Goleta officials do not believe they took a gamble in moving forward with construction of the San Jose Creek restoration project without securing prior state funding.
Questions about known risk are beginning to surface more than a week after city officials learned that the California Department of Finance has denied Goleta millions of dollars to fund its flood-control project, which was supposed to be finished later this year.
The state is disputing just over $18 million, $14 million of which is related to redevelopment bond proceeds.
Whether the city acted legally and was eligible for the requested redevelopment funds were concerns raised last year by the Oversight Board to the Goleta RDA Successor Agency.
In a letter dated Sept. 10, 2012, the board monitoring the distribution of funds asked the State Controller’s Office to rule whether the transfer of redevelopment fees to the city in March 2011 was consistent with state law.
The letter was sent merely to ask a question and not to imply fault, according to Santa Barbara County Assistant CEO Renee Bahl, chair of the oversight board.
“We had a lot of discussion on was this legal or eligible,” Bahl told Noozhawk. “We couldn’t figure it out. The dissolution of the redevelopment issue is very complicated. The timing was part of the issue. We really didn’t have a leaning. Our question was, in fact, just a question.”
Although no direct answer ever came back, Bahl said she suspects the state’s response came in last week’s letter.
City officials are preparing to defend the project — designed to widen the creek to improve fish movement and relieve some flooding and drainage issues — during a “meet and confer” session with the state Department of Finance next Thursday in Sacramento.
If the funds are still denied, Goleta officials have mentioned legal action as a viable option.
Officials have also made clear that the city doesn’t have an extra $18 million to pay for the project.
City Attorney Tony Giles said officials have not taken a risk but have come under review because of timing and the “unusual and ambiguous” language added after the law dissolving redevelopment agencies was passed in June 2011.
“Some of that ambiguity just comes out of the way the law was adopted and the additional changes that were made over time,” Giles said. “This project has been on the boards for a long time, even before the city was incorporated. We felt pretty comfortable based on that this was a reasonable and appropriate expenditure.”
He said the city and RDA entered into an agreement in 2009 to do work for the San Jose Creek project, with RDA reimbursing the city for costs. In 2010, the city and Santa Barbara County Flood Control District entered into a separate agreement to complete the project in which the city would pay all costs minus the $5 million provided by the flood district.
After the RDA transferred about $14 million to the city for the project in 2011, the state tweaked rules about which pre-existing projects qualified for such funding, Giles said.
“The law kept changing after we took the actions,” he said. “At the time that every action was taken, we took careful consideration of the law. The things that call us into question came up much later. We calculated what those risks were. I think (the state will) understand and see that the actions were appropriate.”
Assemblyman Das Williams told Noozhawk this week that his office would be glad to help Goleta defend its redevelopment funds, something Santa Barbara has successfully done with its parking lots project.
“We’d be happy to help the City of Goleta move forward, but I hope they of course do ask and work with us to help save whatever we can save,” Williams said, noting that Goleta officials have not yet reached out. “I don’t think it’s fair to criticize the City of Goleta for not being able to see the future. The future is often hard to read.”
— Noozhawk staff writer Gina Potthoff can be reached at gpotthoff@noozhawk.com. Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.