City will put $500,000 to Park Project
Faced with “act-now-or-wait-another-year” deadlines, the South Tahoe Redevelopment Agency voted to keep the dream alive.
The agency, consisting of the City Council, voted to put up $500,000 in existing agency funds to the Park Avenue Project that would be reimbursed by bond sales that will begin in January.
Because several previous private developers have jumped ship from the project, the city did not have enough time to finalize a Disposition and Development Agreement with its latest developer – American Skiing Company – before financial deadlines had to be met to ensure a spring 1999 construction start.
The DDA is the contract for implementation of the redevelopment project. It legally binds the developers and the city.
The first phase of the project still may not proceed until 2000, but the legwork and bond sales will be completed next year.
Although a DDA had been promised by late October, that deadline has been pushed back to December, according to Redevelopment Manager Jaye Von Klug.
With no bond sale proceeds, the agency was forced to find another source of revenue for the $500,000. The revenue will be used to fund a market analysis, Phase 1 acquisition plans and design.
The money will come from the agency’s local bond reserve fund, an account from which funds were to be drawn in the event of shortfalls in debt payments.
Project proponent attorney Lew Feldman provided the council with copies of a pre-development reimbursement agreement that he said binds ASC to reimburse the city the $500,000 if the project doesn’t proceed next spring if the company is unable to proceed. The agreement was designed to act in lieu of the upcoming DDA, according to Feldman.
Agency member Margo Osti said the agreement is not risk-free. She outlined a scenario where the city could be forced into a disadvantageous agreement to keep the $500,000.
“If the proponents come to us with a DDA and we don’t sign it because we think it is defective, are we in violation of the agreement?” Osti asked.
“There must be a level of trust,” Agency Chair Kevin Cole said. “No one wants to end up in a fight over this.”
Stan Hansen, representing ASC, told the agency his company has always been moving forward with the project, acquiring portions of it as other developers pulled out.
“We’ve invested significant money, as has the community,” Hansen said.
Phase I of the Park Avenue Project includes the Grand Summit quarter-share, an ASC venture, as well as an ASC gondola leading to Heavenly Ski Resort.
Phase II, which includes the Crescent V Shopping Center and Lake Tahoe Inn, won’t break ground until 2000.
Northcross, who attended Tuesday’s special meeting, told the agency, if this plan does not work out and the city and ASC are forced to nix the agreement, the Park Avenue Project would essentially be dead.
“It would put the project in a world of hurt as far as public financing,” Northcross said, describing a worst-case scenario fallout between ASC and the city.
He also told the agency that, due to the impending bankruptcy regarding the state line Embassy Suites Hotel, the city could have a harder time selling bonds for Park Avenue.
The first impacts will be felt by the city when the hotel emerges from bankruptcy court in Los Angeles with a lower value, he said.
Bonds from previous issues, such as the Ski Run Project, may become inflated because they were based on past agency values, Northcross added.
“The standard of due diligence on Park Avenue will be higher,” he said. “The city must show investors it’s done a third-party independent analysis.”
As it now stands, the agency, acting on behalf of the city, will enter into contracts for design services, property acquisition analysis and market analysis.
Final project approval will be sought from the Lahontan Regional Water Quality Control Board and Tahoe Regional Planning Agency.
Feldman and Von Klug agreed that a draft of the DDA should be completed by the end of October. By that point, council members agreed that any serious problems between the city and ASC would be visible.
Von Klug estimated the agency will have expended about $170,000 of the $500,000 by that time, cutting the agency’s losses should the city decided to get out of the project at that time.
Property would be acquired in January 1999, vacated between February and May and demolished by June. Construction would begin in May.
“I think, with sincerity, we can look forward to a spring 1999 start,” Feldman said.
“There’s always a risk to take, but the bigger risk is not doing it,” Davis added.
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