Atascadero officials on Thursday said they are working with state and federal officials to get more information about the Federal Emergency Management Agency’s surprise move to disallow nearly $2.7 million of temporary relocation funding received after the December 2003 San Simeon Earthquake.
“We still have a long, drawn-out process ahead of us,” City Manager Rachelle Rickard said. “We’ll put forth our legal arguments as best we can.
“It certainly does not seem fair that we followed all of your (FEMA’s) rules and processes, the money has been spent, and now you want the money back,” she added. “Certainly, if we were given correct advice up front, certain different decisions would have been made.”
It’s too soon to say where the money would come from should the city be required to repay it, Rickard said. The city could eventually pursue other options, such as litigation or mediation to reach a fair resolution.
Atascadero has spent about $2.65 million to rent a former bowling alley as a temporary city hall while repairs were being made to its historic City Administration Building. The rent is about $1 a square foot, or about $30,000 a month, Rickard said.
The money was paid by the city to its now-dissolved redevelopment agency. The agency had purchased the former 31,436-square-foot Creekside Lanes property in December 2004 for $1.3 million by issuing bonds that were retired in part with FEMA funds, according to a report by the U.S. Department of Homeland Security’s Office of Inspector General.
Now that the redevelopment agency is gone, the city pays rent instead to a so-called successor agency tasked with winding down the redevelopment agency and making sure all obligations are met.
In a letter received by Atascadero officials on July 5, FEMA agreed with an Office of Inspector General audit report that determined the lease of the Creekside property was a “less-than-arm’s-length transaction” because of the relationship between the city and Atascadero’s redevelopment agency.
The audit report found that a “less-than-arm’s-length transaction exists where the two parties are ‘governmental units under common control through common officers, directors, or members.’” The city and redevelopment agency fit the criteria since specific people served as officers for both the city and the agency, according to the FEMA letter signed by Terrie Zuiderhoek, director of the recovery division.
“We heavily discussed it with FEMA ahead of time,” Rickard said Thursday. “It’s something that FEMA looked at carefully (and) questioned the relationship between the city and the RDA and ruled that it was appropriate and the most cost-effective method of relocation.”
Redevelopment agency funds were spent on projects to improve various parts of Atascadero. Redevelopment agencies — of which there were some 400 statewide — used a portion of property tax revenues to revitalize blighted areas.
FEMA also agreed with the Office of Inspector General’s recommendation that the city only receive depreciation costs for the temporary city hall facility, calculated at $364,923.
“It’s very frustrating for us as a city,” Rickard said. “We followed the process, got approval, truly vetted out all our options and then to come back eight years later (and say) ‘Oops, we need our money back.’ That money was spent and gone.”