No amount of caution could've foreseen meltdown's effect on redevelopment
I was happy to read that Ric Llewellyn's Oct. 17 column was titled "Government should proceed cautiously on redevelopment" for two reasons. One, the many legal requirements made of redevelopment (and local government in general) demand such caution. Two, prudence suggests that all projects involving public funding require deliberate consideration.
Yet no amount of deliberation would have foreseen the massive financial meltdown and economic nosedive we have endured recently. The effects of these crises have been well documented in this newspaper. These were "equal opportunity" crises, affecting projects of both the private and public sectors.
Llewellyn compares Baker Street Village to the Parkview Cottages. Yes, both are housing developments that have suffered due to the unusual economic conditions of our time. Both have significant amounts of public funding. But he overlooked a key element similar to both projects: Each is privately owned.
Although the private developer of Baker Street Village sincerely tried to complete the project, it had come to a standstill due to tightening of the credit markets. The developer found his bank loan had been substantially reduced, creating a gap in construction financing. An additional gap in permanent financing arose when the original concept of the units being for sale was no longer viable, due to the problems in the local real estate market.
Llewellyn stated, "It's simple: Don't invest money where you will not realize a return." Unfortunately, most things in life, including public policy, are not so simple.
With Baker Street Village stalled, banks would not lend more to the private developer. The cost of construction exceeded the current depressed market value. No other private developer was interested in completing the project and there were no additional city or redevelopment funds available to commit.
What to do? There were two options. One was to do nothing. Doing nothing would mean Baker Street businesses and residents would continue to live with a half-built project with steel columns jutting out of a big hole in the ground. The second option was to do something so the nearby businesses and their customers no longer had to look at this blight. We chose to do something about it.
That something was a successful application by the Housing Authority of the County of Kern for an $8 million federal grant targeted specifically for housing projects stalled due to financing issues. That grant, which was highly competitive nationally, will allow the Housing Authority to purchase the site and complete the building. That means the first phase of the project will be completed, people will soon be living in the project, and the blight of the big hole in the ground will be gone.
Llewellyn was incorrect on a few specifics of the project. First, the project is not being "touted as a great economic boost for our scanty city coffers." It is, instead, seen as making the best of an unfortunate economic crisis. Second, he asks what the cost to taxpayers will be "if the project is built and minimally occupied." The question that should instead be asked is, what is the cost if the project remains half-built, and with no occupancy?
Regarding Parkview Cottages, Llewellyn is correct that the prices of the units have been slashed and the rules have been changed to attract more buyers. That is because the private owner of the development had not competitively priced the homes. Now that the prices are more in line with the depressed market, buyer interest has significantly increased.
Redevelopment is not easy. Its goal is to address issues of blight to which the private market cannot quickly respond. I am pleased to report that the Bakersfield Redevelopment Agency and the city of Bakersfield continue to proceed cautiously, as Llewellyn suggests, to address issues of blight and to provide much needed affordable housing and other improvements in older parts of our city.
Donna Kunz is the economic development director of the city of Bakersfield.
