Principle That Saved Project Phoenix Requires City Build Amenities Some Disfavor

Something of a contretemps is developing in Twentynine Palms over the city’s successful effort to preserve what was one of the last redevelopment projects in the State of California.
Project Phoenix was an undertaking by the Twentynine Palms Redevelopment Agency originally conceptualized in 2010 that was 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 and potentially a library. Project Phoenix was to utilize redevelopment funding.
Redevelopment agencies were adjuncts to local governments empowered to issue bonds, which would be sold to investors. The proceeds from those bond sales would then be used to eradicate blight and/or create infrastructure that would encourage development. The improvements in the property contained within a redevelopment project area would, theoretically, result in an increase in property values and the increase in property tax derived from the properties in the redevelopment project area, referred to as tax increment, would then be routed to repay the bondholders.
Project Phoenix 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 entered into what proved to be a long, but successful, twilight battle against the state of California over Project Phoenix.
Twentynine Palms intrepidly sought to push 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 was trumped by federal securities regulations, meaning the money the Twentynine Palms Redevelopment Agency bonded for in 2011 could 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 by 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 State 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 their 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 California Department of Finance in April 2014 and granted the petition for a writ of mandate on behalf of the city of Twentynine Palms as successor agency, allowing the city to utilize the bond money for the fulfillment of Project Phoenix. After the department of finance filed an appeal of Kenny’s ruling in June 2014, it 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 was throwing in the towel on opposing the cities’ moves to preserve their last remaining redevelopment agency projects.
Twentynine Palms has since move ahead with attempting to bring Project Phoenix to fruition. A number of city residents are now second guessing the direction the city wants to take with Project Phoenix, in particular the performing arts center/theater and the library. Some have expressed the view that such amenities are not needed and are elements of a vision for Twentynine Palms being foisted on the community by a group of elitists with an artistic and cultural bent that is out of step with the majority of the community. They want the money applied to public safety enhancements and improvements to the city’s core.
A difficulty is, however, that the same principle that preserved the redevelopment money for the city is also at play in how the money is to be applied.
Muñoz’s assertion was that the money the Twentynine Palms Redevelopment Agency bonded for in 2011 could be utilized only for the purpose that bondholders were told the money would be applied toward. Contained in the bond documents was that Project Phoenix was to entail the community center, theater, classrooms/library, civic plaza, park, paseo, residential units, a wastewater treatment plant, and fire station improvements.
Current city manager Frank Luckino is attempting to build a community consensus on how the project should proceed. The city has brought in a set of consultants, AECOM and Kosmont Companies, to assist in facilitating Project Phoenix.
AECOM staff, including Matt McCleary, have met with representatives from the Morongo Unified School District, Copper Mountain College, San Bernardino County Libraries, Joshua Tree National Park and the Marine Corps Air Ground Combat Center, as well as residents and local business interests to get their input on how the project should proceed.
Feedback included recommendations for a new or revamped library, meeting and conference facilities, an events venue, computer lab, commercial kitchen to accommodate caterers, the performing arts theater, an athletic facility, a museum and visitors center.
In addition there were suggestions relating to architectural and landscaping requirements, the inclusion of outdoor areas around the building such as shade structures, desert landscaping and a park area.
Early this month, the public was invited to weigh in on its vision for the project. Staff is compiling that input into a compendium to be considered by the city council.
In public and private, elements of the community are dismissive of the downtown arts/performing arts component of the project. They want the city to concentrate on nuts-and-bolts issues, such as expanding the fire station and building the wastewater treatment plant.
Though there is a sewer system located on the 29 Palms Marine Base, there is no municipal waste water treatment system in Twentynine Palms, making it, along with Yucca Valley, one of only two municipalities among San Bernardino County 24 incorporated cities or towns that do not have extensive water treatment facilities.
Because of its commitment to the bondholders and federal securities regulations, it would appear that the City of Twentynine Palms must include all of the elements spelled out as a part of the original Project Phoenix in the effort to complete the project. This runs contrary to the expectations of those elements of the community who see the cultural component of the project as unnecessary and a waste of public money.
Simultaneously, Luckino is looking at expanding the effort around Project Phoenix.
Kosmont, which specializes in providing cities with economic development, public finance and public/private real estate strategies/transaction assistance, 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 is also acting 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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