EL CERRITO -- Three major retail buildings here continue to sit vacant, costing the city sales tax revenues that could help replenish coffers still depleted by the Great Recession.

The buildings are a former Safeway store located in the strip mall at San Pablo Avenue and Moeser Lane, the former Orchard Supply Hardware store on Eastshore Boulevard near San Pablo Avenue and the former Guitar Center building at the corner of San Pablo and Eureka avenues.

The Safeway property closed after the grocery chain moved north to a new location on San Pablo in El Cerrito. But Safeway and the owner of the old building haven't been able to agree on a tenant, resulting in a standoff, said city Economic Development Director Dwayne Dalman.

"Safeway still holds the lease on the building for a few more years," Dalman said. "They have a tenant in mind and they may not want a competitor, such as another grocery store, in there."

On the other hand, revenue from the lease is based in part on sales receipts, and Safeway's tenant candidate may not have the sales receipt potential to produce enough income to satisfy the landlord, Dalman said.

Orchard Supply, which closed its El Cerrito store during the chain's bankruptcy proceedings last year, was subletting from the Kroger grocery chain, which had the lease on the property.

A developer is in negotiations with the owner to buy the building and either rent it to another tenant or tear the building down and build something new, Dalman said.


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In the Guitar Center case, Dalman said he believes the building owner has an unrealistic idea of how much the property is worth in a lease or a sale.

"The owner has a price in his mind and is willing to wait until that happens," Dalman said. "We have pushed him to hire a commercial broker to get a good poll of what the market is going for, and he has been unwilling to do that."

Cities could formerly use their redevelopment agencies to condemn empty properties through eminent domain and negotiate deals with developers.

But that capability ended when the state dissolved the agencies in 2012.

In a report to the City Council in December, the city Finance Department projected a decline of $372,000 in sales tax income in 2013-14 compared with what El Cerrito received in 2012-13.

As a result of this and several other factors, El Cerrito is on course to spend down its reserves from 8 percent of its annual budget to 6 percent, even though it is continuing to leave vacancies on its city staff unfilled, according to the report.

The projections are based on analysis of four months worth of income from July through October, with a second interim report due in March, Finance Director Lisa Malek-Zadeh said.

"The Great Recession, loss of redevelopment and outside reductions in key revenue streams have all served to have an impact on the city's ability to obtain adequate funding to maintain the current level of services that it provides," according to the report summary.

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