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Oversight board approves write-off of nearly $4.9 million promissory note tied to San Jose redevelopment
Summary
The Countywide Oversight Board voted unanimously to adopt a resolution approving the Successor Agency to the Redevelopment Agency of the City of San Jose’s write-off of an uncollectible, unsecured promissory note of about $4.9 million after staff said the loan lacked adequate security when it was converted from a grant.
At a special meeting of the Redevelopment Dissolution Countywide Oversight Board of Santa Clara County, members voted unanimously to adopt a resolution approving the Successor Agency to the Redevelopment Agency of the City of San Jose’s write-off of an uncollectible, unsecured promissory note totaling about $4,900,000.
Board members said the loss is disappointing and noted the funds could have otherwise supported local needs such as school-district projects. Kevin Fisher, assistant city attorney for San Jose, told the board the original development disposition agreement (DDA) treated the amount as a grant and that the developer later requested conversion of the grant to a loan so the developer could obtain tax credits: "The original DDA provided that the developer could request that the grant be converted to a loan, for the developer to get tax credits," Fisher said.
The board heard several members express frustration that the loan was unsecured when converted. Member Williams said, "I can't tell you how frustrating it is to see almost $5,000,000 of taxpayer money go away because of a lack of legal documentation at the time that the loan was made, that it did not provide adequate security for the investment." Several other members echoed disappointment but said they would support the write-off to remove the liability from the agency's books rather than leave it outstanding.
Staff said the situation arose from the transaction history: the amount was initially a grant under the DDA and later converted at the developer’s request; records indicate the conversion resulted in an unsecured note. Board members asked whether other similar liabilities remained; staff said there are other notes receivable but none known that share the same unsecured status.
The board adopted the resolution by roll call vote; recorded ayes included Member Williams, Member Gomez, Member Jim, Member Pasquale and Vice Chairperson Snow. The board made no further directives on recovery or litigation at the meeting.
The item was introduced as "item number 4" on the board's regular agenda and concluded with the board's roll call vote to adopt the resolution.
