Petaluma to recoup $5M from state

Petaluma is set to receive $5.7 million from the state, money that had been in limbo when California dissolved a key local funding mechanism in 2011.

The money was once pegged for infrastructure projects including the Old Redwood Highway interchange and the Rainier crosstown connector. Petaluma issued bonds to fund those projects, but the state, during a budget crisis, dissolved local redevelopment agencies, leaving the city unable to use those funds.

Petaluma lost a court challenge to recover the money, arguing that the funds were already obligated to the projects before the state did away with redevelopment.

Sen. Lois Wolk last year inserted language into a bill that enables cities to recoup redevelopment funds if they were originally designated for transportation projects, which resulted in Petaluma receiving a portion of its redevelopment bond proceeds.

“This is fantastic news,” said City Councilman Mike Healy. “It is unusual in civil litigation to get a second bite at the apple.”

The money will go into a fund used to offset the impacts on traffic from large development projects, Healy said. That fund can only be spent on projects that the city has identified to help ease traffic, including the Rainier extension, a long envisioned project that would provide another route across Petaluma.

With the infusion of the new redevelopment money, Healy said the traffic impact fund is up to $23 million. He said the city’s share of the Rainier project is upwards of $30 million, and other developments in the works will pay into the fund when they come online.

“We’re in fantastic shape,” he said.

Ingrid Alverde, the city’s economic development manager, said the allocation was good news for the city, which could receive another $4 million in redevelopment money that is still outstanding.

“We’re thrilled to be able to recapture those funds,” she said. “It’s a good chunk of money and indicative of our ability to get an additional $4.2 million.”

The Rainier project, while approved, is on hold until Caltrans finds the money to widen Highway 101 through Petaluma. The new road will eventually pass under the widened highway at the Deer Creek shopping center.

Mayor David Glass, who said the city was able to sell the redevelopment bonds to JP Morgan Chase just before the state dissolved redevelopment, said he was glad to recoup the funding, but cautioned that it would not be enough to build Rainier.

“It’s good news for the city of Petaluma,” he said. “Rainier still has its challenges financially. Fuzzy math says it’s paid for, but it’s not.”

(Contact Matt Brown at matt.brown@arguscourier.com.)