PICO RIVERA — In its ongoing effort to create a moneymaker for the city, the Redevelopment Agency has appropriated $3 million to build a multimillion-dollar hotel and convention center.
But, in another move related to the project, the agency also agreed not to sell more bonds or incur long-term financial obligations unless it can show that Los Angeles County that its share of taxes would not be threatened.
The $3-million allocation was unanimously approved when the City Council, sitting as the Redevelopment Agency, rushed to meet Wednesday's deadline for applying for the federal funds needed for the project.
City officials said the request for a $1.5-million Urban Development Action grant is the last piece in the financial jigsaw puzzle put together by the Redevelopment Agency. Those grants are expected to be awarded in mid-June, agency officials said, and construction of the hotel could begin within six months after the money is received.
Source of Funds
According to the city plans, the 255-room hotel will be financed by the federal grant, a $10-million industrial development bond, $10 million from the developer and $4.5 million in agency funds derived from revenue bonds sold in 1984.
The developer for the project is Western Capital Industries Inc. of Scottsdale, Ariz., which has received an $11-million loan commitment from a San Diego savings and loan subsidiary, according to Dick Stacy, general manager of Western Capital. The loan, he said, exceeds $10 million to cover bond costs and is contingent on the federal grant.
The $4.5 million in agency funds for the project includes the $3 million allocated Monday and $1.5 million appropriated for it last fall. If the grant is awarded, the money will be used to buy the property for the hotel, City Manager Dennis Courtemarche said.
Project to Be Pursued
But, even if the grant is denied, Councilman James M. Patronite said, the project is important enough to the city for the Redevelopment Agency to pursue another avenue of financing.
The Redevelopment Agency expects the hotel project to create about 300 jobs and generate nearly $500,000 annually--$189,717 from property taxes, $32,690 from sales taxes and $271,556 in hotel occupancy taxes.
"It is an excellent investment," Patronite said.
The Club Caribeno Inn, as the project is called, would include three restaurants, a combined conference center and ballroom with a 500-person capacity, 10 seminar and meeting rooms for 375 people, 7,552 square feet of retail space and parking for 361 cars.
Assistant City Manager Dave Caretto said the city could draw business from the nearby Northrop Corp., whose associates now use hotels in other cities such as Commerce, Montebello and Industry.
"That could be revenue coming to Pico Rivera," Caretto said, adding that the city is "serious" about pursuing the project regardless of the outcome of the grant application.
Two motels and two houses would be displaced if the project gets a final green light and the city acquires the 7.85-acre project site, which is bounded by Washington Boulevard, Danbridge Street, Rosemead Boulevard and the Northrop Corp. property.
The site is assessed at $4.62 million, according to Bill Shannon, community development programs director, and its value is expected to increase to about $25 million, yielding about $200,000 in annual tax increments. (A tax increment is the increase in property taxes a redevelopment area generates as a result of rising property values or new construction.)
To Divide Tax Funds
In a tentative agreement with the county, Pico Rivera will divide the tax increment funds three ways, with 58.7% of the money going to the county and 18.6% going to the fire district. The agency would use the remainder to pay off the principal and interest on the bond.
But the wording of that agreement was the subject of dispute between city officials and county representatives. The county had sought a provision that would protect its share of the increment money, according to county Chief Analyst Virginia Collins.
She said the county just wanted to be sure it is first in line to receive its share before cities issue more bonds for additional projects. One way to ensure that, she said, was a provision in the agreement that would bar Pico Rivera from issuing more redevelopment bonds without county approval.
City officials, however, opposed any requirement that they seek such approval to issue more bonds. Patronite said it would be like having to go to "Big Brother," and could interfere with the city's ability to begin other projects.
The city did agree, however, to show that there is adequate increment money, that the county will be free of risk and that additional county funds will not be needed before the Redevelopment Agency sells any more bonds or assumes long-term indebtedness.
Although the agreement requires city-county consultation before the Redevelopment Agency can sell more bonds, City Atty. Sam Siegel said there is a distinction "between the county arbitrarily saying yes or no (to a bond issue) and saying that once the obligation to the county is met, we can proceed."