Developer sued Modesto over downtown project. How much did it cost city?
A lawsuit by the developer that helped Modesto remake its downtown has cost the city more than $776,000 to settle.
Civic Partners Modesto sued the city’s Redevelopment Successor Agency in Stanislaus County Superior Court in January 2017.
The lawsuit also cost the successor agency $433,075 in legal fees and $43,095 in other costs, according to the city, bringing the litigation’s total cost to $776,170. The lawsuit has been dismissed. Attorneys for Civic Partners filed a request to dismiss it June 28.
The Bee learned about the settlement through filing a California Public Records Act request for all lawsuits, claims and similar matters Modesto settled in the second quarter of this year, April 1 through June 30.
California cities and counties formed redevelopment agencies to eliminate blight and spur development. They issued bonds to raise large amounts of money to do high-impact projects. And they used their property tax revenues to pay off the debt.
The state abolished redevelopment agencies in 2012. Cities and counties were required to set up successor agencies to pay off the debts of their former redevelopment agencies through the property taxes they receive.
Modesto used its Redevelopment Agency for the Tenth Street Place project, which spans Ninth to 11th and J to K streets in the heart of downtown.
The project includes the six-story city-county government center at 1010 10th St. — which opened in 1999 and also is known as Tenth Street Place. The building was developed and paid for through a partnership among Modesto, its Redevelopment Agency and Stanislaus County.
The Redevelopment Agency also worked with Civic Partners on the project, which includes Brenden Theatres, dining, retail and offices.
Civic Partners entered into an agreement with Modesto’s Redevelopment Agency — lease with the option to purchase — for the ground-floor retail space at Tenth Street Place in 2001. Civic Partners then leased the space to businesses.
Civic Partners alleges the agency miscalculated the lease payment and overcharged the developer $25,000 to $50,000 a year. Civic Partners also paid for spaces in the adjacent parking garage for its tenants’ customers. The lawsuit alleges the city overcharged Civic Partners nearly $89,000 over two years.
The successor agency did not admit to wrongdoing or liability in settling the lawsuit.
Civic Partners bought the ground-floor retail-commercial space from Modesto’s successor agency in 2017. Civic Partners sold the 28,608 square feet of space to Stanislaus County in 2018 for nearly $4.5 million, according to a county report.
While the City Council lent the successor agency the $300,000 to settle the lawsuit in January, with the loan due June 30, the California Department of Finance did not approve the loan.
City spokeswoman Diana Ruiz-Del Re said in an email that the successor agency paid the $300,000 from the property tax it received in June. She said the agency also is responsible for the other costs associated with the lawsuit.
This story was originally published August 4, 2022 at 6:30 AM.
