Burbank to Pay Nearly $700,000 From Mall Buyout Funds : Finances: Proceeds from the Redevelopment Agency’s $10-million Media City Center deal will be tapped to refund a San Diego developer that tried for 12 years to build a shopping facility.

The $10-million buyout deal ending the Burbank Redevelopment Agency’s interest in the troubled Media City Center shopping mall will be reduced by at least $698,000 that city officials promised to give an earlier, unsuccessful developer of the property.

The Hahn Co. of San Diego will receive the money. Hahn tried unsuccessfully for 12 years to build a shopping center in Burbank before the Alexander Haagen Co. stepped in to develop the Media City Center.

The payment to Hahn would decrease the amount of money taxpayers receive from the agency’s $120-million investment in the Media City Center by about 7%.

Although the city collects $1.2 million in annual sales taxes from the mall, millions of dollars in other revenues have been diverted to Haagen through a series of costly deals since 1989.

In October, the Burbank City Council gave up the city’s right to half of the mall’s profits in return for Haagen’s promise to pay $10 million over the next two years.

At the time, city officials called the buyout a success, emphasizing the size of the $10-million payment.

Haagen retains 100% of the profits and the right to lease the land on which the mall sits for $1,000 a year for up to 95 years.

“Until we get cash from the transaction, they don’t get paid,” Assistant City Manager Steve Helvey said of the Hahn Co.

“It’s not that we didn’t have money from other sources to pay Hahn,” Helvey said. “The agreement (with Hahn) called for money from a specific source, and that specific source wasn’t generating any money.”

The Hahn Co. was selected in 1975 to build a two- to three-level mall with four major department stores that was projected to open in 1987. By that time, however, the firm failed to secure a fourth major department store considered vital for the entire project. Consequently, the company did not purchase the land on which the mall was built from the Redevelopment Agency as planned.

In 1987, Burbank council members determined the Hahn Co. was in default, but had acted in good faith and was entitled to a refund of about half its investment--with interest--so long as the city earned more than $1 million from a new developer.

The Hahn Co. had invested a total of $1.1 million that was paid to the Redevelopment Agency--$500,000 advanced for the land purchase, $100,000 in administrative costs, and a $500,000 deposit guaranteeing the firm’s sincere effort to complete construction of the mall.

Hahn’s money, Helvey said, was placed in the agency’s General Fund for use in appraising the property and relocating businesses from the site, among other things.

For years, the Hahn Co. sought the refund. But Helvey repeatedly stated that the money would not be paid until the Media City Center turned a profit for Burbank. Hahn’s former vice president of development, Daniel Felix, wrote Helvey in 1990: “Your convenient interpretation that so long as the Agency does not come into direct receipt of funds, Hahn is not entitled to a repayment under the agreement . . . is patently indefensible.”

In 1989, Haagen was selected as the project’s new developer. The mall opened two years later and has reportedly lost millions of dollars in revenues ever since, partly because of high vacancy rates.

The city has never received any profit from the mall, and Haagen, in papers filed with the Securities and Exchange Commission, has stated the mall lost money the last two years. But the council decided that the receipt of the $10 million from Haagen justifies the payment to Hahn.

Haagen and the Redevelopment Agency agreed to part ways after the developer made a series of financial demands he said were necessary to ensure the mall’s long-term viability.

With the buyout agreement, city officials say they will finally be able to settle the agency’s debt to Hahn.

“This was money we owed for a long time,” Vice Mayor Dave Golonski said. “The Haagen deal was not influenced at all by the fact that we had to pay Hahn.”

Hahn’s general counsel for real estate, Douglas Hageman, reserved judgment on the latest deal until his company’s dispute with the city is resolved.

“Assuming we get paid,” he said, “we’ll be satisfied.”