Questionable Grover Beach plan using redevelopment funds derailed

June 7, 2011

By LISA RIZZO

Two Grover Beach councilwomen voted down a controversial plan Monday to sell a public garden to the town’s redevelopment agency in a move that had been set to help ease the city’s budget woes.

The city needed a super majority — four out of five votes — to approve a resolution to proceed with the sale. With only three supporting votes, the motion was denied.

The Grover Beach City Council had planned to approve the sale of the 6,620 square-foot property at 920 Brighton Avenue next to Ramona Park for someone to potentially build an affordable single-family home in the neighborhood, even though there were no plans in place to develop the land and the mayor noted it could be three years before work was likely to begin.

The controversy brewed over the fact that the council, representing the buyer and the seller, set the $235,000 price tag without an appraisal or a search of all the best available lots in Grover Beach suitable for an affordable housing project.

California city council persons and members of their redevelopment boards are typically the same people. Even so, they are required by law to do what is best for the agency board they are sitting on at the time of a vote.

Attorney Babak Naficy, working on behalf of a group of community gardeners, said in a formal protest that the arrangement was a “self dealing” for the city and an abuse of the housing fund, being that the price of the property was “grossly inflated” and would be unappealing for a developer considering the size and profitability.

Councilwomen and redevelopment board members Phyllis Molnar and Karen Bright admitted they were originally motivated to sell the property as a solution to the city’s budget shortfall with an added benefit to affordable housing. They had a change of heart following ethical and legal questions raised by Naficy and a CalCoastNews article. Their two dissenting votes killed the deal.

“I think it is wrong, both financially and morally,” said Molnar, who also said she felt the city needs to look for long term solutions to the budget deficit rather than a short term fix of selling assets, a habit that in the future could leave the city with nothing.

Bright said she wanted to do what was best for the redevelopment zone and the city while making sure the council and the board followed process and law.

City Manager Bob Perrault argued an appraisal is not required to do the transfer and the city has made similar transactions in recent years, a statement supported by the city’s legal counsel.

“It is neither illegal nor improper,” responded Grover Beach City Attorney Martin Koczanowicz.

However, California Health and Safety Code 33334.6, says that housing funds are “to be used to the maximum extent possible to defray the costs of production, improvement, and preservation of low- and moderate-income housing.”

In addition, California codes also requires that funds “used for the purposes of increasing, improving, and preserving the community’s supply of low- and moderate-income housing shall be held in a separate Low and Moderate Income Housing Fund until used.”

While the council pondered the ethical and legal decisions at hand, some Grover Beach residents were grappling with the daunting thought of losing their beloved community garden, which was finally producing bounty after years of sweat and dirty palms.

Nevertheless, city council members appeared to unanimously agree that the approximately 14,000 residents affected by a $120,000 fiscal year budget deficit outweighed keeping the property so that 10 local families could grow vegetables on 18 small plots.

City officials, including Mayor Protem Bill Nicolls who made the motion to approve the sale, argued they have made cuts to salaries, services and capital improvements and more sacrifices need to be made, as they are responsible to Grover Beach residents.

Without the revenue from the sale, Mayor John Shoals said “deep cuts” will be made but “we will find a way to balance the budget.”

The council cannot reconsider the plan to sell the Brighton lot for at least six months. If the city still wants to pursue the plan, they have the option of initiating a measure that would put the decision before the voters.

Meanwhile, the State Controller’s Office is planning a second round of investigations encompassing how state redevelopment agency funds have been spent in California cities, following a March report which concluded misuse of affordable housing funds in some of the 18 agencies audited so far.