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City to receive fraction of $2.4-million loan repayment

Council vote clears way for building sale
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BY STEVE ARCHER

OF THE LINCOLN NEWS MESSENGER

Lincoln will be repaid less than two percent of a $2.4-million loan, made by the city’s now defunct redevelopment agency, after City Council voted unanimously Tuesday to clear the way for an iconic downtown building’s sale.

The city of Lincoln’s Redevelopment Successor Agency will receive $46,000 upon the sale of the Lincoln Brand Feed Building at 446 Lincoln Blvd. The Lincoln Redevelopment Agency, dissolved in 2012 with the rest of the redevelopment agencies throughout California, loaned $2.4 million for the rehabilitation of the 150-year-old building. The building is owned by Lincoln Brand Feeds, Inc., of which the principle shareholders are William and John Falconi.

The council’s action allows interim City Manager Robert Adams to prepare documents needed to complete the short sale of the building. Adams was hired Tuesday night as former City Manager Matt Brower’s temporary replacement. Adams will serve until the council finds a permanent replacement for Brower, whose last day was July 6.

Anastasia Efstahtiu, a city Finance Department staff member, said the council was charged with winding down the redevelopment agency’s business as efficiently and expeditiously as possible. Redevelopment agencies would make higher-risk loans that banks typically would not make, according to Efstahtiu.

“Ideally, you would like the loan paid back in full,” Efstahtiu said. “But you should also consider that, while loans were made with the expectation of being paid back, the public purpose was to further economic development in town.”

The building’s rehabilitation was a success but the building owners are unable to satisfy the existing debt, Efstahtiu added. Currently, there is a $4.25 million offer on the building. According to the approved agreement Tri-County Bank will receive $4.2 million, $204,000 will cover the borrower’s closing costs and past due taxes and the Lincoln Redevelopment Successor Agency will receive $46,000.

Foreclosing on the property,  Efstahtiu said, is “not advisable and would likely increase our loss.”

“Loan payments were not required to start until final disbursement of funds and final disbursement was never made,” Efstahtiu said. “It was the perfect storm of everything bad that could happen.”

Mayor Stan Nader said he was concerned with the city’s prior practice of making inter-fund loans. Money for this loan was borrowed from the Development Services Fund, which then borrowed from Fund 225, the Placer County Water Agency Water Connection Fund, according to Nader.

“We wrote off $3 million in 2011, we wrote off $2 million in 2013 and it appears we will be writing off, per this agreement, $2.4 million,” Nader said. “It is troubling that we continue to write off money our good citizens trust us to steward.”

Lincoln resident Travis Mickel said he was troubled by what he saw as a pattern of helping friends of the city.

“It’s not fair and just to collect rent for 14 years and not make a payment,” Mickel said. “You are effectively making a gift of public funds.”

Tony Wood, a commercial real estate broker with the Lincoln Brand Feed Building listing, said the property is complicated by railroad leases and “massive” utility easements running through it.

“Both Tri-County Bank and the owner have stood there all these years by the project, an iconic gateway to downtown Lincoln,” Wood said. “The bank knew it would be a disastrous impact if it were foreclosed; they waited for a better market and it is here.”

Councilman Gabriel Hydrick called the issue “very distasteful.”

“I don’t like it at all,” Hydrick said. “This is a text book example of public money invested in private interests.”

Interim city manager hired

Robert Adams, a senior associate with Municipal Solutions and former city manager of Manteca and Dinuba, was hired Tuesday night as Lincoln’s interim city manager. Adams’ contract specifies his start date as next Monday and end date as Jan. 16, 2019. He will make $97.68 per hour.

Nader said Adams is a good fit for Lincoln.

“Bob has an exceptional breadth of experience in the areas of government that Lincoln values most,” Nader said. “During his brief time with us, he’ll offer our city steady direction and a commitment to excellence, which is something we strive for in our day-to-day operations.”

The city has hired executive search firm Bob Murray and Associates of Roseville to recruit a permanent city manager. The process has begun and is expected to take four to six months.

State audit

The Lincoln City Council voted 3-2 to designate Councilman Peter Gilbert and Councilman Dan Karleskint as representatives to the State Audit team and to attend an entrance meeting next week. Nader and Hydrick voted no. Nader had requested one of the two spots but didn’t have the votes. Gilbert made a motion to nominate himself and Karleskint.

Karleskint said it was important to have representatives of the council interface with the audit team to keep the council apprised.

Gilbert said he offered himself due to his decades of experience in finance, both publicly and privately.

At the meeting’s conclusion, Lincoln resident Holly Andreatta said she felt Nader had been disrespected by Gilbert.

“I am upset,” Andreatta said. “I feel they stepped over (Nader). It was disrespectful.”

Nader said he was “out of sorts” after the vote on the representatives to the state audit.

The Assembly Joint Legislative Audit Committee voted unanimously May 17 to conduct an audit of the city, at the request of State Sen. Ted Gaines of Roseville. The city is currently looking for a consultant to help manage the audit process.