In the case of the Ford dealership, Llovio Ford is operating under a conditional franchise and must relocate to larger quarters to gain permanent status. Their new site at Firestone and Garfield is made up of two parcels. Parcel A is the old Builders Emporium location and Parcel B is an old newspaper publication building and yard. The developer (Llovio Ford) will purchase the parcels from the Redevelopment Agency. The price on Parcel A will be in the range of $2.15 million to $2.5 million depending on the outcome of an eminent domain action. Parcel B is even more interesting. It will be sold to the developer for $600,000 repayable at $2,000 monthly for 25 years, interest free for the first 10 years. The City claims the interest subsidy ($2,322,906) will be offset by the tax increment. This is truly creative financing. Anywhere else it would be called a gift of public funds.
So where does the money come from to do all these wondrous things? The City of South Gate has applied for a $5 million HUD Section 108 loan which is somewhere in the pipeline and this money will be loaned to the developer to "buy" the land and build the car dealership. There needs to be some sort of collateral for a government loan, so the City is pledging $2.8 million of its anticipated block grant funds, also from HUD, to back up its $5 million Section 108 loan from HUD. (Santa Claus may live at the North Pole in December, but he is alive and generous in the nation's capitol the rest of the year.)
An interesting side note is that since the HUD money was late in coming, the Redevelopment Agency got a $600,000 bank loan so construction could get started, which it has. Now everybody hopes the HUD money will come in time to pay back the bank and finish the building on land for which they don't even have fee title because the eminent domain proceedings have not yet gone to trial.
Across the Firestone/Garfield corner the Gonzales Automotive Group has reopened the old Chrysler/Plymouth agency. This deal also has some interesting financial arrangements.
The City of South Gate purchased the whole facility from Chrysler Realty for $3,220,000 and is reselling it to the Gonzales Group for $2,970,000. The DDA says the Redevelopment Agency "will carry financing on the land, fixtures and equipment plus improvement costs with no down payment at 6 percent amortized over 20 years, with all remaining principle and accumulated interest due in three years."
In real terms what this means is that the Redevelopment Agency bought a closed auto dealership, sold it to an operator for no money down and negligible principle payments for three years at which time, theoretically, if the business is not doing well, the operator could just walk away.
This is fairly typical of what is happening today in Redevelopment deals and shows the extent of Redevelopment abuse.
In my opinion, if a project is planned, it should be put out to open bid to see who will pay the most to be there, not as it is now, who can get the biggest subsidy behind closed doors.