City Approves $3.3M in Incentives for Prison Health Agency, Developer

City council members did their best Wednesday night to speed along negotiations for , setting aside $1.9 million in city incentive grants for the agency and another $1.4 million for property owner Pappas Investments.

The two parties are in the final stages of negotiating a 20-year lease that would bring 1,500 agency employees to the Laguna Springs Corporate Center—a deal city and business leaders view as a major coup for Elk Grove. It’s the first use of funds from a special city incentive program designed to lure state agencies.

Council members—along with some audience members at the regular council meeting—broke into applause after voting unanimously to approve the funds.

The money, which is contingent on both parties signing a lease by February 1, 2012, is roughly equal to the $3 to 4 million in economic benefit the city expects to reap over the life of the lease.

But council members said that with hundreds of new workers on the streets and shopping in the city, the deal will still be a net win for Elk Grove.

“That was a conservative number,” said Mayor Steven Detrick after the meeting. “There’s also a compounding effect” from, for example, restaurant servers that could benefit from a larger customer base and then spend that money in the local economy.

Those effects, Detrick said, are difficult to quantify and were not included in revenue estimates. He also pointed to an anticipated payoff if other state agencies decide to relocate here.

“The hardest one to get is the first one,” he said. “Then the word gets out there.”

A major incentive package has always been part of the negotiations between the city, the agency and property owners. Council members also said they felt pressure to act quickly to stave off critics of the agency’s decision to abandon downtown Sacramento for the suburbs. The Elk Grove Citizen reported Tuesday that the state’s Joint Legislative Budget Committee had sent a letter to the prison health agency—which is run by a receiver appointed by a federal judge under a court settlement—questioning the proposed move.

“There are some very powerful downtown interests and some very powerful state interests that don’t want these jobs to come to Elk Grove,” said Councilmember Patrick Hume. “Unfortunately the pot has to be sweetened to make that happen.”

Hume said that while he supported the project, he was nervous that the big price tag would force the city to draw down its general fund reserves to far below 15 percent of its total budget—a target the city has set to ensure financial stability.

“We have to make sure we replenish that,” he said.