RISPIN FREQUENTLY ASKED QUESTIONS

The proposed Rispin Mansion project sites consist of approximately 5.7 acres of land located along the eastern side of Wharf Road and an approximately ½-acre paved area located across Wharf Road, west of the Mansion site. The Rispin Mansion site is bounded by Soquel Creek to the east, open space to the north, a multiple-family residential development to the south, and a residential care facility, multiple- and single-family residences, and the parking lot/library site to the west. Across Soquel Creek, there are also single-family residences. Access to both of the sites is provided via the 41^st Avenue exit off of Highway 1, Clares Street and Wharf Road.

Why and when did the City purchase the property, and how much did it cost?

The City of Capitola purchased the property in 1985 and paid $1,350.000. The City purchased the property to preserve the Rispin Mansion as a historical asset for the City.

What is the historical significance of the property?

Henry Allen Rispin, a large Capitola land owner and businessman purchased the land the encompassed most of the City of Capitola in 1919, with plans to sell properties to Bay Area Residents for summer homes. It was this purchase and later subdivisions and sales that created Camp Capitola and established the fundamental beach cottage nature of what is now the City of Capitola. The Rispin Mansion was built in 1922, as both a residence and a site to entertain potential buyers. The Mansion consists of four stories and 22 rooms totaling approximately, 7,106 square feet, and is designed in a combination of Mission, Spanish Colonial, and Mediterranean architecture styles.

Mr. Rispin overextended himself and was forced to sell the property to Burlingame millionaire Robert Hayes Smith, in 1929. Smith suffered bankruptcy in 1936 and his Capitola holdings were liquidated. Rispin Mansion remained empty until 1941 when it was acquired by the Oblates of St. Joseph’s for use by the Order of Poor Clares. The Cloistered order of nuns added a chapel and another residential building. The nuns remained in Capitola until they moved to another site in Aptos in 1959. A group of investors then acquired the Rispin estate. In the 1960s, a caretaker lived in a residence on the property, while transients periodically occupied the mansion. Over time, the interior of the property was destroyed by vandals.

Why not leave the property like it is; what other options are there?

In its current condition the property is not only a liability to the City in an annual amount ranging from $30,000 to $75,000 per year or more, but its historical and environmental values are degrading. Trespassers, vandals, homeless and youth find their way onto the property forging through the environment to reach their destination, destroying the architecture, lighting fires, and engaging in various activities that are often destructive to the area. Options previously considered for use of the property include: a) Contracting with a private developer, purchase and improve the property with an agreement to meet the City’s need for historical preservation. b) Using City/Redevelopment resources to improve and maintain the property wholly public purposes. c) Establishing a public/private partnership to improve the property in a manner that preserves its historic nature yet provides a business incentive to keep the property maintained and in an environmentally healthy condition. Given the environmental and historic constraints of the property, no one from the private sector will be able to improve the property in a manner that will provide an adequate return on their investment. As further discussed below, the City cannot afford to improve and solely maintain the property. It is the private/public partnership that offers the best hope for the best use of the property.

Why not improve and maintain the property solely as a historical asset and interpretive site and only for public access.

Very simply, it would be too costly for the City to improve and maintain the property solely as a historical asset. Construction alone would cost in excess of $2.5 million. Maintenance and operation of such a site would likely exceed $50,000 per year. If gardens were reestablished these annual costs would likely exceed $100,000.

Who will own the property?

The proposed development has not been heard by the City Council or Planning Commission and is subject to change. The initial proposal under discussion with staff considers that the redevelopment Agency will own the property for the life of the Agency. Once the term of the Agency expires, the ownership of the property will accrue to the City. It is further planned that the property will have a long term lease to the bed and breakfast developer.

What is Redevelopment?

Redevelopment is a process created by State of California statutes to identify and allow certain public monies to be invested into blighted properties so that those properties can be improved and made productive to the local jurisdiction in which that property resides. Blight is perhaps an unfortunate word chosen and defined by the Sate of California to mean property for which the free market place is unable to develop to its highest and best use. In order to find blight that justifies redevelopment, two types of blight have to be identified: physical blight and economic blight. Any one of the following characteristics identify physical blight:

- Buildings in which it is unsafe or unhealthy for persons to live or work. Serious building code violations, dilapidation and deterioration, defective design or physical construction, faulty or inadequate utilities, or similar factors can cause these conditions.

- Factors that prevent or substantially hinder the economically viable use or capacity of buildings or lots. This condition can be caused by substandard design, inadequate building size given present standards and market conditions, lack of parking, or other similar factors.

- Adjacent or nearby uses that are incompatible with each other and which prevent the economic development of those parcels or other portions of the Project Area.

- The existence of subdivided lots of irregular form and shape and inadequate size for proper usefulness and development that are in multiple ownership.

Any one of the following characteristics identify economic blight:

- Depreciated or stagnant property values or impaired investments, including but not necessarily limited to, those properties containing hazardous wastes that require the use of agency authority.

- Abnormally high business vacancies, abnormally low lease rates, high turnover rates, abandoned buildings, or excessive vacant lots within an area developed for urban use and served by utilities.

- A lack of necessary commercial facilities that are normally found in neighborhoods, including grocery stores, drug stores, and banks and other lending institutions.

- Residential overcrowding or an excess of bars, liquor stores, or businesses that cater exclusively to adults that has led to problems of public safety and welfare.

- A high crime rate that constitutes a serious threat to the public safety and welfare.

*Click here for California Community Redevelopment Act; Health and Safety Code Sections 33000 – 34160

Why rely upon a public/private partnership for the development of the property?

The City or the City Redevelopment Agency does not have the money to improve or maintain the property on its own. With a private sector partnership, the property can be made secure from environmental and historical degradation; the mansion can be improved and its historical value improved; and the property can provide a positive return to the City’s general fund through additional taxes and other revenues, and finally if a bed and breakfast inn is constructed the property would then bring business to other businesses in Capitola.

What are the environmental impacts from the proposed development of the property?

There are many and almost all are mitigated. Some impacts include monarch butterflies, and cumulative impacts to traffic. The identification and review of environmental impacts is a complex and lengthy process. The Draft Environmental Impact Report has been prepared and distributed in accordance with state law.

*Click here to review the summary of environmental impacts and mitigation measures.

What is planned to be on the redeveloped Rispin site?

A twenty-three to twenty-five room bed and breakfast project is planned for the site. The project is required to be consistent with the Secretary of State standards for historic purposes, which means where possible the reconstructed Rispin Mansion should conform to the exterior of the old Rispin Mansion. The historic gardens are planned to be reestablished and other elements of the historic mansion.

*Click Here for Photo of Rispin Plan

How will this project be financed?

Although the project is in its preliminary stages of development, yet to be reviewed by the City Council or the Planning Commission, it is estimated to cost in excess of $7 million. In general, the project will be financed by a combination of private and public money. The private money will come from two sources: a conventional commercial loan and owner equity (money directly from the pocket of the business owner). The public sector money can come from two sources: Redevelopment Agency tax increment or State grants. The final negotiations are not complete with this project. Currently it expected that the public contribution will be determined through an independent financial analysis of the project to determine the amount of public money needed to make the project a viable business enterprise with a fair return. The other determining factor on the loan of public funds is based upon the availability of the RDA tax increment money and grant funds.

Will property tax be paid on the Rispin property?

Possessory Interest Tax will be paid, which is a form of property tax. Currently, since the property is owned by a public agency, the property does not generate any property tax. Once the property is leased or rented to a private business, the possessory interest tax is applied and is collected and distributed in a manner similar to property taxes.

Questions Related to the Purchase of the Rispin Property by the Redevelopment Agency

Why sell the Rispin property to the Redevelopment Agency?

In July 2003 the Capitola City Council sold the Rispin property to the City of Capitola Redevelopment Agency. The sale of the property to the Redevelopment allows Redevelopment funds to be spent on making the property safe and secure. The City during its 18 plus years of ownership has expended hundreds of thousands of dollars on maintaining the property with limited success. It is hoped that the increased availability of Redevelopment dollars will better keep the property secure and safe. Without ownership of the property by the Redevelopment Agency these funds would not be available. Redevelopment Agency ownership of the property has no impact on any application for development.

Does the Agency have the legal authority to purchase the Rispin Mansion prior to adoption of the Redevelopment Plan?

Yes. Section 33392 of the Health and Safety Code states in pertinent part: “… an agency with the approval of the legislative body of the community may acquire, by negotiation or other means, real property in a project area at any time after formulation of the preliminary plan for the area by the planning commission…” (Community Redevelopment Law)

Has the property been paid for, and is it being used to secure bonds?

The property has been paid for and it is not being used to secure bonds. The Official Certificates of Participation show the property was paid for with General Fund money, and that the property is not being used as security for the 1986 or 1996 bond issues. (Certificate of Participation Statement- 1986 and Lease Revenue Refunding Bond Statement- 1996)

What is the fiscal impact on school district, fire district and County?

The County and special districts benefit from this plan. The Agency has pass-through agreements with the Fire District, other special districts and the County. The agreements provide that all agencies receive a 100% pass through of property tax and tax increment, thereby causing no fiscal impact. The school district does not have a pass-through agreement, however, any loss of property tax in the redevelopment area is, in effect, made up by the State of California.

Is the property a burden on the community?

The burden has been significant and long term. The Fire Chief has testified he is very concerned about the public liability of the property and for the safety of his responding fire fighters. The Fire Department has had to respond to several fires over the last several years. The Police Department has estimated the cost of responding on an annual basis is between $5,000 and $10,000 per year, or an average of $7,500. The City Public Works estimates close to 1,000 man-hours per year for repairs and safety measures. If one assumes an hourly rate of $47.00, including overhead, the annual cost would approach $47,000. Therefore, one can conclude the annual cost to the community would be about $54,000, not including the cost to the Fire District.

If this amount is added to the annual loss in value to the City of the $1,350,000, then the total cost to the City is significant. Further, when there is no income from the property and significant cost to the property, this is in fact an economic burden on the community that can and should be properly assumed by the Redevelopment Agency.

If one assumes the above annual cost of $50,000 has occurred over just the last10 years, along with not receiving any return on the $1,350,000 investment, then the community has lost $1,850,000 over the last ten years.

Note: On April 29, 2003 Public Works staff found four individuals inside the Mansion and called the Police Department and four arrests were made.

Does Extending debt take tax increment away from the State of California?

Yes, in a manner of speaking this is true, but the community needs to understand the whole picture of how redevelopment works. For example, because of the Capitola Redevelopment Agency, the State has backfilled school costs to the tune of about $10,000,000 over the 21 year life of the project. This is the money that went into tax increment and not to the State. In return, this year the City will pay the State of California over $32,000,000 in sales tax. If one assumes half of that amount, or $16,000,000, is related to the Macerich Mall and auto dealers, and further that half of that amount, or $8,000,000, is related to the expansion of other retail uses by redevelopment project, then you can conclude the State has made and is making an excellent investment, because it was Redevelopment that delivered those sales tax generating projects. Furthermore, it could be inferred that since the State has not changed the law over this period of time it is aware of the advantages of redevelopment and supports it.

If the above numbers are extended out, the State has collected sales tax over the previous 15 years at an adjusted equivalent rate of $8,000,000. In addition, the City has given the State of California $120,000,000 just for the sales tax related to the redevelopment project. This is in return for an investment of $10,000,000 spread over 20 years. This relationship will continue until year 2017, at which time the State will no longer be backfilling school districts costs, yet it will continue to receive the sales tax as well as the new tax increment.

Does the law require an appraisal of the Rispin Property, and what is a fair value to pay to the City for the Rispin Mansion?

No. California law does not require an appraisal for the City to sell the Rispin property to the RDA. Again reference is made to California Health and Safety Code Section 33220 which states: …any public body, upon the terms and with or without consideration as it determines, may: (a) dedicate, sell, convey, or lease any of its property to a redevelopment agency…”, and section 33392 which states: “… an agency with the approval of the legislative body of the community may acquire, by negotiation or other means, real property in a project area at any time after formulation of the preliminary plan for the area by the planning commission…”

With regard to a fair value for the property, it is important to note that when the City purchased the Mansion in 1985 it was for a civic purpose, which was to restore a historic treasure for the community. The City paid $1,350,000 for the Mansion at that time. The suggested price for the property by the community, in round numbers, has ranged from $3,000,000 (due to inflation) to a negative $1,000,000 plus (due to development constraints). Placing a value on this property is different from estimating a value for property to be sold in the everyday real estate market. It is difficult to discuss value for the Rispin property without considering civic value.

For example, the City has had the Mansion placed on the National Register of Historic Places in 1991; this of course adds civic value. That is, the City as a whole benefits from that designation. However, it can be argued that it generally decreases market value, because of the additional rehabilitation requirements. When a development requirement limits the number of buildable units that can be placed on the property, in order to keep open space for the public, this also creates civic value. Again, the City as a whole will enjoy the open space, but this civic value will decrease market value of the property. A butterfly habitat area, which will be an excellent addition for the public and schools, creates significant civic value. It also limits the area of development and, once again, can decrease market value.

It is interesting to note that when the City loses market value due to various development constraints or public access, the community gains civic value. In reviewing the history of the Rispin Mansion one could fairly conclude any loss in market value over the last 18 years from its purchase was not due to the economic decline of property values but was due to comparable gains in civic value.

Given the above analysis of value, staff believes that the civic value of the Rispin property is actually closer to an amount equal to the 1985 purchase price in 2003 dollars. This amount would be in the range of $2.5 to 3.0 million. However, since the public has paid the original price of $1,350,000 to create this civic value, a fair accommodation to the imprecise nature of civic value would be to reimburse the City for its original purchase price. Such a reimbursement is not only an appropriate role for the Agency, but one of the reasons why Redevelopment Agencies were created.

For the reasons mentioned immediately above, and more particularly because Redevelopment Agencies were legislated into existence to assume the fiscal burden of blight, Staff recommends that a reasonable sales price of the Rispin property to the RDA be the original price of $1,350,000.

Will the Agency have adequate funds to purchase the Rispin?

If one assumes the Agency would pay the original purchase price to the City of $1,350,000 and an interest rate of 5%, then the annual payment would be approximately $67,500. The Agency does not now have the cash to purchase the property, however, the Agency is projecting a fund balance of $243,700 for fiscal year 2003-04 and $272,800 for the following year. It is expected that this amount will continue to increase over the years, and that the improvement to the Rispin Property will contribute to that increase.