State finance officials question redevelopment expenses

State finance officials question redevelopment expenses

Michele Ellson

State finance officials are questioning nearly $370 million in payments city officials say they owe on their former redevelopment projects, more than a third of the amount they say their remaining redevelopment obligations will cost.

Most of the payments the state is seeking to disallow, about $303 million, are for future infrastructure and affordable housing at Alameda Point and in other former redevelopment areas on the Island. Finance officials are also questioning another $47 million the city says is due to the Alameda Unified School District for housing and capital projects.

Debbie Potter, who is working to push the payment schedule through for the city, said city officials plan to appeal to the state regarding some of the costs in an effort to gain recognition. The county auditor-controller can’t pay bills that don’t gain state approval.

Most of the questioned expenses are being held up because the city didn’t have contracts executed to perform specific services before state legislators decided to eliminate redevelopment, in June 2011. The state is also seeking to disallow payments for loans the city made to its redevelopment arms to pay for predevelopment work at Alameda Point and to complete an extension of Wilver “Willie” Stargell Avenue.

They are also seeking to deny payments for infrastructure for the Alameda Point Collaborative and funds to pay for monitoring measures intended to blunt the impacts of developing Alameda Landing, obligations Potter said the city must meet under federal law and the strictures of its agreement with Alameda Landing developer Catellus.

“They’re taking kind of a very hard line of what it means to be under contract,” Potter said of the state, which she said has questioned redevelopment expenses in several neighboring cities. “It’s just a reflection, I think, of how redevelopment deals are extremely complicated. They have all kinds of obligations that are embedded agreements that will come at a later date.”

State finance officials didn’t respond to an e-mail seeking comment late Thursday afternoon.

Potter said the city will appeal many of the denials to state officials but may hold off on others to see if new state laws are put in place allowing the expenditures. She said the denials won’t have a huge impact at this stage of the game since the county has already released funding to pay redevelopment bills through June 30, and many of the questioned items won’t come due anytime soon. But she said they could have impacts in the future.

She said the city will seek to hang on to $4.6 million it had set aside for school district housing projects as cash to cover disputed payment items and is looking into its options for another $1.9 million in bond funds left over from the downtown parking garage project, money that also was used to fund Park Street streetscape improvements.

The state has not questioned payments to cover the cost of low-income housing the city must build as the result of a 1993 lawsuit settlement agreement or others associated with a settlement with Boatworks developer Francis Collins, though a May 1 letter the state sent to the Potter said the state’s denials were “based on a sample of line items reviewed.”

Also moving forward are payments for a pair of affordable housing projects the city is working on, a renovation of the Islander Motel and a future 16-unit project for people with developmental disabilities to be built on a city parking lot on Lincoln Avenue.

State legislators voted to eliminate redevelopment in 2011, but they created an alternative plan that many cities, including Alameda, planned to opt into. But shortly after Christmas, the state’s top court struck down both redevelopment and the alternative program.

Cities have been scrambling to undo some 450 redevelopment programs across the state and win state and local approval to pay their remaining redevelopment bills, including bonds they incurred to help fund projects. The city owes more than $142 million in redevelopment bond payments, its most recent payment schedule shows, and it’s listing more than $40 million worth of redevelopment bills for the 2011-2012 fiscal year, which ends June 30.