Originally published 4:50 p.m. July 31.
Imperial Beach must revamp a deal with a developer in order to build a 9th Street and Palm Avenue shopping mall, state finance officials said Tuesday.
Selling land worth millions of dollars for $1 does not follow the spirit of state law to dissolve redevelopment agencies, the California Department of Finance said in a letter to the city of Imperial Beach.
"The selling of these two parcels to the developer for $1 is not aimed at maximizing value," the letter stated.
A contract was signed for the Breakwater Project, a project to replace the Miracle Shopping Center also known as the 9th and Palm Shopping Center, in December 2011 between the city and Sudberry-Palm Avenue LLC to sell the land for $1.
The deal must also be changed or nullified because the contract, known as a Disposition and Development Agreement (DDA), was not signed before a June 27, 2011 deadline.
"The DDA was signed after the cutoff date and the City did not have rights to the property at this time," the letter states.
"Our plan isn't to have the city be involved," said Assistant City Manager Greg Wade. "This is the successor agency's property so we're trying to have the successor agency dispose of it."
The contract was signed by the city instead of the successor agency, Wade said, "because the agency was suspended from doing any activities and the city went ahead and did the agreement with Sudberry."
"The determination is not unexpected," Wade said. "We'll be reviewing it and discussing it with the successor agency and city council and we'll be requesting a meeting with DOF to discuss it."
Sudberry Properties Project Manager Estean Lenyoun was unaware of the state's findings and declined to comment.
Efforts have been made to bring a new shopping center to the area since proposals were first requested in 2004.
After years and multiple proposals fell through, in February 2009 the former Imperial Beach Redevelopment Agency purchased the Miracle Shopping Center and North Island Credit Union properties for $11.2 million. Hundreds of thousands of dollars were spent to relocate more than a dozen businesses. The Miracle Shopping Center was demolished in December 2011.
The contract between the city and Sudberry calls for the construction of seven businesses to occupy about 42,000 square feet of space, including a grocery store.
The Imperial Beach Redevelopment Agency Successor Agency, the agency charged with carrying out the last steps of redevelopment in IB, may revamp the contract if certain conditions are met.
The long range property management plan for the land in the 700 and 800 block of Palm Avenue that was rejected by the state can be revisited if a compensation agreement is reached between the successor agency and other property tax beneficiaries like schools districts.
Once a deal is reached it would require approval from the Oversight Board and California Department of Finance.
The Imperial Beach Redevelopment Agency Successor Agency and Imperial Beach Redevelopment Agency Successor Agency Oversight Board were created following the passage of laws to dissolve more than 400 redevelopment agencies statewide.
The Oversight Board approved the shopping center contract in February 2012.
There is no appeal process to the state's decision, the letter states.
A July 2012 appraisal by Robert Becker and Associates found that the 4.75-acre vacant land is worth near $5 million.
Larger drainage pipes, making the ground even with the rest of Palm Avenue and other improvements laid out in the DDA will cost more than $5 million, according to estimates from Sudberry Development attained by Robert Becker and Associates.
Visit the city website to read more about the 9th and Palm Long Range Property Management Plan.