SH Oversight Board and CarMax await state’s final answer on disputed $6 million debt

CJ Dablo
Staff Writer

Representatives of used-car retailer CarMax haven’t forgotten about that $6 million CarMax paid Signal Hill’s former redevelopment agency (SHRDA) four years ago, long before California state officials and lawmakers decided to shut the redevelopment program down. In fact, they’ve made it clear they want it back.
It was an amount highlighted in a special meeting of the City’s Oversight Board last week when board members voted 4-0 to approve an obligation payment schedule that covered the period of January to June 2013. Chair Douglas Haubert and board members Tim Williamson and Alex Cherniss were absent from the meeting on Aug. 23. That evening, the Oversight Board approved just over $12.2 million in outstanding debts and obligations for the six-month period from January to June 2013. Signal Hill’s Finance Director Maida Alcantara confirmed Wednesday that these financial obligations will be paid in part by redevelopment property tax and in part by bond proceeds. The payment schedule that outlines the recognized obligations will be forwarded to the state’s Department of Finance for ultimate approval.
According to a staff report, from late 2007 to mid-2008, CarMax had paid the former redevelopment agency $6 million towards the property acquisition of six acres in Signal Hill. The used-car retailer had proposed to build an auto superstore on the west side of the Signal Hill Auto Center, according to a June staff report from Ken Farfsing, who serves as both the Oversight Board’s chief administrative officer and Signal Hill’s city manager.
The $6 million amount is one of several debts and financial obligations that the California Department of Finance had previously rejected for payment earlier this year, Farfsing confirmed in his August staff report to the Oversight Board.
Out of Signal Hill’s former redevelopment agency’s list of outstanding debts and financial obligations that City officials have asked the Department of Finance to reconsider paying, CarMax’s $6 million is the largest amount under dispute that may be owed back to a priprivate developer, Farfsing confirmed in an interview Wednesday.
The latest payment schedule indicates that the amount of redevelopment’s outstanding financial obligations total over $225.5 million which includes nearly $17 million in debts and obligations that were previously rejected by the Department of Finance.
Farfsing’s June staff report outlined the history of the used-car retailer’s development project, which had been moving along from its initial proposal in 2005 up until October 2008. At that time, CarMax failed to obtain building permits and then a month later requested a “time out” from their development schedule, Farfsing reported.
Progress on the development of the new dealership had been effectively put on hold after that time, and last year, California lawmakers passed legislation to end the redevelopment program throughout the state. CarMax’s attorney has told Signal Hill city officials that CarMax expects most of the money back, however California’s Department of Finance did not approve the $6 million as a recognized obligation of the former redevelopment agency program. Farfsing’s June report indicated that the Department of Finance offered no written statement to explain the rationale of their decision.
Although the Department of Finance previously rejected the used-car retailer’s request for a refund, there is a possibility that the department can reconsider approving CarMax’s claim to millions of dollars under the guidelines of a new California law. AB 1484 modifies some of the existing provisions related to the process of dissolving the redevelopment programs and also outlines new requirements for the obligation payment schedules. Farfsing explained in a telephone interview Wednesday that Cities may now be able to retain some of the assets or sell them. In addition, under the new law, the Successor Agency, which is charged with the former redevelopment agency’s administration matters, may address disputed amounts with the Department of Finance through a specific process called the “meet and confer.” Signal Hill’s Successor Agency can “meet and confer” with the Department of Finance for disputed amounts, according to Farfsing’s June staff report.
That official meet-and-confer session has not yet been scheduled. Signal Hill officials and the Department of Finance have only met and discussed their issues. Alcantara said at last week’s Oversight Board meeting that it had been recommended during a “meet and discuss” session that the CarMax line item should be listed on the January through June 2013 obligation payment schedule. The director of finance explained in a telephone interview Wednesday that the “meet and discuss” sessions were different from the “meet and confer” sessions. Alcantara confirmed at the Aug. 23 meeting that the $6 million has been spent and had therefore been listed as an “enforceable obligation.” The payment schedule notes do highlight the line item as a denied amount that is currently under appeal.
Farfsing told the Oversight Board members at their August meeting that he hoped that the Department of Finance can resolve the disputed amounts within the next review period. He reiterated that the attorney for CarMax said that the company feels that the $6 million is “a legitimate real-estate deposit that they should have back.”
“So we’re really depending on the Department of Finance to kind of give us their direction,” Farfsing said. He then explained what could happen should CarMax sue the Successor Agency of the City.
“We would tender any litigation that CarMax brought against us to the State. We made them clear of that, so they’re going to have their attorneys take a look at it,” Farfsing said. “I think, to some extent, the Department of Finance is just unfamiliar with how our real-estate transactions are put together.”

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