St. Helena’s flood protection project is in serious financial straits after Vineyard Valley Mobile Home Park owner Dick McDonnell rejected the city’s attempt to pass some of the project’s costs on to the property owners who will receive protection.

The proposed $2.9 million benefit assessment district required the approval of the owners of the four properties. Each party’s vote was weighted according to how much benefit they’ll receive from the project. Since Vineyard Valley would receive most of the benefit, McDonnell’s vote against the assessment sealed its fate.

“We’re devastated,” park resident Diane Barr said, summing up the feelings of Vineyard Valley residents at Tuesday’s city council meeting, where McDonnell’s vote was revealed.

St. Helena City Council members were also disappointed.

“We assumed this was going to pass because it’s in the best interests of all property owners to push forward,” said Mayor Del Britton. “We’re not dead in the water, but obviously we’re going to have to get together and discuss financing options again.”

If McDonnell had approved the assessment, he would have been responsible for paying Vineyard Valley’s $2 million share, but he could have passed those costs on to park residents.

In a letter accompanying his vote against the assessment, McDonnell’s attorney, Scott Jenny, said McDonnell had heard “numerous concerns” from park residents, mostly retired couples on fixed incomes, opposed to paying additional rent to compensate him for his share of the assessment.

But park resident Ellen Cotton said she would be willing to pay a share of the assessment.

“I’m very upset,” she said. “Not only are we not getting our flood project, but with the work that’s been done it looks kind of like a war zone out there. I certainly don’t understand our owner.”

Money problems

The city’s hopes to begin construction by July 1 are now dependent upon receiving a state flood corridor protection grant.

City officials expect to learn in the next few weeks whether they will receive the $5 million they applied for. But only $25 million is available — and the state has received requests exceeding that amount. It’s not clear how much the city will get.

Until property acquisition issues are finalized, it’ll remain unclear how much of the $5 million the city will need.

Jenny’s letter spelling out McDonnell’s objections to the project also mentioned the city’s initiation of eminent domain actions against McDonnell to acquire 4.7 acres of Vineyard Valley needed for construction and maintenance of the flood project.

Based on its own appraisal, the city offered McDonnell $1.4 million for the property last December. But the letter said the offer was “not sufficient” to offset the loss in property value.

City officials said they made an initial offer in January 2007 and have been waiting for McDonnell to make a counteroffer.

“Over a year ago they had a number from us that we felt was a fair value for the property,” said City Manager Bert Johansson. “But we have yet to hear from them what they consider a fair value.”

Jenny’s letter also pointed out that since the city’s legal costs associated with the eminent domain action are part of the flood project’s costs, the assessment would mean the park “is paying for the city’s outside attorneys to sue Vineyard Valley. Thus Vineyard Valley has already made a huge contribution to the flood control project by losing its property in this lawsuit.”

In addition to Vineyard Valley, properties owned by the city and Dennis Hunter would have been assessed. Hunter, whose property would have development potential if it were protected, didn’t cast a ballot, but an attorney representing him said he supported the assessment.

The flood project was awarded a $12 million state revolving fund loan last year. But the state was only willing to disburse the $9.1 million that’s backed by the city’s portion of Measure A funds. The benefit assessment district would have given the city access to the balance of the loan.

Johansson said the city might try to renegotiate the terms of the loan. Since St. Helena’s sales tax revenue went up last quarter, more Measure A money might be available than previously estimated, he said.

Financial problems aren’t the only obstacles standing in the way of construction. The city hopes to put the project out to bid by May 1, but first it needs to acquire the Vineyard Valley property and a portion of Hunter’s vineyard.

Even though the city has initiated eminent domain against McDonnell, there’s still hope of reaching a deal outside the court process, Johansson said. He said negotiations on the Hunter property are “wrapping up.”

The city also needs PG&E and AT&T to remove some utilities from the project site so archaeological surveys can be finished and a bid can be awarded, which officials hope will happen in late June.