CITY HALL — City staff took out a $60 million loan Friday to provide immediate capital for four redevelopment projects that will enter the design and build phases in upcoming months.
The deal, struck between City Hall and Wells Fargo, is a boon to the city, said City Manager Rod Gould.
“It was a major interdepartmental effort,” Gould said. “I’m happy the money is sitting in the city’s account, ready to be used to design and construct capital improvement projects.”
That $60 million, seven-year loan will prime the pump on four projects — the Palisades Garden Walk, Pico Library, Parking Structure 6 and the Civic Auditorium renovation — which are each at different stages of completion.
Together, the four projects are expected to cost $112.3 million, but the initial influx of cash will get them started, and then city staff plan to use a combination of pay-as-you-go and financing to complete the projects, said Finance Director Carol Swindell.
The loan will act as a complement to the Redevelopment Agency funding, garnered through property taxes, that City Hall will use to complete the projects.
“This provides an immediate source of capital funds to allow us to begin paying now,” Swindell said.
Not covered was the possibility that the RDA will no longer exist as of July 1 should Gov. Jerry Brown’s proposed budget become law.
In the budget, Brown calls for the elimination of redevelopment agencies across the state to free up $1.7 billion he proposes to use to cover deficits in MediCal and court costs.
“Successor agencies,” usually the cities or counties that formed the redevelopment agencies, will then pay off existing debt obligations using the tax money that would have gone to the original agency.
Under the terms of the loan, which only leverages tax increment money, Wells Fargo will not be able to go after the General Fund to recoup the loan losses if Santa Monica’s Redevelopment Agency goes under.
Draft language in a trailer bill issued by the California Department of Finance might invalidate new loans or other debt obligations entered into after Jan. 1, when the governor proposed his budget, but it hasn’t been considered or adopted by the legislature.
City staff are monitoring the situation closely, Swindell said.
“I don’t think there’s any real possibility they won’t get paid,” Swindell said.
In a special meeting of the RDA and City Council last Tuesday, the RDA representatives sought permission to pursue the loan from Wells Fargo.
Staff had also reached out to Bank of America and JP Morgan Chase.
Only Councilmember Bobby Shriver expressed any misgivings about the deal, which he worried had been put together too quickly for council members to know exactly what the terms of the loan were.
He advocated for a small committee of council members to review the loan, and then respond back to staff before signing away power to the city manager to enter into the agreement.
Gould objected, saying that timing, in this case, was everything.
“If you think it’s a good idea to borrow these funds, we must do so expeditiously,” Gould said.
The council voted to allow the city manager to go through with the loan in a five to one vote, with Gleam Davis absent and Shriver against.