A letter signed by six Novato residents and businessmen was hand-delivered Oct. 11 to City Manager Michael Frank and individually mailed to Novato City Council members and the County of Marin Civil Grand Jury. The letter raises issues of citizen concern as to the propriety of the and the use of those bond proceeds to indirectly pay for planned for Machin Avenue.
It also questions the wisdom of spending this money, estimated at $12 million to $15 million, while the state determines whether to close redevelopment agencies such as Novato’s, requiring the bond proceeds to be returned. The letter asks that the city office plan be stopped until these questions and issues are properly addressed.
Not surprisingly, the city's response is that all actions with respect to the redevelopment bonds and the city offices have been in accordance with applicable state and federal laws and that there has been no breach of public trust.
In addition to sharing the letter, which is a public document, I want to share this timeline leading up to the events described in the letter.
* 1983 — The city opens the Novato Redevelopment Agency to build Vintage Oaks shopping center and begins loaning the RDA money.
* 1987 — The public stops the city's plan to build two large and expensive office buildings in Old Town. In response to the city's plan, voters pass Measure D, requiring a vote if the city wants to incur debt over $1 million to acquire or build public facilities.
* 1991 — Vintage Oaks is making money from the tax increment, and the RDA has the ability to repay the loans from the city. The city declines repayment, leaves the money with the RDA, and charges interest at 10 percent.
* 2003 — The RDA issues promissory notes to pay back the city for loans in the amount of $6.5 million at an interest rate of 10 percent. With public support, the City Council approves a plan to renovate and improve the multiple buildings housing the city offices at the time.
* 2004 — Newly elected council member Jeanne MacLeamy convinces the council to reopen discussions and shows that it would be cheaper to build a single office rather than renovate multiple buildings. The city decides having offices in multiple buildings is inefficient. The buildings are condemned, and staff moves to 75 Rowland Way.
* 2005 — Public workshops are held to review plans for single office building. Once again, the public doesn't like what they see and plans for a new city office building in Old Town are eventually abandoned. Funds from the 2003 promissory note are not collected.
* 2009 — Michael Frank is hired as city manager. With the city facing an annual $3 million budget deficit, he takes an immediate pay cut. Frank is told about the money that the RDA owes the city (now close to $20 million) but is told that it is for city offices and is not to be touched.
* 2010 — The city officially declares a fiscal emergency and starts making major cuts to staff and services. The $21 million owed to the city by the RDA continues to go untouched, including the $6 million cash the RDA is holding. Instead, Measure F is passed to increase sales tax by a half cent for a period of five years. In December 2010, the city restarts public discussions of building a new office building in Old Town. The RDA initiates the bond process to raise the funds the city needs to build its office building.
* 2011 — In March, the RDA sells bonds to raise the money to pay back the city’s general fund. However, the bonds are sold as "tax exempt," which per federal law attaches restrictions to the money that require, among other things, that it only be spent on capital improvement projects as opposed to being available for any purpose that general fund money could normally be spent on.
You do not need to stretch to see that the city leadership, clearly wanting to build an office building in Old Town, manipulated public funds to this exclusive goal. They didn't allow the debt to be repaid from the RDA but instead imposed a healthy interest rate so they could stockpile funds to build city offices in a way that would circumvent Measure D and the requirement for the public to vote on the project. That interest that accrued is tax dollars that did not go to schools, police, infrastructure or redevelopment.
If the city had collected the debt in 2009, would we still have a fiscal emergency on our hands? Would we have needed to raise our sales tax? If we would have collected money at any time we were able to over the last 20 years and let it go back into the general fund, we wouldn't now be at risk of losing it all if the state follows through on closing the RDA and requires the bonds (which were sold after the legislation past) to be paid back.
For those of us who signed this letter, the points are simple and clear.
1) The money was borrowed from the general fund and should be returned to the general fund. That means with no strings attached and usable for any purpose that general fund money can be used for. The money from the bond sale as currently structured is not usable for any purpose that general fund money can be used for so, the general fund has not been repaid.
2) The project is too costly for office space in the current market. It is expensive by current new construction comparisons and it is really expensive relative to the cost of existing office buildings.
3) The whole project is counter to the spirit of Measure D. A project (the building as well as the bond issue) of this magnitude should have gone to the voters for approval.
The Marin County Civil Grand Jury is investigating and we look forward to hearing what it has to say. In the meantime, I encourage you to contact all of the City Council members. Let them know what you think of all of this. Let them know if you feel the public trust has been breached.