Heralding a “new spirit of cooperation” among local public officials, and finally a return of local control over the future of downtown properties, the Morgan Hill Redevelopment Oversight Board approved the settlement of a lawsuit that sought to limit the worst possible repercussions of the state’s labyrinthine 2012 redevelopment wind-down law.
The settlement, as well as a separate agreement with Santa Clara County officials, clears the way for the City and County to work together to develop a “long range property management plan” for downtown Morgan Hill, using about $19 million remaining from bond proceeds acquired by the Redevelopment Agency in 2008.
That money has been off limits to the City since Gov. Jerry Brown decided to shut down RDAs statewide last year and redirect their resources to other basic services. But as soon as the downtown property plan is completed, which Mayor Steve Tate thinks could be within months, the City and County should soon be able to access the money.
Namely, the slate of upcoming downtown projects includes a multi-level $7 million parking structure on Depot Street, $1.8 million worth of improvements to existing downtown parking lots, $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.
Tate, who serves on the Oversight Board, said they could have the property management plan ready in about six months, with construction starting maybe as soon as late 2013 or early 2014.
“We don’t want to lose any momentum,” he said.
Six of seven board members present at an April 24 meeting (board member Steve Kinsella was absent) unanimously approved the lawsuit settlement with the state, and the separate agreement between the City and County. The latter agreement squashes most of the two parties’ previous squabbles over the fate of the downtown properties, and over the validity of some of the ongoing, post-redevelopment expenses claimed by the City.
“This represents a wonderful step forward,” Santa Clara County Deputy Executive James Williams said at the meeting. “Underlying the spirit of this ‘County agreement’ is an effort to start fresh (with) a new spirit of cooperation moving forward.”
The Oversight Board, which was created by the state law that eliminated RDAs statewide as of Feb. 1, 2012, is tasked with tying up the Morgan Hill RDA’s ongoing affairs, including costs for projects, contracts and debts. The ultimate goal is to redirect the RDA’s former revenues to the City, County and other agencies represented on the Oversight Board.
If it follows the state redevelopment law, the City could now gain access to a total of about $28 million in former RDA bond proceeds, according to the County agreement. About $19 million of that is earmarked for the downtown projects. The remainder has not yet been appropriated.
Local officials also plan to use some of the money work with private developers to spruce up other downtown properties that were a subject of dispute, including the Granada Theater, Downtown Mall, former Simple Beverages site and Royal Clothier building.
The path toward completing the RDA’s work is paved with subsequent approval by the state Department of Finance, but City officials are optimistic they can continue the effort that started in 2008 to revitalize the downtown.
“One of the concerns of the (City) has been…we would have a fire sale of these properties. We now know that is not the case or intent of the properties,” City Manager Steve Rymer said at Wednesday’s meeting. “We the (City) will take the lead, and work closely with the County, trying to ensure the spirit and intent of our Downtown Specific Plan are held in place. That ‘s what’s most important to the people of Morgan Hill.”
Rymer noted that the two complex agreements are not yet finalized, with the parties still working out some of the finer details as of Wednesday.
The Oversight Board consists of representatives of the former RDA’s “underlying taxing entities” who will gain the revenue that was once directed to the RDA.
The City and County each hold two seats on the board, and the two parties have consistently disagreed on whether certain outstanding RDA obligations – such as staff costs for administering certain ongoing projects – should be charged to bond proceeds or property tax revenues formerly controlled by the RDA.
The property tax revenues formerly collected by the RDA – about $22 million per year in Morgan Hill – are now held in a trust fund controlled by the County Auditor Controller. Every six months or so, the City presents a list of proposed ongoing RDA expenses to the Oversight Board for approval before the California Department of Finance reviews the requests.
Also pursuant to the agreement, the County will no longer oppose the City’s proposal to use about $14 million of the 2008 proceeds to expand South County Wastewater facilities to the former RDA area.
All of these costs and projects will still require consideration by the full Oversight Board, and the approval of the state DOF.
The lawsuit settlement is separate from the County agreement, but solidifies the détente between the City and County once it gains final approval.
The lawsuit in question was filed by the City and the Morgan Hill Economic Development Corporation in September 2012, shortly after the state said it could impose stiff penalties on Cities that do not comply with the state’s guidelines for divvying up the former RDA assets.
The State Controller’s office had ordered the EDC, a private nonprofit created by the RDA in 2011, to return the $14 million worth of downtown properties and about $4 million in cash from the 2008 bond proceeds back to the City. The RDA transferred the properties and cash to the EDC in 2011, in order to protect them from the state law and a potential “fire sale.” And the RDA created the EDC to manage the properties in accordance with the 2008 Downtown Specific Plan.
The EDC indicated it would not return the properties to the City, and the City feared that would lead the state to withhold sales tax revenues that fund public safety, street repairs and other basic services.
But now, under the settlement agreement, the City will gain the properties and cash back from the EDC, but will not be pressured by the County to immediately sell the properties or supply the cash to other agencies. The City will also agree to drop the lawsuit it filed against the state and County.
“I know we will form some tighter partnerships going forward,” Tate said.
A group of local residents and business people who are ready to put some money toward reopening the Granada Theater for movie screenings and live performances find the agreements encouraging, according to John Liegl, who is helping head up the Granada effort. Once they gain permission, the Granada proponents plan to start off slowly and try to open the theater a few days a week for movie screenings. Eventually, they hope to buy the theater, remove the middle partition dividing the building into two auditoriums and open it to movies and events seven days a week.
“We need to strike a deal with whoever is going to own it,” said Liegl, who envisions the theater as a permanent economic stimulus for downtown businesses. “We knew there was going to be a settlement of some sort, but we didn’t know who exactly was going to have it. ”
