The Sacramento City Council stood firm Tuesday and backed a riverfront development project for a pot of state funds – upsetting the developer of the downtown railyard who maintains that the same money is crucial for his project to move forward.
In a compromise move, the council agreed to recommend the developer of Township 9 for a portion of state bond money in “infill funds” now, but made it clear the city would thereafter designate Thomas Enterprises as the No. 1 priority in all other “infill” funding cycles.
The council previously designated Thomas Enterprises as the city’s top preference for a different pot of bond money known as “transit funds.
“We’re not up here picking one,” said Councilwoman Sandy Sheedy. “We’re up her choosing both of you.”
At stake are millions of dollars from voter approved Proposition 1C, the state’s affordable housing bond. Money is available for transit-oriented projects and also for infill development.
Competition is fierce from projects throughout the state for the infusion of funding, and cities like Sacramento are being forced to carefully submit the projects that have the best chance of selection.
The council made it clear that developing the downtown 240- acre railyard with housing, office space and shops was the city’s No. 1 development priority.
However, that project is extremely costly, is environmentally complex and is facing lawsuits, factors that could mean it could take years before any vertical building can begin, said Assistant City Manager Marty Hanneman.
On the other hand, construction could start almost immediately on Township 9, a 65-acre development between Richards Boulevard and the American River, envisioned to eventually include 3,000 housing units. That ability to move quickly forward will be a key factor when the state hands out funding, Hanneman said.
In the first phase, each development is promising to build 850 units of housing, with 15 percent set aside for lower-income households.
“Being shovel-ready – that’s the real difference between Township 9 and the railyard,” Hanneman said.
Stan Thomas, president of Thomas Enterprises in Atlanta, contended at the meeting that his company has been working on the project for seven years, including significant environmental cleanup.
“We’re shovel-ready,” he said. “In fact, we’ve been digging around for a year and a half.”
So far, Thomas said his company has put $200 million into the railyard.
The council did its best to publicly soothe Thomas’ ruffled feathers. Last week, he all but threatened to kill the urban project if the council continued with its intention to back Township 9 for the infill bond money.
Mayor Heather Fargo said she had talked to Thomas on Monday about the planned compromise, and again with a Thomas representative on Tuesday.
“I don’t think they’re leaving,” Fargo said in an interview after the meeting. “They’re still very interested in the project, as are we.”
Immediately after the council decision, Thomas and his entourage rushed from City Hall, refusing to answer questions. Later, Thomas vice-president Suheil Totah said Thomas was “very disappointed by the actions of the council.”
Totah said Thomas will still apply for both transit and infill funding, competing with Township 9. In total, the developer could receive $47 million this year from two separate pots of Proposition 1C funding.
Thomas was counting on the full $47 million this year, Totah said.
“If the financing doesn’t come together, the project can’t move forward,” Totah said.
In the next three years, the company needs to gather $100 million from the state, the maximum available, he said.
Hanneman said he’s never heard Thomas say it must successfully get $47 million from both state sources this year for the project to continue.
It is estimated that it will cost $745 million alone to build roads, sewers and other needed infrastructure for the development.
The city has paid Thomas $55 million upfront for the railyard depot. And the city has pledged to build an $80 million garage by fronting bond money and repaying the debt with garage revenue, as well as giving Thomas $50 million in tax increment funds once revenue starts flowing from the project, Hanneman said.
Councilman Kevin McCarty said it was “a fallacy” for Thomas to believe that the city could love only one development project. And, he said Thomas couldn’t have counted on state 1C money, since it didn’t exist when the company launched the project seven years ago.
“Saying if you don’t get this, that you’ll walk away, that’s a fallacy, too,” McCarty said.
After the vote, Scott Syphax, project partner for Township 9, said he felt wonderful.
“The council demonstrated real leadership,” he said. “This was the best decision on the merits.”
Editorial: City faces tough new battle for Prop. 1C funds
The Railyards, Township 9 get lumped with Bay Area to fight over $108 million
To put this sea change in political terms, it means that areas represented by Assembly Speaker Fabian Núñez and incoming Speaker Karen Bass, both Democrats from Los Angeles, are taken care of. So are the home communities of incoming Senate Minority Leader Sen. Dave Cogdill, R-Modesto, and Assembly Minority Floor Leader Michael Villines, R-Fresno.
Meanwhile, Senate Pro Tem Don Perata, D-Oakland, and incoming Senate Pro Tem Darrell Steinberg, D-Sacramento, are pitted against each other in the competition for these funds. Perata was the driving force behind putting the housing bond on the ballot, so you can bet that he will want his list of projects funded.
You don’t have to know much about politics to see where that leaves Sacramento.
For the mega-region that includes Sacramento and the Bay Area, the state will distribute only $22.5 million for particular projects and $85.5 million for larger redevelopment areas. If developers and communities seek the maximum grants ($20 million for a project and $30 million for a redevelopment area), the state will only have enough money for one or two projects and two or three redevelopment areas. Township 9 wants $25 million and The Railyards want $30 million. Perata has at least eight prospects on his list.
Clearly in this new hyper-competitive environment, Sacramento city staff and the City Council need to revamp their approach to the infill grant application.
Earlier, the city decided to jointly apply with The Railyards for a $34 million Transit Oriented Development Grant. A council resolution identified Township 9 as Sacramento’s top priority for the infill grant application, with The Railyards as a second priority.
In competition with the Bay Area, this split-the-baby solution no longer flies. The council must decide which of the two proposals is its top priority and then submit a joint application with the project’s developer before the April deadline.
Developers of The Railyards and Township 9 both understand the big change and are jockeying anew for the top priority position. With an April deadline for the infill application, the council has time for The Railyards and Township 9 to make presentations.
The council then needs a new resolution to make crystal clear which project is its top priority for a joint city/developer infill grant application.
Editorial: City should stick to its plan for Prop. 1C money
For the first round of Proposition 1C funding, the council should stick with its Feb. 19 decision to make The Railyards its top priority for one pot of money and Township 9 its top priority for a second pot of money.
Unfortunately, The Railyards folks are panicking unnecessarily over the city’s priorities in this first round of funding. Stan Thomas of Thomas Enterprises, developer of The Railyards, has sent a letter to Mayor Heather Fargo and the City Council falsely accusing the city of weakening its commitment to The Railyards. He demands that The Railyards be the city’s top priority for both pots of Proposition 1C funds. Get a grip.
The fact is, Sacramento already has made The Railyards its top priority for the first pot of money (known as the Transit Oriented Development Program). That application was submitted March 15. The state will select one signature project per region, with the Sacramento Area Council of Governments region guaranteed one project.
The city applied for the maximum award of $17 million in the first round (with the potential for a total award of $50 million over multiple rounds of funding). The Railyards has a good shot at getting this money, which would go toward street improvements, including an overpass at Fifth Street.
Then there’s a second pot of money: the Infill Infrastructure Grant Program, which has an April 4 application deadline. The guidelines say that the state “will fund only one application for each Capital Improvement Project.” The city has to choose. That’s why city staff is recommending that the council “authorize the city manager to submit an area application for Township 9 recognizing it as the city’s first priority” for this pot of money. The city would apply for the maximum of $30 million, to build 7th Street and the Richards Boulevard light-rail station.
The developers of The Railyards could maximize good will and public dollars with a little patience. The fact is, Township 9 is seeking funding only in the first round of infill money – and will not seek any Proposition 1C funding in future rounds. Over time, The Railyards could apply for a total of $50 million from the infill pot. Add in the $50 million maximum for the transit-oriented pot and The Railyards potentially could get $100 million from the two Proposition 1C pots of money.
This is no time for the mayor, City Council or city staff to succumb to divisiveness. The city gains if both The Railyards and Township 9 succeed – creating jobs and leveraging private financing to bring housing and other amenities to Sacramento.
The mayor and City Council should show strong support for both The Railyards and Township 9 by following the city staff recommendation.
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