$31.3-Million Grant Paves Way for Big Shopping Mall

Los Angeles County will contribute about $31.3 million to help pave the way for a regional shopping center in Pomona in exchange for more than $61 million in increased revenue from bond sales and various city redevelopment projects over the next 30 years.

Under an agreement approved this week by the City Council and the County Board of Supervisors, the county will grant the Pomona Redevelopment Agency some of the tax increment revenue it would ordinarily receive as the result of increased property values in the Southwest Redevelopment area.

In return, the Pomona Redevelopment Agency will provide the county with $10 million raised through bond sales. The county will receive $4 million when the bonds are sold in January, with the remaining $6 million to go into a Redevelopment Agency account to pay for county-approved improvements to the redevelopment area.

Simple Concept

Although the 18-page agreement between the two entities is complicated, the impetus behind it is simple: Without the county’s assistance, the Pomona Redevelopment Agency would be unable to move ahead with the regional shopping center project.

If that happened, a major mall would probably be built a few miles down the Pomona Freeway in San Bernardino County, depriving Los Angeles County and the Pomona Redevelopment Agency of the $440 million in tax increment revenue officials hope the project would generate over the next 30 years.

“Everyone should come out a winner,” said Delta Uyenoyama, a county financial analyst who specializes in redevelopment matters. “They would get a regional shopping mall, some infrastructure improvements and the county will receive increased revenue in the future. It should work out for everybody.”

Although the county has locked horns with cities in the past over redevelopment revenue, the prospect of both entities losing a major revenue source was a unifying force.

“Unless we take this action, (the regional shopping center) won’t be in L.A. County,” said Sanford Sorenson, Pomona’s Deputy City Administrator for development. “By allowing us to do this, the county is going to get more (revenue) than they ever would have and so will we. There’s just a bigger pie to split up.”

May Centers Inc., the development arm of the St. Louis-based May Department Stores Co.--owner of the May Co. and Robinson’s chains--has entered into a preliminary agreement with Pomona to build a major mall on a 74-acre site near the junction of the Pomona Freeway and Corona Expressway.

The center would include about 100 shops, anchored by at least three major department stores. Sorenson expects that the mall and other nearby development it would spawn would have a total property value of $150 million. The center itself would yield more than $2.7 million annually in sales and utility taxes for the city and would create 2,200 jobs.

Pomona officials view the project as a godsend for the financially pinched city. But its construction will require freeway access, street construction and other improvements totaling $75 million, of which Pomona’s share would be between $15 million and $20 million, Sorenson said.

The Pomona Redevelopment Agency now receives only $2.5 million in tax increment revenue from the Southwest Redevelopment Area, all of which is committed to servicing its annual debt on bonds that funded expenditures such as the acquisition of land for the shopping center and the development of a nearby auto mall, Sorenson said.

“We just don’t have the money coming in to pay for some of the things that are needed,” he said.

Enter the county, which will provide grants and loans to guarantee the Redevelopment Agency annual revenues of $8.5 million from the Southwest Redevelopment Area. The grants will come out of the county’s 49.3% share of all tax increment money generated in the redevelopment area.

“What the agency is saying is that they’ve hit their bonded-debt limits, so they’ve asked us to participate,” Uyenoyama said. “They asked us for more money to do more.”

The maximum county grants will be $2.6 million annually for the project’s first three years and will increase to $3.1 million a year thereafter, up to the total of $31.3 million, according to the agreement.

Loans Guaranteed

If in any year the Redevelopment Agency is unable to collect $8.5 million through the combination of grants and its own tax increment revenue, the county will lend the agency enough money to make up the shortfall at a 7% annual interest rate.

The grant amount would begin to drop from $3.1 million in the mid-1990s as between $300 million and $400 million in new Southwest-area projects are brought onto the tax roles, Uyenoyama said.

By the year 2005, the annual county grant would be only $600,000, and it would stay at that level until the redevelopment project ends in 2019, he said.

When the Redevelopment Agency begins receiving more than $8.5 million in tax increment revenue, the excess money would go to the county until the county received all of its 49.3% share, according to the agreement.

Housing Grants

Under another provision of the agreement, the county will provide $19.2 million in grants over the next 30 years to the Redevelopment Agency to pay for the construction and rehabilitation of low- and moderate-income housing in the Southwest Redevelopment Area.

The grants will enable the agency to share the burden of committing 20% of its tax increment revenue to low- and moderate-income housing, as required under state law.

However, the county will also gain an estimated $19.4 million in property tax revenue from five other redevelopment project areas in Pomona, which now goes entirely to the Redevelopment Agency. Under the agreement, the county will begin receiving 49.3% of the tax increment money generated in these areas.

While Pomona officials were less than pleased about splitting the revenue from these other areas with the county, they agreed to this provision to avoid a costly legal battle. The county has gone to court elsewhere in an effort to obtain some of the new revenues created in redevelopment areas.

“The reason the county is taking more of the agency’s action, if you will, is that they threaten to sue you,” Sorenson said. “You have to make the best agreement you can.”

The agreement was reached after more than a year of negotiations that began when Sorenson, Pomona Mayor Donna Smith and Councilman Mark Nymeyer raised the idea in a meeting with Supervisor Pete Schabarum.

“I can recall the conversation: ‘This is impossible, this will never work,’ ” Nymeyer said at the council’s Monday night meeting. “Yet here we are, with excellent prospects for the future.”

Schabarum confirmed in a statement read by spokeswoman Judy Hammond that the city did request help about a year ago from his office in putting together a tax-increment deal.

“Our role was simply to monitor the negotiations to make sure they continued in a positive way,” Hammond said. “We encouraged the (county chief administrative officer’s) office to come to an early resolution, knowing that the city had some deadlines to meet.”

‘County Was Pushing’

A major sticking point in the negotiations, Pomona officials said, was the county’s insistence on receiving 25% of the sales tax revenue produced by the regional shopping center.

“The county was pushing that very hard,” Sorenson said. “That was probably the one situation that was non-negotiable. . . . We’re the ones who have to provide all the local services to the shopping center.”

Although the county eventually abandoned its efforts to get a cut of the sales tax, Schabarum commented favorably on the agreement.

“It was a good give and take between the city and the county, which results in a shopping center for the city and some badly needed revenue for the county general fund,” Schabarum said in a statement.

Before voting unanimously to approve the agreement Monday night, council members exulted in being able to get the money to initiate the project without having to part with the city’s future sales tax dollars.

“At the time (negotiations began) we weren’t sure that we could reach an agreement,” Smith said. “We have really achieved the impossible. . . . This sets the ball in motion and gets the financing in effect. It’s a very nice Christmas present for all our residents.”

Although support for the agreement was unanimous, not all council members were overjoyed.

“I think the county’s getting too damned much already,” Councilman C. L. (Clay) Bryant said. “L.A. County treats its cities as separate fiefdoms and that burns the hell out of me . . . giving (tax money) to a bunch of shysters down there who provide little or nothing for local government. . . . (But) I’ll vote for it because it’s the best we can do.”

In response to Bryant’s criticism, Councilman E.J. (Jay) Gaulding succinctly expressed his satisfaction with the deal.

“We didn’t get shafted,” he said.

COUNTY-POMONA REDEVELOPMENT AGREEMENTSt. Louis-based May Centers Inc., has signed a preliminary agreement with Pomona to develop a regional shopping center near the junction of the Pomona Freeway and the Corona Expressway. The Pomona Redevelopment Agency is responsible for coordinating development of freeway access to the center. The county has agreed to grant to the redevelopment agency about $31.3 million from county’s share of tax increment revenue over the 30-year life of the project.

Proposed mall would:

Cover 74 acres

Include three major department stores

Include about 100 shops

Generate $440 million in tax increment revenue over 30 years

Generate $1.7 million a year in sales tax revenue for city

Generate $1 million a year in utility tax for the city

Create 2,200 jobs

THE FINANCIAL AGREEMENTS

Redevelopment Agency

will receive:

About $31.3 million from county’s share of tax increment revenue over the 30-year life of the project

A guaranteed annual base revenue of $8.5 million

A grant of $600,000 a year, totaling $19.2 million, to construct or rehabilitate low- and moderate-income housing

County will receive:

$10 million from the Redevelopment Agency raised by the sale of bonds

($4 million will be given to the county in January and placed in its general fund. The remaining $6 million will be placed in a Redevelopment Agency account to be spent on county-approved general public improvements)

$32 million in increased tax revenue from Pomona’s Southwest Redevelopment Area

$19.4 million in tax increment revenue from other redevelopment areas in Pomona