Board OKs Modesto plan to take redevelopment agency properties, but not debt
10/17/2013 7:22 PM
10/17/2013 7:23 PM
Modesto’s city government should be given all the properties – but none of the $129.7 million in debts – from the now-defunct Modesto redevelopment agency. That’s the plan approved Thursday by the local oversight board that’s tasked with winding down the redevelopment agency’s affairs.
But California’s state Department of Finance will have to approve that deal and decide whether it would be fair to debt holders and other public agencies.
The valuable downtown properties at stake include Modesto Centre Plaza, the ground floor of Tenth Street Place, two massive parking garages and two parking lots. One of those 10th Street parking lots is where the state wants to build a new courthouse.
Those properties generate more than $1.5 million per year in gross revenues, but the proposal would allow the city to keep that income, rather than use it to pay down the redevelopment agency’s debts. And if the city eventually sells any of those properties, such as the 10th Street courthouse site, the city would get to keep those proceeds, too.
The redevelopment agency’s continuing debts, meanwhile, would be paid from future property taxes collected from private landowners in the greater downtown Modesto area over the next 25 to 35 years. A $77.7 million chunk of the agency’s debt is owed to the city of Modesto, which repeatedly had loaned the agency money interest free during the past 30 years.
But giving Modesto all the agency’s properties wouldn’t be counted toward paying down what is owed to the city, according to Laurie Smith. Smith is a Modesto city employee and a member of the agency’s oversight board.
The Modesto Redevelopment Successor Agency Oversight Board has gotten virtually no public attention since its members were appointed in 2012. City of Modesto employees serve as the agency’s staff members, just as they did for the old redevelopment agency, which was run by the City Council.
The main source of income for California’s more than 400 redevelopment agencies was property taxes. Modesto and other agencies borrowed against future property tax proceeds to fund projects that were supposed to eliminate blight and stimulate the economy. Such developments were expected to increase Modesto’s property tax base.
State lawmakers dissolved all redevelopment agencies last year. But banks and other financial institutions that loaned redevelopment agencies money must be repaid. The Modesto agency, for example, owes the Bank of New York $28.5 million, US Bank more than $20.9 million and the Stanislaus County Economic Development Bank $405,000.
Modesto Centre Plaza and Tenth Street Place are responsible for most of those debts, and it will take an additional 20 years to pay off what they owe to the banks. For example, the debt payment for Modesto Centre Plaza and the adjacent Ninth Street parking garage is $1,961,450 per year. Even though it was built in 1988, the main loan on that community center won’t be paid off for another decade.
The debt payment for the ground-floor retail section of the Tenth Street Place county-city building and the adjacent 11th Street parking garage is $1,353,104 per year. That complex opened in 2001, but when its debt will be paid off isn’t clear from the long-range property-management plan approved Thursday.
There is no debt on the agency’s 31,500-square-foot parking lot on 10th Street, which is on the block where the state wants to build a $277 million courthouse. A recent appraisal was done on that property, but city staff will not reveal what was said about the land’s value.
Once the city gets title to that parking lot, it plans to sell it to the state’s administrative office of the courts.
Whether the state Department of Finance will agree that the parking lot – or any other redevelopment agency property – should be given to the city is not known. The city’s staff thinks such transfers will be allowed because the properties will continue to be used by a government agency.
How long the state Department of Finance will take to decide also isn’t known.
“There is no time frame set in statute. Because of this, long-range property-management plans are only worked on during those times when reviews with statutory deadlines are complete. The amount of time to complete the review will also be dependent on the number of properties in the plan. The larger the number, the longer it will take to review,” said Department of Finance spokesman H.D. Palmer.
Should that review drag out, it might jeopardize the city’s plan to sell the 10th Street property for the courthouse. The administrative office of the court’s deadline for buying a Modesto courthouse site is June 2015.
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