Tom Williams
Tom Williams
Milpitas taxpayers will get to keep city hall. They'll also be able to keep Milpitas' four fire stations, senior center, community center, police department building, multiple parks and the popular Milpitas Sports Center and Milpitas Public Library.
Prior threats by officials from Santa Clara County and State of California to seize these public-use sites as well as others all but disappeared following a negotiated $41-million settlement over two related lawsuits that claimed the city illegally transferred assets or kept millions of dollars of its former redevelopment monies following dissolution of redevelopment statewide more than two years ago.
Milpitas City Council, convening as the Milpitas Successor Agency of the former Redevelopment Agency, the city's Economic Development Corp. and Housing Authority Commission, held a special meeting June 19 inside a city hall first-floor conference room.
The meeting, which lasted about five minutes, saw four on the panel, with Councilwoman Debbie Giordano absent, quickly vote to approve and ratify the settlement agreement that concludes the legal cases County of Santa Clara v. the Milpitas Economic Development Corp. as well as the Successor Agency to the Milpitas Redevelopment Agency v. John Chiang, the state's auditor-controller.
In another city hall conference room a few minutes later, in a separate meeting of the Milpitas Oversight Board to the RDA Successor Agency for City of Milpitas, largely comprised of appointed Santa Clara County employees, voted unanimously to accept the terms of the settlement.
According to the agreement, the settlement amount to be paid by the city with interest comes to more than $41.08 million. Of that amount, the city as a taxing entity will receive back about $6.2 million. Among the other taxing entities involved, Milpitas Unified School District is expected to receive up to $16.4 million, or 40 percent of the amount.
James Williams, the deputy county executive of Santa Clara County, at the meeting said the oversight board, which is not a party to the settlement, is required to take action on the settlement to approve conveyance of open-government use properties such as Milpitas' fire stations, the police station, the library and many other facilities that had been under review by the board back to the city's control. He added the action included the transfer of cash the city used to purchase a McCandless Drive property -- slated for a park and possibly a new public school -- that had been transferred from the city's former redevelopment agency to the city's economic development corporation, about $21.7 million.
"The cash remittance amount includes the return of the cash; the property will stay with the Economic Development Corporation...The property was not ordered back by the state controller or the (state) Department of Finance," James Williams said.
The deadline to approve this settlement agreement was Monday, June 30. If there had been no approval of the settlement agreement, it would have been declared null and void.
According to Milpitas City Attorney Mike Ogaz, $10.9 million of the city's $41-million settlement amount to be paid to the other parties will come from current Milpitas Economic Development Corp. funds.
"The remainder of the $41 million will come from the (city's) general fund," Ogaz said.
In addition, he added any future potential sale proceeds of the McCandless property may eventually be committed to reimburse the city's general fund.
Other parcels to be sold include two vacant parcels at 230 N. Main St. and at 86 N. Main St. as well as a Barber Lane property near Interstate 880 and Tasman Drive previously slated as a hotel site.
"The properties to be sold have not yet been appraised, so value is unknown," Ogaz said.
Milpitas City Manager Tom Williams confirmed the city, in cooperation with the Milpitas Oversight Board, will hire an appraiser and a broker to determine the value of these properties.
In March 2013, County of Santa Clara filed suit against the city -- to which the city countersued months later --- alleging the city in 2011 illegally transferred nearly $150 million of its former redevelopment agency's assets to a new entity, the Milpitas Economic Development Corp., a non-profit organization, and kept tens of millions of dollars more in violation of state law.
The county's lawsuit, filed in Sacramento County Superior Court against the city and Milpitas Economic Development Corp., followed Gov. Jerry Brown's 2011 elimination of redevelopment agencies statewide via Assembly Bill X1 26, which redirected millions of dollars away from former redevelopment agencies, like the one Milpitas had operated since 1958, was originally meant to cure blighted communities and create affordable housing instead of going toward core government services such as police and fire protection and schools.
The state's actions led to the crafting of Assembly Bill 1484, legislation authorizing California Department of Finance to "claw-back" city sales and property taxes to satisfy state funding demands imposed on legally separate redevelopment successor agencies entities charged with handling any outstanding debts and winding down the activities of former redevelopment agencies, including one in Milpitas, under the direction of a seven-member oversight board.
The county's lawsuit cited state documents indicating in 2011 City of Milpitas created the Milpitas Economic Development Corp., or EDC, formed as a California nonprofit organization for charitable purposes, and transferred $50 million cash to that entity.
The county's suit claimed the city also conveyed almost $97 million in former redevelopment agency capital assets and properties back to the city's control. The city did not transfer more than $87.6 million to the new successor agency.
The county's suit rested on State of California Controller Chiang's order in March 2011 that mandated a return of all assets transferred from redevelopment and into a city or public agency after Jan. 1, 2011.
In August 2012, after months of conducting an audit, Chiang declared Milpitas had transferred $175.6 million in assets between Jan. 1, 2011, and Jan. 31, 2012. In total, the state audit showed $234.7 million in redevelopment assets were owed by Milpitas to the successor agency.
According to Williams, City of Milpitas ultimately brokered this settlement agreement by going directly to the California Department of Finance.
"The way that this thing happened is that we the city quite frankly bypassed the oversight board and county and went directly to DOF," Tom Williams said. "So we called a meeting up at the state Department of Finance in Sacramento of which the county said, 'Well, we're not going to attend.' Then we said, 'Fine, don't attend, we're going to meet with DOF... and they did attend. And we had a meeting with DOF, a representative of the attorney general's office and we cut this deal."
He said the meeting occurred in April.
"And basically I went up there with Mike Ogaz and we said our objective is not to leave this room until we have a deal," Tom Williams said. "And it was kind of a marathon meeting led by us and DOF ... and the county got on board."
Originally, he said the state wanted City of Milpitas to hand over $150 million that "included every curb, gutter, side walk and street" in the city. Ultimately, during negotiations, he said the amount was whittled down to $41 million.
Tom Williams added claims the county made against the city to take away public use buildings such as its city hall, its police and fire stations was "all a red herring."
"It was kind of like negotiations," he said. "The county threw everything at us and made a big deal about things that were really not relevant, just to mislead, confuse the situation, which has been the case for two and a half years.
"We're paying the $41 million and all of this nonsense goes away and the city can move forward," he said. —...It's positive in that regard."
After the council's June 19 vote, Mayor Jose Esteves said the decision to settle was a hard one for the city but necessary.
"It's not the best of all because ideally we want to keep all of these properties because they're RDA acquired before the dissolution, but we just have to get the best we can and move on," Esteves said. "We could drag this one on year, after year, after year but it will not benefit the city so we are biting the bullet here."
The mayor said he did not care for aspects of the deal including the take away of some city-owned properties.
"As mayor and as a public servant I hate to see these properties (go) away because they're serving the people ... and it's an obvious public use and you don't have to prove it," Esteves said. "In that sense it's unfortunate for the city, but we have to go by the process...we just have to do the best we can out of this circumstance."