By Ryan Hagen Staff Writer
Posted: 02/25/2011 03:48:03 PM PST

GRAND TERRACE – A month-long review of more than a decade of decisions has chipped more than $1million off what was once a $4.6million debt.

The city owes the money to its Redevelopment Agency, a city-controlled body that former City Manager Tom Schwab often borrowed from to balance the city’s general fund, officials said.

After resigning for medical reasons in 2009, Schwab told the City Council he intended to dissolve the Redevelopment Agency without paying back the debt, a plan that current officials say would not work.

Instead, City Manager Betsy Adams and her staff have been poring over documents to find projects paid for out of the General Fund that could have qualified for redevelopment funding.

If the agency had initially paid for the city’s $819,235 road project, the city would not have needed to use General Fund money and then borrow from the redevelopment fund to cover other General Fund expenses.

So, after running the idea by the city’s auditor, attorney and the California Redevelopment Association, the City Council voted to use redevelopment money retroactively for the project and lower its debt.

The accounting move has shrunk the debt to about $3.5million, when combined with Tuesday’s repayment of a loan in the other direction – $267,622 left over from 2003, when the Redevelopment Agency borrowed from the city and only partially repaid it.

Minimal documentation from the time makes it unclear why the agency borrowed city money, reversing Grand Terrace’s usual trend, or why the loan was not repaid.

“They started paying it off, so it’s clear they intended to,” Adams said. “It’s not clear whether, perhaps, they lost track of it.”

Adams said her search leaves her confident there are no other loans that haven’t been paid off. But there may be other opportunities to inch down the debt.

“We’re still working through that, and there’s probably at least one more item to do,” Adams said.

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