HUNTINGTON PARK — The City Council has decided to use municipal funds to back a $450,000 loan to its Redevelopment Agency to enable construction of a 223-unit apartment complex for senior citizens.
The council voted Monday to back the Redevelopment Agency's loan from Bank of America with the city's risk-management fund. The city uses that fund to pay for expenses related to workers compensation cases and other potential liabilities, including awards in lawsuits.
Mayor Thomas E. Jackson said use of the risk-management fund is a stopgap measure and city officials plan to approve a bond issue to refinance the debt in the near future.
The city was forced to guarantee the loan to keep the Redevelopment Agency from violating its agreement to sell land to Katina & Associates Inc. of Torrance to build the senior citizens project, Jackson said. The land, which was supposed to be transferred by April 1, is in escrow, officials said.
"We don't want to (rely on a loan guarantee) from the city or the risk-management fund, but we have to meet a deadline," Jackson said.
Katina & Associates plans to build the apartment complex on 1.13 acres of land on Randolph Street, between Seville and Stafford avenues. One out of every five units will be reserved for low- and moderate-income seniors, said Vaggi Lieberman, a partner in the firm. The project will take about a year to complete, a spokeswoman said.
The Redevelopment Agency began acquiring property for the project in early 1986, and finished buying the eighth and final parcel last January, Redevelopment Director James Funk said. The Redevelopment Agency paid $1 million for the parcels, and owes two banks $655,000 against the land.
The Redevelopment Agency will use the new loan, which is expected to be secured this week, and money from other pending land sales to free the property for sale to Katina & Associates for $200,000, Funk said.
Funk said the development is expected to have an assessed value of more than $8 million, which would generate more than $100,000 in additional property tax revenue a year for the Redevelopment Agency. If the project moves forward as planned, Funk said, it will enable the Redevelopment Agency to service the $450,000 debt and recover the discount on the land sale relatively quickly.
"The bottom line is that by this loan we will reduce our debt and that's the whole major issue here," Jackson said.
Jackson said this week's council action is part of the city's effort to hasten completion of redevelopment projects to increase the Redevelopment Agency's property tax income, projected to total $2.7 million this year--not enough to satisfy the agency's $4.4-million-a-year bond payment.
City officials blame the shortfall on delays in the completion of several key projects, which they say were caused when developers defaulted several years ago against a backdrop of high interest rates.
Because of the shortfall, sales tax revenue that was supposed to pay for salaries and other city expenses went to service the Redevelopment Agency's bond debt. That left the city with cash-flow problems last November, forcing the City Council to eliminate 13 municipal jobs and borrow $1 million.
There is $1.2 million in the risk-management fund, which is used to pay up to $250,000 per liability or workers compensation case, officials said. The city is insured against losses exceeding $250,000.
If the risk-management fund were to be depleted by a series of awards and because the city had to back the $450,000 loan in the event of a default, money would have to be drawn from city coffers to cover any worker compensation or liability losses, Chief Administrative Officer Donald L. Jeffers said.
"If we had our druthers we wouldn't want to do this, but you've got to remember that redevelopment and the city of Huntington Park go hand in hand," Jackson said.
Jackson and Councilman Jack W. Parks, who are seeking reelection April 12, have been criticized by their two challengers for the cash-flow problems the Redevelopment Agency has caused for the city. City councilmen sit on the board of directors of the Redevelopment Agency.