29 Palms Reinitiates Work On Long-Delayed Project Phoenix

TWENTYNINE PALMS—In its first official action with regard to Project Phoenix since the California Department of Finance threw in the towel on its opposition to the city of Twentynine Palms completing its final redevelopment project, the city council authorized spending up to $309,000 to reinitiate action on the $12 million downtown rejuvenation plan.
Project Phoenix was an undertaking by the Twentynine Palms Redevelopment Agency aimed at constructing a community center, a 250-seat theater, classrooms, a civic plaza, a park, a paseo, residential units, a wastewater treatment plant, and improvements to the downtown fire station. The project was put in jeopardy in 2011, however, when the legislature passed AB X1 26 and AB X1 27, which shuttered more than 400 municipal and county redevelopment agencies up and down the state. The state sought to reroute redevelopment money to law enforcement and education efforts in that closure.
Twentynine Palms, however, intrepidly pushed ahead with the project, based upon Twentynine Palms City Attorney A. Patrick Muñoz’s assertion that the project had been initiated prior to AB XI 26 and AB XI 27 going into effect. According to Muñoz, the state law ending redevelopment function is trumped by federal securities regulations, meaning the money the Twentynine Palms Redevelopment Agency bonded for in 2011 must be utilized only for the purpose that bondholders were told the money would be applied toward.
The city then used the locally composed bond oversight board that was formed as a consequence of the state legislation to recommit the bond money to the Phoenix project. Subsequently, however, the state Department of Finance used its authority to disallow the recommitment. In response, the city appealed and when that appeal was turned down, filed legal action in Sacramento Superior Court, the venue where the legislation required any litigation pertaining to cities’ use of redevelopment money had to be filed. The case was heard by Sacramento Superior Court Judge Michael P. Kenny.
Muñoz asserted in filings with the Sacramento Superior Court that the non-taxable bonds issued in 2011 created specific obligations between the city, as the issuer, and the bond purchasers, and as such are enforceable obligations and any use of the money for a purpose other than what the city had specified in marketing the bonds to the bond buyers would constitute fraud.
The California Department of Finance in December 2013 told Kenny that the Twentynine Palms Redevelopment Agency, like several others, “rushed to encumber future tax increment revenues” ahead of its legislated demise in December 2011. The department alleged that in March 2011, Twentynine Palms “conceived, authorized, issued and sold” $12 million in tax allocation bonds for the Project Phoenix downtown development and an affordable housing plan without contracts to build or a definite plan for spending the proceeds.”
Ultimately, however, Kenny ruled against the department of finance in April 2014 and granted the petition for a writ of mandate on behalf for the city of Twentynine Palms as successor agency, allowing the city to utilize the bond money for the fulfillment of Project Phoenix. In June 2014, the Department of Finance filed an appeal of Kenny’s ruling.
Since that time, the department of finance suffered multiple setbacks with regard to several cities’ efforts to control the spending of redevelopment agency money appropriated in 2011. On May 14, 2015, the department sent a letter to several cities, Twentynine Palms among them, announcing it would no longer oppose those cities’ moves to preserve their last remaining redevelopment agency projects.
On Tuesday June 23, a bare quorum of the city council was present, but that did not delay a vote on two key elements of the long-postponed redevelopment project. With council members Cora Heiser and John Cole absent, the remainder of the council, consisting of Mayor Joel Klink and councilmen McArthur Wright and Daniel Mintz , unanimously voted to authorize city manager Frank Luckino to negotiate the purchase of property at 73551 Twentynine Palms Highway and to contract with Kosmont Companies for assistance in facilitating Project Phoenix. What was hinted at is that a purchase price on the property has already been worked out. The council authorized the expenditure of an amount not to exceed $216,910.97 to cover the property, escrow and inspection. In addition, the amount specified in the contact with Kosmont Companies was $92,500.
The property at 73551 Twentynine Palms Highway is intended as frontage for the project, according to city officials. The property was formerly a Chevron gas station, later a tire store and is now a smog check station. The city’s purchase of the property will relieve the owner of any environmental clean-up responsibility.
Kosmont, which specializes in providing cities with economic development, public finance and public/private real estate strategies/transaction assistance since 1986 and since 2011 has focused on redevelopment successor agency services, is being called upon by the city to utilize its experience and expertise to build into the Project Phoenix program post-redevelopment economic incentives and financing mechanisms to assist the city in promoting public-private transactions and financing solutions with private sector constituents, as well as support the city in its efforts to make good on its bond obligations while the successor agency uses the bond money to complete the project. Kosmont will also act as the city’s real property negotiator, assisting with public outreach, and overseeing a range of third party service providers such as appraisers and demolition, engineering and architectural contractors. Kosmont is also being tasked to see whether the city can take advantage of enhanced infrastructure finance districts, entities created by the legislature as a gesture to replace traditional redevelopment agencies.

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