Atascadero’s backing for a loan to help pay for downtown’s Colony Square construction ended Friday, relinquishing the city’s financial liability in the shopping center.
The backing wasn’t an actual loan, but a $1.5 million guarantee used to strengthen the developer’s ability to get financing for a $9 million loan. The money originated from the city’s former redevelopment agency, which has since disbanded as part of Gov. Jerry Brown’s move to dissolve all redevelopment agencies statewide.
In 2009, the agency pledged the redevelopment money to help kick-start the long-stalled Colony Square on El Camino Real. The backing was renewed last year.
Because the agency disbanded in February, the $1.5 million doesn’t go back to the city’s redevelopment projects. Instead, the money will be rerouted to schools and special districts because the agencies existed to use a portion of property tax revenue to pay for projects in areas that have been labeled as blighted.
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But income was still made on the guarantee.
The redevelopment agency incurred about $54,400 in interest on the guarantee. That’s in addition to $30,000 it got from a fee the developer paid in 2009 to get the guarantee.
Before it dissolved, the agency used that income on its redevelopment projects, officials said. It’s not clear how much of that money was swept into the agency’s dissolution process, finance director Rachell Rickard said, but “the interest and loan guarantee fees that we received prior to (Feb. 1) were able to be spent on redevelopment projects at the time.”
Much of downtown Atascadero’s revamped look, tourism efforts and economic stimulus are examples of recent redevelopment projects.
Colony Square, with its anchor Galaxy Theatres, had long been thought of as the key to downtown’s revitalization.
The loan guarantee contract stated that once the shopping center opened with tenants, the developers would be responsible for refinancing the project, and the city would no longer be liable for its pledge. That is now the case.
Going forward, Colony Square’s owners plan to ask the City Council to not have housing in their projects, said Corban Holland with Pacifica Commercial Realty.
Those changes would go before the City Council for consideration in the coming months. Mayor Bob Kelley said Friday that the idea behind the changes is that homes paired with downtown parking may not be a good fit after all, but is something the council should look into to determine what’s best.
Colony Square is now nearly occupied, Holland said. He is working with a national tenant for the space next to the AT&T store, though he declined to say who. Two spaces, which can be altered into four, remain vacant.
On Friday, city leaders celebrated the end of their financial commitment by staging a burning party in which they burned the financing contract in a bucket, a spin-off of the tradition homeowners do when they pay off a mortgage.
“It’s to celebrate the city’s ability to leverage assets in the community,” Assistant City Manager Jim Lewis said.