UNCERTAINTY LEADS CITY TO PULL PLUG ON SALE OF $140 MILLION IN TAX BONDS, FOR NOW
By Steven Tavares
The Fremont City Council put the brakes on an ambitious sale of $140 million in tax allocation bonds to fund redevelopment projects amid market uncertainty and possible legislation in Sacramento.
It was just less than two months that the council became one of the first in the state to find a way around Gov. Jerry Brown’s controversial proposal Jan. 10 to eliminate redevelopment agencies across California. Fremont approved the robust tax sales just a week later on Jan. 17.
In the time since, though, not much clarity has been found as to how the governor’s plan would be implemented leading many jurisdictions, including Fremont, to find creative ways to secure millions for a bevy of public improvement projects.
The city intended to begin sale of its bonds on the volatile market Feb. 25, according to Finance Director Harriet Commons, but pulled back when a 27-page state report detailed the possible formation of an oversight agency intended to sell and reconcile remaining redevelopment assets. The city pulled back, according to City Manager Fred Diaz, who described the report as “pulling the rug from under us.” Diaz said he was initially undeterred by the report, but later relented by holding off the sale of tax allocation bonds.
The council’s unanimous decision to stop the sale of bonds before it begins comes with some potential risks. Although, the process leading to the possible dissolution of redevelopment will likely be drawn out and contentious, the League of California Cities’, for one, is threatening a lawsuit, Fremont risks the possibility of having no financing for its numerous and expensive projects, namely new BART stations at Warm Springs and, specifically, in the Irvington District. Conversely, says Commons, the bond market is currently glutted with similar bonds with unfavorable interest rates to the city. In late February, similar bonds were priced at around 6.5 percent, she said, and waiting for cheaper rates may be wise.
Ultimately, the all-around uncertainty of the situation appeared to be the issue leading members to temporarily suspend the sale. “We’re being asked to submit our return before knowing what rules will be in place, now, or in the future,” said Councilman Bill Harrison.
“I don’t really think this falls into the category of a good risk to take because the consequences are much too severe if you lose,” said Mayor Bob Wasserman, who again noted his gambler’s mindset, while saying the issue is long from a done deal. “Keep watching the ballgame. It’s not over," he said. "We’re only in the second or third inning.”
Although, recent reports say construction of the Warm Springs BART station will be delayed because of uncertainty with the state’s own sale of bonds for the project, it will have little impact on the Irvington BART project unless the city is unable to secure redevelopment for the $112 million project, according to Public Works Director Jim Pierson. City Attorney Harvey Levine said he believes the city’s best bet for Irvington is to enter into a third-party agreement with BART. The transit body has been in preliminary talks with Fremont, said Pierson and has shown a willingness to cooperate.