CCDC Warns City of Tarnished Image in $2-Million Bailout

A reluctant Centre City Development Corp., the agency in charge of downtown redevelopment, agreed Monday to help the city of San Diego out of its budget shortfall by accelerating its loan payments by $2 million over two years.

But in doing so, directors of the nonprofit corporation warned that the city risks tampering with the image of downtown on the rebound.

A perception that the City Council intends to continually dip into redevelopment funds could potentially drive away investors, lenders and bond holders, who form the crucial financial foundation behind downtown’s revitalization, according to the board.

Board member Patrick Kruer said he is worried that private financial backers of redevelopment projects will grow wary of investing in downtown if they believe redevelopment funds can be used as a “slush fund” to bail out the city.

“We can send the message we think it’s a mistake” to draw on CCDC funds, said board president John G. Davies, who stressed that the $2 million should be viewed as a one-time expenditure to help alleviate a budget crisis.

‘Part of a City’

While there was unanimous agreement among the seven board members about the bail-out money, member Janay Kruger said it’s important to note that redevelopment is part of the city and shares its problems. “We are part of a city that is in trouble,” she said.

Only last week the City Council, groping for ways to pay for a larger police force and solve its budget woes, raised the possibility of demanding early repayment of about $65 million in loans advanced over the last two decades to CCDC, the redevelopment agency it created to oversee downtown’s rebirth.

The City Council wants to add 140 officers to the police force during the coming fiscal year, at a cost of $7.5 million, plus another $14.3 million the following year. Additionally, the proposal includes construction of two new police substations, at a two-year cost of $14.5 million.

City Manager John Lockwood has proposed deep and wide-ranging budget cuts--including elimination of the city’s after-school recreation program and abolishment of the city attorney’s fraud unit--to help fund the hiring of more police.

It was with that backdrop the CCDC board of directors met in special session Monday to consider the City Council’s demand to seek early repayment of its loans.

Scheduled to Pay Debts

Under a previous agreement between CCDC and the city, the redevelopment entity was scheduled to begin paying back its debts in the fiscal year 1992. The CCDC staff, led by its top administrator, Pamela Hamilton, recommended accelerating that schedule by two years, starting in the 1990 fiscal year.

As outlined by Hamilton, the agency would pay the city $1 million in 1990 and another $1 million in 1991, and then make payments as originally scheduled, which includes an increase to $3 million in 1994. Much of that latter money is earmarked to help the city plan for its new civic center in Centre City East, and Hamilton warned that any tampering with that amount or any new financial demands placed on the agency by the city would have a negative impact on financing for the new City Hall.

The board of directors--all of whom are appointed by the City Council, which under state law actually serves as the redevelopment agency--recommended cuts in CCDC’s 1990 budget of $1.175 million. (It made no specific decisions on reductions to the agency’s 1991 budget.)

The reductions, which the City Council will discuss at a budget workshop on Thursday, are not in major programs. For example, $600,000 would come from money set aside to improve Broadway by adding banners to the light poles, as well as improving the light standards themselves and median dividers on the heavily traveled thoroughfare and replacing the sidewalk in front of the Spreckels Building at 121 Broadway.

Also included in the cutbacks would be $250,000 set aside for a new sidewalk outside the YMCA on Broadway; $200,000 budgeted for negotiations with Santa Fe Realty, and $125,000 CCDC hopes San Diego Gas & Electric will pick up for other sidewalk improvements.

Hamilton had suggested the agency turn over $800,000 budgeted for curbs, gutters, sidewalks, street lights and trees in the Gaslamp Quarter, but the board decided against that, saying redevelopment of the Gaslamp, which has limped along for years, should remain a priority.

While the recommended cutbacks are minor in scope, the directors were worried that the perception may be worse than the reality. “We don’t want to give the impression we’re changing courses,” Kruer said. Davies said one possible long-term ramification could be lower bond ratings for CCDC, which would mean paying higher interest rates.

On Verge of Expansion

Board member Tom Carter said that, for all of downtown’s recent success, redevelopment is not done yet and that, in fact, CCDC is on the verge of a major expansion into other areas of downtown. He also said the city was hurting itself by tapping into redevelopment funds because the city receives many more dollars from private investors downtown than the city puts in, a technique known as leveraging.

Deputy City Manager Maureen Stapleton said the City Council hadn’t specified exactly how much it wanted from CCDC, and that it’s up to the council to decide whether to accept CCDC’s recommendation or alter it.

There were questions raised last week about whether the city could use revenue derived from CCDC because some it came from federal grants and included restrictions of how it could be spent. But Stapleton said the $1.175 million suggested by CCDC could be used for either the hiring of new police officers or for construction of the substations.