BELLINGHAM - The future of the city's Public Development Authority appeared a bit cloudy Monday after Mayor Kelli Linville and City Council members gave its budget a preliminary review on Monday, Nov. 19.

Early in the process of drafting a proposed 2013 city budget, Linville proposed an abrupt end to the authority's $358,000-a-year appropriation from the general fund, which is the source of tax revenue that pays for parks, public safety and other city functions. Even with that cut included, the city is likely to end 2013 with a $400,000 deficit that will have to be closed by eating into reserves.

But rather than pull the plug on the PDA, Linville has suggested that the council allow the authority to use some portion of the $1.2 million from the sale of a small parcel at Cornwall Avenue and Maple Street that the authority arranged at the end of 2011.

The preliminary budget now on the table would let the authority and its executive director Jim Long spend about $938,000 from the Cornwall sale in efforts to launch development of other city-owned parcels, in hope of returning more revenue to the city.

But for 2014, the authority's funding would drop to about $372,000 according to the current budget proposal.

Long proposed a different approach. He asked the council to allow the PDA to spend $358,000 from the Cornwall property sale proceeds in 2013 and another $818,000 in 2014 - an amount that could be supplemented with up to $759,000 in general fund money.

Long stressed that his proposed 2014 spending plan, totaling $1.7 million, would be a maximum amount that would be necessary if the authority is moving ahead on development plans for the Army Street property in Old Town, the old Federal Building, and the former Sash & Door property at 600 W. Holly St., which is now envisioned as a site for a fish hatchery project that could be a tourist attraction.

If the projects do move forward, Long told the council that the city would recover its investment and then some: He calculates that the properties could be worth more than $120 million if fully developed according to the PDA's visions.

But Long thinks he needs more than one year to get the projects rolling.

Council member Terry Bornemann noted that the city originally spent $1.5 million in parking fund money for the Cornwall property, with the understanding that it would be developed to provide added parking to benefit downtown.

Bornemann said there was some logic to reinvesting the sale proceeds in developing the Army Street project, which would include a 500-car parking garage. But he also noted that the ambitious Army Street plan, including a hotel plus other commercial and residential buildings, would require enlisting the cooperation of several other Old Town property owners, with no certainty of the outcome.

"We could very well burn through that money and not have anything going forward," Bornemann said.

Council members Jack Weiss and Michael Lilliquist also questioned the use of the Cornwall sales proceeds for projects not directly related to providing more downtown parking.

Former Mayor Dan Pike launched the PDA in 2008 to spearhead development of city-owned real estate parcels.

Linville didn't urge the council to kill the PDA, but she made it clear she is not an advocate. She said some of its functions could be taken over by other city departments. Development authorities can do valuable work if they control large tracts of land and have money to do preliminary development work, but that is not the case here, she said.

"I think the timing was bad for our PDA because we were right into the recession," Linville said. "We're not out yet. I think there will have to be a hard discussion of this."

Council members agreed. Lilliquist, who chaired Monday's session, said council members would have to give the matter a lot more thought before deciding what to do next.

Reach JOHN STARK at john.stark@bellinghamherald.com or call 715-2274.