comfortable with the list of projects the city had, and said the agency already had about $2.5 million in the bank that it could use for the downtown plan without selling the bonds.
“I think we need a better list of projects right now,” he said.
Bertsch was concerned that the bond funding amount wasn't enough, and questioned if the funding would be able to improve more than just a few blocks of downtown, when considering the cost for engineering and consultants.
City Engineer Scott Harter said a project on Third Street, including the City Hall parking lot, was going to cost about $500,000 for one block.
Knoll told the council that there is a substantial amount of interest arising in the development community because people are realizing that the city has capital to offer in partnership with developments. “I would just encourage you to move forward on this because I think it is a positive move for the agency and the city.”
City Manager Jerry Gillham said the city will move forward on projects this year and into next year, and once the city knows the money is coming the project plans will become more specific.
Recognizing the concern that Irwin had, Brunetti spoke to the council again, explaining that in redevelopment incurring debt is both good and necessary, in part because it will draw projects.
Redevelopment debt isn't the same as other kinds of indebtedness, said Brunetti. “It really is different.”
Having the funds on hand, said Brunetti, will help the city be ready for potential projects, and may change the face of the city.
Acting as the council, agency and financing authority, members had to pass three motions to finalize the bond sale's approval. Irwin was the dissenting vote on all three, maintaining that he was not comfortable with the sale or the projects at this time.
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