When you read this. Remember the antics of the Redevelopment Agency not identifying the Bonds or Debt as a Liability and yet claiming a Surplus of 15 Mil, and then not having sufficient Low Income Housing Plan for All age groups in their spending of 9Mil for Senior Housing, and so forth and so forth.
Ruling hands money trouble to Fontana redevelopment
02:28 PM PDT on Tuesday, July 31, 2007
By MARK MUCKENFUSS and DARRELL R. SANTSCHI
The Press-Enterprise
*
A state appellate court ruling has effectively halted Fontana’s ambitious redevelopment plans and prohibited using money required for low-income housing to help pay off debt that has reached at least $1.3 billion.
*
The decision by the 4th District of the state Court of Appeal, issued last week, overturns a San Bernardino County Superior Court ruling that would have allowed the Fontana Redevelopment Agency to sell $40 million in new bonds to pay down some of its delinquent debt.
*
Experts say the biggest change the court ruling will bring is in crippling the Redevelopment Agency’s ability to borrow money either to find new projects or to pay its creditors. The debt will siphon off money from projects for the next 20 years, when the agency’s term expires at the end of 2027 along with its obligations to pay off the debt.
*
City officials say they don’t know yet what their next step will be. Local economist John Husing said the impact could be significant.
*
“It basically takes from the city its most important tool for revitalizing its aging infrastructure in the older parts of the community,” Husing said. “You’ve badly damaged the ability of the city to upgrade.”
*
The Fontana Redevelopment Agency’s debt dates to 1982, when the city formed the Redevelopment Agency to spur its economy as the community’s largest employer, Kaiser Steel, prepared to shut its plant near Fontana.
*
The agency sold bonds for public improvements that would entice construction of as many as 7,000 homes in the Southridge development, a part of the Jurupa Hills Redevelopment Project south of Interstate 10. Fontana entered an agreement with developer Ten Ninety of Corona to get the project off the ground.
*
Before any homes could be built in the development in southern Fontana, a flood-control project was required. Ten-Ninety agreed to construct not only the flood-control channel but also the storm drains, streets and other infrastructure needed for the Southridge community. The Redevelopment Agency would pay Ten-Ninety back with bonds.
*
The original $20 million project ballooned to $170 million. The city’s deal called for it to pay Ten- Ninety 15.5 percent interest -- home mortgage rates at the time were hovering near 18 percent -- on its investment.
*
The city has never been able to pay the company off, and the interest on the balance now stands at nearly $1 billion, according to the court documents. Fontana caught the attention of the Los Angeles-based Western Center on Law and Poverty, a watchdog group, when it filed a request in San Bernardino County Superior Court asking a judge to validate its intentions to issue $40 million in bonds to make payments to its redevelopment creditors.
*
The city had filed similar requests in past years, all of which had been approved. Superior Court Judge John P. Wade approved this request as well. But lawyers with the watchdog group, representing two Fontana residents, appealed the decision. The appellate court overturned the original ruling.
*
Lynn Martinez is a lawyer with the Western Center on Law and Poverty. She said Fontana has used $53 million that was supposed to be spent on the construction of as many as 8,800 low-income houses. The center filed its appeal on behalf of Fontana residents Jennette Tones and Magdelena Diaz as well as Libreria del Pueblo, a nonprofit organization based in San Bernardino that helps low-income Inland residents with housing issues.
*
Now, Martinez says, Fontana will not be allowed to sell more bonds for redevelopment projects until its debt falls below the $135 million it announced in 1982 that it would be spending on the Southridge project. In addition, she said, the city must now devote 20 percent of the tax money its Redevelopment Agency collects to low-income housing.
*
The Fontana Redevelopment Agency presently collects between $9 million and $10 million a year from property taxes in the Jurupa Hills Redevelopment Area.
*
“Over the years, Fontana has periodically issued bonds and paid that bond money to Ten-Ninety,” Martinez said. “They weren’t building any houses. It was for infrastructure like roads and sewer and water systems in the Jurupa Hills project area. They only owe Ten-Ninety about $174 million, but there is $988 million in interest on the money they owe.”
*
Lisa Strong, Fontana’s management services director, has been overseeing the city’s finances for three years. She said the debt figure in the court record isn’t accurate.
*
“The billion dollars is not on the books,” Strong said, referring to the amount owed to Ten-Ninety. “The principal right now is $183 million, interest is $394 million. We know it will get to a billion at some point, but it will be at the end of the project.”
*
The court decision cited the Fontana Redevelopment Agency’s own 2002-2003 statement of indebtedness as showing it “owed Ten-Ninety nearly $1.3 billion in secured debt.”
Strong says that figure reflects the projected debt at the end of the Redevelopment Agency’s term.
*
‘Just Paper Debt’ (Remember when Tom Schwab said "You don't understand finacial reports" when he was asked about the RDA DEBT).
*
Strong said the debt will have little impact on the city. She and outside officials said the city’s credit would probably not be hurt by the Redevelopment Agency debt.
*
“It’s just paper debt,” Strong said, noting the city has paid Ten-Ninety a total of $125 million over the years. “We know it will never get paid back.
*
The project area will expire before we can pay it all back.” Calls seeking comment from Ten-Ninety were not returned.
*
City officials said they expect to meet with attorneys this week to discuss their options.
“The immediate (effect) is that we cannot issue the bonds that we had tried to issue back in 2003,” Strong said. “I don’t know what the next step of the city will be. It’s kind of bewildering.” *
John Shirey, executive director of the California Redevelopment Association, said he was bewildered by the size of Fontana’s debt. “I think if I were to go and look at any number of agencies that size, we’d find that that’s high,” he said.
*
Fontana has the fifth-largest redevelopment agency in the state in terms of the tax increment it receives. Even so, if it can’t issue bonds, starting any new projects “is pretty hard,” he said.
*
Although the court also found that the city has not complied with its obligation to spend 20 percent of its redevelopment monies on low- to moderate-income housing, there is no state agency with the power to compel the city to produce the low- and moderate-income housing that it has failed to build.
*
A 2001 audit by the California Department of Housing and Community Development concluded that Fontana was 1,835 units short of its requirement for affordable housing. The housing agency’s chief counsel, Dennis Beddard, said by phone Monday that findings in the audit could be used by public- interest groups to bring legal action, but that his agency has no authority to take enforcement action on its own.
*****************************************************************************
HOW IT WORKS State law allows local governments to establish redevelopment agencies.
Blighted areas that are not being used to their frill potential are identified and project areas are defined.
Money is raised by capturing Future property-tax increases generated by development in the project area.
Bonds are sold, to be repaid by the captured property taxes, and the bond money is used for improvements.
Twenty percent of the redevelopment money must be used to develop low-income housing.
A sunset clause establishes a date when the redevelopment authority expires.
http://www.pe.com/localnews/fontana/stories/PE_News_Local_B_fontana31.4043398.html#
