State To Look Into Illicit Sale
DESERT HOT SPRINGS, CA – Cities all across California are wrangling with the state Department of Finance to get permission to sell public properties owned by their former redevelopment agency. Millions of dollars of real estate are hung up over an inability of cities to sell those properties. One city did something no other city has done. It went ahead and sold property without Sacramento ’s permission.
The problem for California cities started when the State Legislature voted to end redevelopment agencies across the state. Now every one of California ’s 384 cities that had redevelopment agencies are tasked with winding down their redevelopment agency by selling off public properties. To do that requires they follow specific guidelines handed down by the State’s Department of Finance and have permission to sell a property.
Months have dragged on while the State Legislature made adjustments to the rules by which Successor Agencies can sell the public properties.
The Southern California city of Desert Hot Springs located in the Coachella Valley across the railroad tracks from Palm Springs decided to forego the rules and the wait. In December 2012 it went ahead and sold six consolidated parcels in its downtown without obtaining permission from Sacramento. The city had purchased the parcels through its redevelopment agency in 2008 for use as a community center, paying $1.4 million plus the cost to demolish an old building on the site.
The city sold the parcels at 66675 Palm Drive in December for $291,000. The land contains a 3,000 square foot building that survived the original demolition.
The sale of the Redevelopment property has now caught the eye of the California Department of Finance.
“They were not allowed,” said Justyn Howard, Department of Finance Assistant Manager, referring to the sale by the city. Howard is the program administrator of property sales by Successor Agencies that replaced redevelopment agencies. He said his department is now looking into the matter that he termed an “illicit sale.”
The city had previously received notice from the California Department of Finance that the sale was not authorized. That notice came in response to a city request made to the Department.
Shortly after that, City Manager Rick Daniels reported to The Desert Sun newspaper that the Department of Finance had approved the sale after all. It appears it was that public statement by the city manager that caught the attention of the Department of Finance. The newspaper account contradicted the notice the Department of Finance had previously sent the city and seems to also now disagree with the Department of Finance position regarding the December sale.
Other Agencies Waiting
Taking a different approach in dealing with the State Department of Finance over the sale of property is the city of Camarillo. There, more than 30 developers are waiting to bid on a mixed-use property called Cedar Oaks. It is a former gas station the city already cleaned up, just as Desert Hot Springs had done in clearing the six parcels in its downtown.
Camarillo, however, continues to wait for permission from the Department of Finance, leaving the project hanging in the balance while state officials work out the details on how properties are to be sold. “It is all on hold,” said assistant city manger Dan Paranick.
“The state has imposed these ungodly restrictions on how this is done, but there are some projects that may fall into a category where cities are saying ‘We can’t relinquish this property to the state and we can’t sell it until we figure out who the real property owners are so there aren’t third party lawsuits,” said Sam Olivito, executive director of the California Contract Cities Association about the situation in Camarillo and across the State.
Olivito was not aware of the situation in Desert Hot Springs and did not comment on the specific details of Desert Hot Springs unique approach that has not been tried by other cities in his association.
Meanwhile Camarillo continues to wait. “We’re cautiously optimistic as we jump through the various approvals that we will develop those properties,” Paranick said. City Manager Bruce Feng said, “As soon as we’re authorized by the state to develop the projects, we’ll work in an expedited manner to develop those real estate projects.”
Closure to home, Riverside County is taking the state of California to court to protect $40 million in funds it holds and needs to pay off debts of its now-defunct redevelopment agency. It filed its lawsuit in Sacramento County Superior Court on March 1 over seventeen construction projects it wants to finished such as the renovation of Mission Plaza in Jurupa Valley and the Perris Valley Aquatic Center.
The city of West Covina, like Riverside County, has taken the court option. The city filed a lawsuit against the state of California and other state agencies to prevent the state from taking $12.2 million in loan payments made by the city’s redevelopment agency to city and used to fund new projects.
West Covina Mayor Shelley Sanderson said the funds belong to the city. Instead of ignoring Sacramento ’s instructions, West Covina has taken the court option. City Manager Christopher Chung said the $12.2 million are general fund dollars. “We use that for a variety of services, including police and fire. That $12.2 million would represent most of the cash reserves we have on hand.”
Meanwhile in Desert Hot Springs the former agency property has been sold and is now in private hands. Construction has begun and is at the halfway mark. The new privately owned building is expected to be completed by September.
Desert Hot Springs’ sale of former redevelopment property
Resolution of Sale
Resolution of Sale Agreement
Agenda Dec. 12 City Council Meeting
Another Staff Report
Email from Dept of Finance to City
Request for Expedited Review
Resolution for Sale 2
Assembly Bill X1 26 (“AB 26”) as modified by Assembly Bill 1484 (“AB 1484”)