HERCULES -- Eight businesses are delinquent in their payments on loans with balances totaling almost $700,000 that they received from the city's now-defunct redevelopment agency, but officials have put collecting the debt on "the back burner."
With the city saying it is facing more pressing financial issues, it has put little energy into recouping taxpayer funds that would go toward paying off a mountain of redevelopment debt, not to fund city services. As a result, it is unclear if or when the businesses that received the loans may be forced to pay back the money.
The former Hercules Redevelopment Agency's receivables, according to records provided by City Hall in June, include some 20 business development loans, originally totaling about $3.9 million, that currently have a combined outstanding principal balance of $3.3 million. More than one-third of the business loans are deemed "delinquent" on a list provided by City Hall.
The city is the successor agency to the redevelopment agency, which lapsed Feb. 1, 2012, as part of the statewide dissolution of redevelopment agencies.
"Successor agencies and oversight boards have a fiduciary responsibility to ensure amounts owed to the former (redevelopment agency) are collected," H.D. Palmer, spokesman for the state Department of Finance, said in an email last month. "Any revenue coming in is then used to pay for approved enforceable obligations."
Redevelopment agency revenue is supposed to go to bond debt service, a court-approved settlement with Catellus Corp., and into a tax trust fund for distribution to various taxing entities. But Hercules' redevelopment agency debt stands at more than $300 million on the latest state Recognized Obligation Payment Schedule, and with obligations -- about $19.2 million a year at latest count -- far exceeding the annual tax increment revenue of about $8.2 million a year, there will be no excess revenue anytime soon that would go to the city. Unpaid obligations get rolled over to the next period.
"Although we do try to collect all nonhousing delinquent loans via phone call on a quarterly basis, this will go to the back burner for more immediate financial situations," Hercules Finance Director Nickie Mastay said this week.
Business development loans on the city's list include a $2 million loan to Bio-Rad Laboratories in 2010 that has a balance of $1,891,000; payments on that loan are up to date. But as of June, nine business development borrowers were listed as delinquent; one appears to have made a payment since, leaving eight delinquent accounts with a combined balance of about $687,000. They are:
Buchanan said this week he has worked with city officials on a "mutual walkaway" but had not heard back recently. Meanwhile, a $710,000 debt to Emmerich is on the latest obligation payment schedule.
his business but still lives in Hercules. "I'm committed to repaying the loan; that's the best I can tell you," Jones said.
Although Penner Homes is still listed at the Railroad Avenue address on the state Department of Real Estate website, the premises are occupied by a travel company. Penner Homes has an office in Orangevale.
Mastay said this week she has no quick way to check which of the business loans may be secured by real property or other collateral.
The former RDA's receivables also include almost $5 million in housing loans, mostly first-time homebuyer loans, that are slated to begin monthly payments over the next few years. The list also includes 10 second mortgages totaling $3.1 million that the agency financed to bail out some underwater homeowners. The combined mortgage balance was down to about $2.7 million as of June.
Contact Tom Lochner at 510-262-2760. Follow him at Twitter.com/tomlochner