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City's dream lacks funds

Originally published: 11/8/07

As Sacramento races to approve the downtown railyard redevelopment project, city leaders are feverishly trying to cobble together $300 million to get construction started.

The issue of where the money will come from to lay down the backbone of a city center -- with streets and sewers and lighting -- in the railyard's barren acreage is far from resolved. While there are ongoing debates over a variety of issues, including the size of a proposed railroad technology museum and boundaries for a historic district, money eclipses them all.

"I think everyone right now at the city is focused on whether or not we can get this plane off the ground," said Councilman Rob Fong.

The state has emerged as the potential financial savior, but it is far from clear whether California will provide the amount that developer Thomas Enterprises is seeking.

A study released by the city this week concludes it will cost $745 million over the next 20 years to lay the basic groundwork that will make the redevelopment of the railyard possible.

Included in this total are amenities such as sewers, utilities, streets, parks, a library, community center and light-rail station. They would serve a new urban community of 12,000 housing units, offices and stores.

A smaller first phase, which would include renovating some of the historic central shops and building key streets -- could be accomplished for $300 million. This would allow Thomas Enterprises to open the public market and entertainment venues anticipated for the shops, and build some retail buildings topped by housing and offices.

"That's the real heart of the development project; that's what's going to start to create that special place," said Dave Harzoff, the city's economic development manager.

Over time, the finance plan predicts that about three-quarters of the $745 million infrastructure cost will come from the public sector -- including $222 million from the city's redevelopment agency.

Another $168 million is to come from private fees levied on development within the railyard. Thomas Enterprises also is spending millions to clean up toxic contamination in the railyard -- a task it says will cost $100 million.

"We've fronted a huge amount of money," said Suheil Totah, vice president of Thomas Enterprises. "We can't do this alone. If we combine private money with local, state and federal money, we can make it work."

But the city, which is facing its own fiscal crisis, has little to pitch in up front to get the railyard rolling.

Most of its contribution won't materialize for years. It will come from property taxes generated by the eventual railyard development, parking fees paid in city-owned railyard garages and fees paid for development in the railyard, downtown and the Richards Boulevard area.

The city's first order of business is figuring out how to pay to move the tracks that serve freight and commuter trains, and to renovate the existing depot as the centerpiece of a new commuter transit hub.

"There is really no upfront money from the city to pay for the (development) infrastructure in phase one," Fong said.

Instead, Thomas Enterprises is hanging its immediate hopes on the state of California. The developer is eyeing $150 million from Proposition 1C, which provides money to support "infill" and transit-friendly housing projects.

"It's a very real pot of money, and we're going to be pursuing it aggressively," Totah said.

City officials say the need to secure Proposition 1C money is a big reason they're moving quickly to approve the railyard plan. The development goes to the Planning Commission on Tuesday, and is expected to reach the City Council by early December.

While the criteria for awarding the 1C money are still being written at the state Department of Housing and Community Development, project readiness clearly will be one of them.

But it's uncertain whether Thomas Enterprises will qualify for anywhere near $150 million.

Proposition 1C contains a total of $1.13 billion.

"That's a logical pot of money for the railyard," said Russ Schmunk, deputy director of the state Department of Housing and Community Development.

However, just $395 million of that money is available statewide for this fiscal year. The competition will likely be fierce, and the housing department is considering placing limits on how much an individual project can get.

In the limits under discussion, the railyard could qualify for $37 million in the upcoming fiscal year -- far less than the $150 million included in the finance plan.

Schmunk said the issue hasn't been decided.

"It's premature to predict how it's going to turn out," he said.

If the 1C funds don't arrive, it would be up to Thomas Enterprises to shoulder the initial financial burden for constructing the needed improvements to start development, Fong said. The company could be paid back over time as property taxes and other fees generated by the project materialize.

"If it doesn't come through, it means it would really fall to the developer to step into that role," Fong said. "I don't know if they're willing to do that, or if they can."


The Planning Commission will hold a hearing on the railyard. When: Tuesday, 5:30 p.m.Where: Historic City Hall, 915 I St., Sacramento

Call The Bee's Mary Lynne Vellinga, (916) 321-1094.