CLEARLAKE – The Clearlake City Council and Clearlake Redevelopment Agency's special Thursday meeting on a proposed shopping center plan drew a wide range of comment from dozens of county residents.

A considerable amount of carefully reasoned argument on both sides, combined with a passionate defense of businesses from around the lake, characterized the majority of the comments shared in hours of testimony Thursday night.

Supporters of the plan explained that the Pearce Airport property on Highway 53, where it will be situated, was supposed to be a regional shopping center all along, following its purchase from the county in 1996. That was a point made by people including Gary Briggs, who sits on the Lake County Planning Commission, and by Clearlake Planning Commissioner Albert Bernal.

At the same time, some community members felt the process – which largely has taken place behind closed doors in confidential negotiations – hasn't been available to them, and they characterized the plan as a major giveaway of public funds to a large corporation.

In some cases, that led to accusations against council members and city staff. City Administrator Dale Neiman said during the meeting that it was the first time he had been accused of being both incompetent and corrupt.

During the meeting, Dennis Linville, a Lowe's employee who opens new stores in Northern California, confirmed that the corporation has approved moving forward with the project.

After Mayor Judy Thein guaranteed that the council would make no decision on the project site's proposed sale, the mitigated negative declaration or other environmental issues, she turned the meeting over to Neiman.

Sitting beside Neiman at the meeting was Iris Yang, an attorney for McDonough, Holland and Allen, the city's redevelopment firm, and Jerry Keyser of the firm Keyser Marston Associates, both of whom assisted with the city's proposal.

Neiman explained that the Clearlake Redevelopment Agency purchased the Pearce Airport property on Highway 53 in 1996. The land was the subject of a 2004 feasibility study, and in 2006 Katz Kirkpatrick Properties and several other developer firms submitted proposals. In early 2007, Katz Kirkpatrick entered into an exclusive negotiation contract with the city.

When Neiman was hired in February 2007, “This was the top priority project that I was to to work on,” he said Thursday.

Fifteen acres of the airport property is proposed to be sold to KK Raphel Properties LLC, whose principals are part of Katz Kirkpatrick. Of that 15 acres, nine will be used for the Lowe's project, with more than 111,000 square feet of indoor space and more than 25,000 in outdoor garden space.

Neiman said the city must complete several tasks – including completing engineering design of some of the needed site improvements – before escrow is closed in February 2011.

He said Lowe's plans to exceed energy efficiency requirements by 20 percent. The rest of the plan includes three fast food restaurants and a sitdown restaurant, which would generate the highest amount of trips and traffic impacts than other businesses, such as furniture stores or vehicle repair.

“We went much more toward the worse case” relating to traffic, Neiman said.

The project has a second phase, which would include two parcels along one side of Lowe's that the redevelopment agency would initially retain, but which KK Raphel could purchase within 30 months of the close of escrow on the main property. The cost for any improvements on that land would be added to the purchase price.

“This property has been marketed for a long time,” Neiman said. “If it's not sold now I don't think it ever will be.”

If the land isn't sold, Neiman said the redevelopment agency would lose $2.4 million; if it sold the land, it only would lose $900,000.

Neiman's report also estimated that the total project would create 320 jobs, of which 175 would be from Lowe's – 131 part-time and 44-full time. The tenants for the other commercial pads have not yet been determined, but they're estimated to produce a total of 41 part-time and 104 full-time jobs.

He said that Lowe's would generate between $575,000 and $635,000 in new sales tax and tax increment revenue annually. Relating to total sales, 20 to 30 percent would come from existing stores and 70 to 80 percent would come from sales that previously took place outside of the county.

Neiman cited a county-funded study that estimated $121 million in retail sales leave Lake County annually, and that there's room for significant retail expansion.

“My personal opinion is there's some room for competition,” he said, pointing to an ad for Friedman Brothers hanging on the council chamber bulletin board.

Neiman said he recently needed to purchase some lag bolts and if he had purchased them locally he would have had to pay 62 percent more for them, a statement which elicited some irritated reactions from business people sitting in the audience.

Public improvements for the project would be funded by the redevelopment agency. Neiman said the estimated cost for those improvements is $6.3 million and is not to exceed $7 million. The city would adopt developer impact fees to recoup about $5.8 million.

If the redevelopment agency spent $2.5 million to make improvements to the city's sewer system, that would free up 3,000 new connections, and at $833 per connection the city would recoup that amount, he said.

“At the end of the day everybody would pay their fair share,” he said.

The project was needed in order to help the city to deal with its “serious financial problems,” Neiman said.

Neiman's description of the city's situation and its outlook if the project didn't go forward sounded at the least bleak and at the worst slightly apocalyptic.

The city's operation funds have only $120,000 in cash reserves. “If that money runs out I think everyone knows the consequences of that – we can't pay our bills,” he said.

Describing the last three years as “miserable,” Neiman said the city has eliminated 30 percent of its work forces.

Whereas in 2006 the city has four to six officers on patrol on average, it now has one to two, Neiman said. They have only one city staffer to maintain 29 miles of city streets, city hall is springing leaks – with buckets everywhere to catch leaking rainwater – and the city owes the state $165,000.

The city's per capita tax trends show that Lakeport has almost three times as much sales tax revenue as Clearlake, despite having a smaller population. If Clearlake was doing as well as Lakeport, it would have another $1.8 million in its coffers, with $1.4 million more for police.

“It's critical for the city's future to be able to generate more income,” he said.

Neiman said the city has two alternatives – get its fair share of tax revenues or not proceed on the project and “accept certain consequences,” such as a continuing decline in services – more cuts to police, elimination of code enforcement and sewer problems with sewage spilling into the streets.

Mike Raphel of KK Raphel – who was at the meeting with partners Fred Katz and Steve Kirkpatrick – spoke briefly about the project, thanking the council for going through the the voluminous reports.

“It's not an easy project,” said Raphel, noting the site has many problems physically due to fill.

He cited a 1993 city study that identified Pearce Airport as its most important development site. Raphel said the site has the makeup of a regional center that can serve the local community. Lowe's has given the developers a corporate commitment, said Raphel.

He said Clearlake reminded him of some other areas like Napa, Vacaville, Rohnert Park and Davis, which have viable downtowns but regionals shopping center on their edges.

Raphel said they can't get the regional and downtown improvements at same time, but they go together, and the project ultimately would benefit downtown. “This is a chance to take that first step.”

He added,“We're here to listen tonight.”

Public questions aspects of project

Victoria Brandon, chair of the Sierra Club Lake Group, was first to the podium during public comment on the proposed property sale. Earlier in the day, she had submitted analyses of the shopping center's documents which were completed on the group's behalf by a consultant.

She questioned the “tremendous haste” in moving the project forward, which she termed as a money loser. Brandon also took issue with Neiman's assertions of never being able to sell the property in the future.

Sales tax doesn't create prosperity in a community, said Brandon. “What's driving the ship is vibrant, local small business.”

Keyser told Brandon that he had rarely seen so much retail leakage, citing the report with the $121 million estimate. “That is a powerful number.”

He added, “There clearly a need to fill the gap as opposed to duplication.”

Lori Peters, executive director of the Clear Lake Chamber, chose to speak instead as owner of Wild About Books. She said the shopping center would create for Clearlake “a clear, marketable identity.”

She said that, “with the development of any city, balance is a necessity,” explaining that every community needs different types of retail, including big boxes where people are programmed for commodity buying, as well as smaller establishment like book stores. Peters said the city needed to bring in shopping opportunities that residents are finding elsewhere.

Robert Riggs, who chairs the city's redevelopment advisory committee, said he didn't question Lowe's or the shopping center, but rather the use of up to $7 million in redevelopment funds, an idea that “was hatched entirely in closed session.”

That redevelopment money is all the community has – or is likely to have – for the foreseeable future, Riggs said.

He recounted a committee meeting held Dec. 18, attended by Neiman, and Councilmen Curt Giambruno and Chuck Leonard, during which Neiman told the the committee that there was no time to look further at the plan.

“So you are being rushed to judgment here,” said Riggs. “That's my biggest criticism of the business deal. It's a rush. That's how major mistakes are made in my opinion.”

He referred to a Dec. 1 e-mail Neiman sent him in which he stated that if the city doesn't trust his judgment on the plan they should hire someone else. Riggs called that an old technique and one used by “swindlers” from the beginning of time up through Bernie Madoff. “It's a confidence game.”

Riggs said he's asked for detailed answers about various aspects of the project and gotten nowhere. When someone isn't willing to give you a detailed answer, most likely they're hiding something, he said. “My fear is that is the case here.”

Not taken into account is a shift of Education Revenue Augmentation Fund (ERAF) funds from redevelopment. “The state has already come and taken this money away from us at least for the next two years,” said Riggs, meaning that the city can't meet its obligations much less spend money on the project's improvements.

The city owes it to its existing downtown businesses to really study the project, Riggs said.

Neiman said the project would generate $25 million in redevelopment revenue, a figure which included a $14 million bond to be issued in 2019.

Yang said redevelopment fits projects like this one. “This is the paradigm example of how redevelopment can assist with making a property developable and usable,” she said, noting the improvements would have broad benefits within the community, not just for the site.

She said her firm is representing the California Redevelopment Association against the state in a lawsuit over the ERAF shift, and that they successfully challenged a previous transfer.

Keyser added of the property's purchase price – which is just over $2.6 million, with the city crediting back $1.2 million for work on the land plus a $500,000 contingency in case hazardous materials are found – “We're actually getting, I believe, a very good price in this economy but more importantly we're getting a price that is not likely to substantially increase in the indefinite foreseeable future.”

Clearlake resident Mike Dunlap questioned the project's job numbers, noting that the 320 estimate doesn't take into account what jobs will be lost from local business. Neiman said existing companies will have to develop niche markets and better customer service.

Dunlap also questioned if they can get supplies – such as Neiman's lag bolts – in a Clearlake Lowe's at the same price as a Lowe's in a larger area, since the equipment would still need to be transported here. Neiman replied that he couldn't get his lag bolts at Lowe's, which led Dunlap to assert that the store wasn't going to help the community anyway.

Dunlap also pointed out, in relation to sales tax, that people in Lakeport have more money to spend, per capita, than Clearlake residents. “Yeah, that's true,” Neiman conceded.

Business owners: Market is overserviced

Mark Borghesani, general manager of Kelseyville Lumber – who also spoke on behalf of Piedmont Lumber – said local retailers want an “equal playing field.” When he built his $9.5 million project, there were no government subsidies offered for improvements.

He stated that the leakage report's numbers were overstated, and that the local lumber and hardware market already is overserviced.

Noting he's had to lay off employees already, Borghesani said, “This is a depression and we've got a ways to go to get through this thing.”

Clearlake resident Tim Williams questioned the sales tax comparisons between Lakeport and Clearlake, saying that most of Clearlake's sales are from within the city's limits, while much of Lakeport's sales tax revenue is because it draws shoppers from the outside.

Williams said transient occupancy tax – or bed tax – is the best, and it depends on getting visitors, which is what redevelopment was supposed to do for Clearlake. “Not a dime has been spent to do that.”

He said that by putting millions of redevelopment dollars into the project, the city is putting all of its eggs into one basket.

Tanner Wardall, whose family owns Four Corners Building Supply, came to the podium next. Noting that he'd never spoken in public before, the young man said, “We're all on the same side. We all want Clearlake to get better. We all want to keep our jobs.”

Local hardware businesses have all helped build the community. “You're all throwing all of us under the bus. Some of us might die but we're all getting hurt.”

Rather than use a resource like Clear Lake to draw tourism, he told the council, “We're just going to make this place like every other place,” he said. “You want to take this all away.”

Someday he'll inherit Four Corners and run it the way he wants, but he added, “You're not going to give me that chance and it sucks.”

Wardall got a round of applause although Thein had repeatedly warned the audience not to applaud speakers.

Ryan Peterson, representing the Clearlake Police Officers Association, read a letter to the council that supported the Lowe's project. They said that its positive aspects will outweigh the negatives and lead to infrastructure improvements.

Clearlake resident Glen Goodman disputed the idea that local hardware stores are higher priced than those in big cities, explaining that when he moved to Lake County from Fremont 17 years ago he compared prices and found local companies' prices were lower. They also have knowledgeable employees who helped describe how to do home repairs.

“We have plenty of hardware in this county,” he said.

Goodman said the entire presentation seemed more about recovering from mistakes that were previously made, and that the numbers didn't have a basis in reality.

Local contractor Wayne Chatoff said he supported the plan. In the last year and a half he's spent $3 million with local lumber yards, he said, but he's also shopped out of the county.

“You need to have the big box stores,” he said.

Chatoff said he didn't totally agree with the job numbers Neiman presented, but urged the council to support the plan because of the needed infrastructure improvements, such as sewer.

In comparing the two cities' sales tax revenue, Herb Gura, a Clearlake Oaks resident who owns a business in Clearlake, asked, “Have you looked at the downtown of Lakeport compared to the downtown of Clearlake?”

Lakeport has invested in its downtown, he explained, pointing to work on sidewalks, streetlights and historic buildings. “Lakeport's a nice place to shop.”

Gura said there isn't a hurry to get the shopping center project done. “This is the biggest commercial project in the history of this city, by far, and it needs to have an environmental impact report done. To say there is no significant impact is just plain silly.”

Supervisor Rob Brown told the council that he realized they had a difficult decision before them.

“I'm consistently concerned about government buying land, period,” said Brown, adding that they should not have bought the land, and now they have a gun to their head in trying to sell it.

But he cautioned them about selling it with the same haste with which they had bought it.

He applauded Wardall for his comments. “He's the kind of person that you should all be proud of to have here in this county,” said Brown. “It's going to make it that much tougher for him.”

Remembering how Kmart impacted Lakeport, Brown told them and environmental impact report is critical to the project.

Responding to some comparisons Neiman had made between the Lowe's project and Kelseyville Lumber, Brown said Kelseyville Lumber was an existing business, not a new business “coming in cutting the throats of other businesses.”

Kelseyville Lumber's project had four years of heavy public scrutiny. Brown said the city should give more time for public comment on the Lowe's project than 30 days.

While he noted they were in a tough position, he noted that he was too – since he and the Sierra Club agreed on the project.

Former District 3 Supervisor Gary Lewis, who works with Mendo Mill and is president of the North Shore Business Association, pointed to the county's success with improving the Northshore. He suggested the city could do a lot to improve itself with the money it was proposing to use for the Lowe's project.

Such investment, said Lewis, encourages people to put their own money into the community, and also brings tourism.

During a brief presentation on the mitigated negative declaration, Neiman said an environmental impact report isn't necessary because all “potentially significant impacts” can be mitigated, and there are no significant impacts.

Archaeologist Dr. John Parker of Lucerne said the city hasn't conducted a historic or archaeological evaluation as required under the California Environmental Quality Act (CEQA), and they will violate CEQA if they don't do such an evaluation prior to deciding against an EIR.

Parker said it's critical to evaluate the site because it's immediately adjacent to Anderson Marsh National Register Archaeological District, which includes 48 sites listed on the National Register of Historic Places. Thirteen such sites are located within a mile of the project.

Councilman confronts local businessman

Borghesani submitted to the council a report that was compiled by San Francisco State University economics professor Dr. Philip King on the project's potential local impacts, which Borghesani said will include Kelseyville Lumber operating well below profitable levels.

He said his facility – formerly 6,000 square feet before it reopened in a new 80,000 square foot location – has seen revenues drop by 40 to 50 percent while overhead has risen. “A Lowe's in Clearlake will likely be the breaking point of our store.”

In 2005, local hardware and lumber businesses totaled 79,000 square feet, he said. After several large expansions, their total square footage now totals 290,000, Borghesani said.

“The big giant move you guys made, you didn't feel it necessary to do an EIR,” Leonard said, adding that they built on ag land and had a mitigated negative declaration that “is virtually a joke.”

Leonard added, “I don't know how you could do it with a straight face.”

Borghesani said they did convert agricultural land that had not been used for agriculture for at least a decade before they purchased it, and which was included in the community area boundary.

Borghesani wondered if Mendo Mill would have been offered such a deal if it had wanted to move down the freeway.

Realtor Dave Hughes said he didn't want to see Kelseyville Lumber or other businesses close, but said Lakeshore Drive already is a ghost town. “We need to take care of our own,” he said. “I don't want to see Kelseyville Lumber close but it ain't in Clearlake and I am.”

Hughes said an EIR wouldn't solve anything. “We need this project, we need the sewer upgraded, we need jobs,” he said.

Gail Strong, vice president of Mendo Mill, questioned the information that Katz Kirkpatrick Properties has on its Web site – where it's advertising for clients for the center – about Clearlake's average household income.

The site lists it at $55,063; the most recent information available establish from the US Census, which dates back to 1999, showed the median family income at $25,504, higher than the median household income of $18,863.

Strong said the job estimates were “pie in the sky,” since not all of the center's tenants are secured, and the city is “giving away the whole farm” to the developers.

When Mendo Mill expanded, it paid all of its own costs. “Make 'em pay,” she said. “You're not negotiating correctly.”

Giambruno noted toward the meeting's end that of the 38 letters they've received on the project, six came from people within the city limits – two were for it, four against it – and 26 came from other areas of the county, with one for it and 25 against it. They also received six letters from attorneys.

The council will continue its discussion on the project during its regularly scheduled meeting, which begins at 6 p.m. Thursday, Jan. 14.

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