The rest of the city’s plan to modernize its downtown and make it more suitable for bigger crowds of visitors and new residents could be severely set back by the state’s redevelopment wind-down process, but city officials remain optimistic.
The city plans to use about $19.3 million to build new parking facilities, spruce up downtown side streets, place utility lines underground and work with private developers, in line with the 2008 “downtown specific plan.” Without that cash, which is left over from RDA bond proceeds acquired by the Morgan Hill agency, there’s no money available to pay for these projects in the foreseeable future.
And there’s a good chance that $19 million will not be available as the city hopes, as the California department of finance might order the city to use the money to pay back some of the debt on the 2008 bonds from which it came, according to City Manager Ed Tewes.
That would be a bummer for the Morgan Hill City Council, which approved allocating the cash for the downtown improvements in March, knowing the state might redirect the $19 million back toward debt payments.
Mayor Steve Tate said he’s looking at the future of the cash with more of a “glass half-full” perspective, and he thinks the state will allow the city to use the funds to improve the downtown. And even if they don’t, the city will still find a way to implement the desired projects.
“We’ve had the intent to do the downtown specific plan for many, many years,” Tate said. “It might take longer than we thought, but we’ll still be looking for ways to move forward.”
One way that could happen is through the efforts of the Morgan Hill Downtown Economic Development Corporation, a private nonprofit agency created by the city last year when the council learned the state was considering eliminating redevelopment.
Without the $19 million, options for improving downtown will be “limited,” according to EDC chair and City Councilman Larry Carr. The EDC will still work on maintaining and enhancing the economic benefits of downtown by partnering with private investors and businesses, managing leases on properties formerly owned by the RDA (and now owned by the EDC), and working with other organizations such as the property-based improvement district.
“The downtown properties and business owners themselves are going to have to be more and more engaged in trying to support the efforts of the City Council and the EDC in keeping resources local, for the benefit of our community rather than allowing them to disappear to Sacramento,” Carr said. “The EDC is going to be spending a lot of time looking at things like what the strategies are for the different assets (it owns), leasing strategies, filling the vacancies we have, and making those become something that is helpful to the entire downtown community.”
The EDC owns the Granada Theater and Downtown Mall buildings, Royal Clothier and the former site of Simple Beverages – all of which were originally purchased by the RDA in 2008.
One ongoing strategy, which was part of the RDA’s efforts before it was closed, is to lure private investors or developers to build on those sites, Carr noted.
Previous efforts and negotiations – such as the attempt to build a mixed-use development at the Granada site with Barry Swenson Builder – didn’t pan out. But the EDC is currently working with developer Stephen Pace to potentially build a mixed-use residential, retail and office project at the Simple Beverages site at the corner of Monterey Road and Third Street.
The approximately $19 million in proposed downtown improvements are separate from but parallel to EDC activities, and include a $7 million, three-story parking garage, $1.8 million worth of improvements to existing parking areas downtown, $5 million for Monterey Road and downtown side street enhancements, and about $2 million for improvements to the median and utility undergrounding on Monterey Road between Dunne and Tennant avenues.
The redevelopment dissolution process, laid out in what legal experts have classified as a vaguely written law approved by the legislature last year to partially balance the budget, requires the newly created oversight board to approve all the former RDA’s ongoing debts and contracts. The law closed all RDAs in California as of Feb. 1, with the intent of directing the agencies’ former resources to more basic services such as education, social services and public safety.
That process began last month in Morgan Hill. But the DOF has veto authority over the local oversight board. In fact, the DOF already decided to take a closer look at the board’s approval of the former RDA’s (now the successor agency, which is City Hall itself) first six-month debt and contract payment schedule, which was approved by the oversight board April 16.
The oversight board, which consists of representatives of all the taxing entities within the former RDA area, likely won’t be tackling the expenditure of the remaining bond proceeds for a few more weeks as the city has not yet signed contracts for any of the projects.
However, anticipating that the $19 million could be a sticky issue that the DOF might want to settle itself, City Finance Director Kevin Riper has already sent the state office a letter pleading the city’s case for keeping and spending the money.
“It is well documented that the former (RDA) promised to use bonds for specific capital projects, as defined in a list adopted as part of the bond approval proceedings” in 2008, Riper’s letter states.
However, the vagueness of the state RDA-dissolving law is what opens up the state’s possible ability to retain the $19 million, according to city attorney Danny Wan. The state law says that remaining bond proceeds will be used for their original purposes, “unless the purposes can no longer be achieved, in which case, the proceeds may be used to defease the bonds,” or pay back the bond debt.
“The argument is what’s achievable, and what’s not,” Wan said. “We think it’s all achievable.”
A team of consultants retained by the city conducted a study on the feasibility of the parking garage, the results of which were reported to the council last month. The structure would be jointly developed by the city and the Santa Clara Valley Transportation Authority and the city, on the west side of the railroad tracks. It would be used for Caltrain and VTA commuters and patrons of the downtown.
The existing Caltrain lot would ideally, at some point, be developed with a residential mixed-use project by a private builder.
