BELLINGHAM - On a 4-3 vote, City Council agreed Monday, Dec. 3, to provide 2013 funding for the Public Development Authority, even though the authority's $250,000 appropriation will add to the city's deficit.

Terry Bornemann, Michael Lilliquist, Seth Fleetwood and Jack Weiss voted to approve the funding. Voting no were Cathy Lehman, Stan Snapp and Gene Knutson.

The PDA was set up by the council in 2008 at the urging of former mayor Dan Pike, in hope that the new agency and its citizen board could find revenue-producing projects for underused city real estate and help the city deal with recession-driven deficits. Instead, the city has been spending about $350,000 a year on staff and other PDA expenses, with the only cash return being the $1.2 million sale of a property at Cornwall Avenue and Maple Street for less than the city's original purchase price.

Until Monday, the council had been in step with Mayor Kelli Linville on keeping the 2013 general fund deficit at about $400,000, with a projected balanced city budget by 2014 for the first time since the start of the recession. The city has been covering the gap between tax revenues and spending by drawing down financial reserves. Monday's decision will add another $250,000 to that deficit.

Linville - no fan of the PDA - had suggested that the council keep it alive by letting the PDA use a portion of the money from the $1.2 million property sale that the PDA arranged, instead of dipping into general fund revenues that support other city services. But at a Nov. 26 budget session, the council voted 4-3 against turning any of that money over to the PDA, with a majority of council members preferring to keep that money in the city's parking fund for future downtown parking improvements.

Council member Bornemann, who had argued against using the Cornwall Avenue sale money for the PDA, moved instead for use of general fund revenue, arguing that it was too soon to pull the plug on the PDA.

Bornemann said the money would be a good investment if the PDA and its executive director, Jim Long, manage to come up with workable plans to turn underused pieces of city-owned real estate from liabilities to assets. Chief among them is Long's ambitious plan to recruit neighboring property owners and turn an unused Old Town street parcel known as Army Street (across from the Old Town Café on West Holly Street) into a complex that would include a 500-car parking garage, a hotel, and other commercial and residential buildings.

"Instead of letting everything go down the drain, I'm going to take the chance," Bornemann said.

The PDA also manages the city-owned Federal Building at Cornwall and Magnolia, and the 600 W. Holly St. property that once was the site of Bellingham Sash and Door along Whatcom Creek.

Mayor Linville suggested that if there was no PDA, other city employees could take on the task of finding new tenants for the mostly-vacant Federal Building, or marketing the Holly Street property to potential developers.

"I think it's more cost-effective to use our staff," Linville said.

Linville also expressed doubts about how quickly the Army Street project would materialize.

But Lilliquist argued that the time of other staffers also amounted to a cost to the city, and the PDA was still the most likely way to enable the city to get some return on its investments in the properties the PDA controls.

"These properties are liabilities that will continue to exist," Lilliquist said.

Council member Knutson expressed dismay at the last-minute decision to swell the city's deficit, just hours before a scheduled council vote on the 2013 budget at the Monday evening council session. He wondered what would happen in 12 months if the PDA has made little or no progress on redevelopment plans.

"I think it's a great deal of pressure but I think it's appropriate pressure" for PDA boss Long, Lilliquist said.

"He's the man to handle it," Bornemann added.

"Loving every minute of it," Long said.

Reach John Stark at 360-715-2274 or john.stark@bellinghamherald.com. Read his politics blog at blogs.bellinghamherald.com/politics.

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