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City Prepares for Legal Battle Over Redevelopment Funds

After meetings with the California Department of Finance and mayor's testimony in front of the Assembly Budget Committee, Petaluma officials are now preparing for legal action to get access to redevelopment dollars

Story updated 10:30pm Monday

The city will file a lawsuit against the state for withholding more than $34 million in redevelopment funds, money that has been earmarked for infrastructure projects including the East Washington Street intercharge, Old Redwood Highway improvements and initial planning of a crosstown connector at Rainier Avenue.

“We’ve been given direction to initiate litigation in the event we don’t get what it is that we need and we are very close to filing those documents,” City Manager John Brown told Patch Monday.

That evening, the city council voted 5-0 to pursue legal action, with councilmembers Chris Albertson and Teresa Barrett absent.

The lawsuit comes after months of feverish letters and meetings between the city and the state in an effort to salvage the funds.

In August Petaluma’s economic development director Ingrid Alverde, Brown, Mayor Dave Glass and several councilmembers went to Sacramento to urge the Department of Finance to release the funds, arguing that they were spoken for prior to the dissolution of redevelopment agencies in February 2012.

But the state rejected the claims, saying that Petaluma did not enter into contracts with vendors by the deadline and is therefore not entitled to the cash.

Later Glass testified about Petaluma's situation before the Assembly Budget Committee, explaining that the projects were obligated long ago and vital to dealing with the growing traffic problem.

“What they are doing is certaintly not fair because both of these projects have been on the books for a long time and considerable investments have already been made,” Glass said. “We will find a way, one way or another, to fund them because they are too important not to pursue. We need both the East Washington interchange and the Old Red improvements in light of the recently approved developments.”

Although some cities have contemplated joining forces to sue the state over the loss of redevelopment, Glass said that Petaluma’s list of obligated projects, which also includes a $7.5 million set-aside for the Rainier crosstown connector, are so unique that the city would likely be the sole claimant in the action.

Last Friday, Gov. Jerry Brown vetoed four bills that would have allowed cities to keep some redevelopment money for affordable housing and other economic development projects.

These include Senate Bill 1156, by Senate President Pro Tem Darrell Steinberg, D-Sacramento, that would allow for the creation of a "Sustainable Communities Investment Authority" to finance redevelopment-like projects.

Another was Assembly Bill 2144, which would would have expanded the types of local projects that could be financed under existing infrastructure financing districts.

Gov. Brown argued that the legislation would have allowed cities to try to find ways to access the funds instead of winding down redevelopment.

Janice Cader-Thompson October 02, 2012 at 08:23 PM
The elephant in the room! Shortly before the Petaluma Redevelopment Agency was dissolved last year, the City of Petaluma incurred an $11.5 million private loan from JP Morgan Chase Bank using redevelopment tax increment as collateral. The redevelopment agency was then folded into the “Petaluma Oversight Board to the Successor Agency of the former Petaluma Community Development Commission." Councilmember Mike Healy was anointed chairperson to oversee this money on a 4–3 vote. All local jurisdictions in California were aware of Governor Brown’s intention to take back redevelopment monies. The city’s own documents warned the City Council that the State could take back this $11.5 million loan, leaving the city on the hook to repay the loan within 10 years. This was irresponsible. The city council now wants to sue the State of California for a loan they knew was risky. It is time to throw the council majority out of office. To be continued!
Janice Cader-Thompson October 02, 2012 at 08:26 PM
Elephant in the room continued: Citizens need to be concerned about the legality and practicality of certain "cooperative agreements" made between the City of Petaluma and the Sonoma County Transportation Authority (SCTA) before June 26, 2011. If anyone wants a copy of the loan document, cooperative agreements and other documents pertaining to this loan, I have them and will share them with those interested. I question whether the City Council even read these documents. The streetlight on my street has been out for over 2 ½ years. I was told over a year ago that this light was first on the list for repairs. Petaluma does not have the money for basic services, yet the council voted to move forward with a risky $11.5 million JP Morgan Chase loan and now they are blaming the Governor. This is the elephant in the room. It is time to vote the council majority out of office, starting with Healy.

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