Zoned for federal bonds

The Costa Mesa City Council voted unanimously Tuesday night to designate the city’s entire geographic region as a recovery zone.

The city is required to designate certain areas and identify certain projects as a recovery zone to qualify for about $6.4 million in federal bonds from the American Recovery and Reinvestment Act of 2009.

The recovery act provides federally subsidized recovery zone bonds to local government and private organizations to promote job creation and economic recovery, said Hilda Veturis, Costa Mesa’s management analyst.

“It provides an opportunity for businesses to borrow money at a reduced interest rate,” Mayor Allan Mansoor said. “If it helps a place like Triangle Square, that’s a good thing. But I’m also concerned about the borrowing on the federal level. All these programs are more borrowing, and to me that’s a concern.”

City staff recommended that the council designate the city as a recovery zone to give all businesses within its boundary the opportunity to apply for this financial tool. Only nine cities within Orange County qualify for recovery act bonds, Veturis said.

The city qualifies for $2.5 million in Recovery Zone Economic Development Bonds, which are taxable government bonds that could be used by Costa Mesa to promote economic opportunities, including construction of public facilities or public infrastructure.

Under the act, Costa Mesa also qualifies for about $3.9 million in Recovery Zone Facility Bonds, which are tax-exempt bonds that can be issued to qualifying businesses, including retail centers, hotels and industrial buildings.

Representatives from the South Coast Auto Plaza and Triangle Square approached the city about the program and asked the city to accept the bonds to give them the opportunity to apply for it, Veturis said.

Local governments that are eligible for bonds from the recovery act must have significant poverty and unemployment numbers, large numbers of home foreclosures, are distressed as a result of the closure of a military base, or are designated as an empowerment zone or a renewal community, Veturis said.

Cities with a population of less than 100,000 do not qualify, she said.

Costa Mesa qualifies for the recovery bonds under the first category. The city’s unemployment rate went from 3.1% in 2007 to 7.4% by October, Veturis said.

The city also saw increased numbers of foreclosures and its sales tax revenues reduced by 21% in 2009 when compared with the previous year.

Along with designating the entire city a recovery zone, the City Council also voted to identify Triangle Square and South Coast Auto Plaza as potential projects in need of the bonds, directed its city staff to inform the public of the program and identify potential public projects that could be financed using the recovery act bonds.

The recovery act bonds must be used by Jan. 1. 2011.