Desert Hot Springs — It's the question residents ask City Manager Rick Daniels more frequently than any other:

What happened to The Village at Mission Lakes?

The 6.6-acre project, developed by a group of businessmen — Michael Risman, James Marek, Paul Smith and Desert Hot Springs City Councilman Al Schmidt — was supposed to provide much-needed commercial shopping to the city's west side, as well as the 1,500 homes at Mission Lakes Country Club in nearby unincorporated Riverside County.

Construction, however, stalled nearly a year ago, and the project's financier, Estate Financial Inc., went bankrupt on July 1, according to the company's Web site, leaving nearby residents frustrated.

Whether the shopping center ever will open remains up in the air.

“It's disgusting that they would start a beautiful project like that and leave it to rot,” said Loretta Rice, who's lived at Mission Lakes for more than five years.

Rice said the stalled shopping center, with its two unfinished buildings, stacks of powdered cement and unkempt grounds, is the talk of her community.

“It's all we do is talk about it,” said Rice, who travels to Cathedral City to shop.

Complicating the matter, Desert Hot Springs is missing nearly $1 million in bonds and fees from and The Village developers.

This includes:

An estimated $600,000 in insurance bonds from the developers, according to Daniels. Cities tap those funds to cover public street and sidewalk improvements when developers can't complete them.

Nearly $260,000 in developer impact fees, which cities use to improve and expand police, parks, libraries and other services as they grow.

Desert Hot Spring's municipal code requires staff to collect those fees before issuing building permits to the developers.

“These are not optional. The city staff does not have the right to waive this,” Daniels said last month.

Daniels blamed his predecessor, former City Manager Ann Marie Gallant, for the absence of these funds, saying Gallant accepted a letter of credit instead of collecting the impact fees — a move that should have been approved by City Council.

That credit came from the now-bankrupt Estate Financial.

Changing the rules

Schmidt, who chaired the city's Planning Commission when it approved The Village at Mission Lakes in May 2005, declined to comment for this article.

Records show he recused himself from the 2005 vote, which took place two years before his election to City Council.

“We know that some people have been finger-pointing regarding this,” the developers stated in an Aug. 5 letter to the city.

It's not clear if construction could resume on The Village at Mission Lakes as planned — even if developers successfully acquire new financing.

Desert Hot Springs updated its building code after the shopping center's building permits were issued.

The two permits then expired in January and May without renewal by the developers.

Because the permits expired, the existing buildings have to comply with the new code, former Assistant City Manager Steven Mendoza told the developers in a July 22 letter.

“This would be a significant cost for the developer to re-draw plans and specs for the buildings,” it stated.

Had they renewed their permits, the developers would not have been affected by the building code changes, Mendoza's letter stated.

However, The Village developers maintained the building code changes would have “no major impact” on the shopping center, in their subsequent Aug. 5 letter.

Daniels, however, said the code changes beefed up the “structural integrity requirements” to protect buildings and occupants during an earthquake.

“I think that's significant,” he said.

“Exactly what they built and what we require, we don't know until we peel off the skin and re-inspect the structural integrity,” he said. “If they overbuilt last year then they'll be OK. We just don't know.”

Waiting for money

Meanwhile, city officials are trying to find out what happened to the estimated $600,000 insurance bond for the public street, curb and sidewalk improvements around The Village property.

“The developers should not have been allowed to proceed without the posting of those bonds,” Daniels said earlier this month.

The developers believe Estate Financial issued letters of credit for the bonds but they can't find copies of them, according to their Aug. 5 letter.

The city is “on the hook” for the improvements only if the site represents a public hazard, Daniels and Public Works Director Jonathan Hoy said.

“It's an eyesore, not a hazard,” Daniels said.

The city could put a lien on the property if it decides to pay for the street work along Mission Lakes Boulevard and Little Morongo Drive to cover costs, Daniels said.

The city also could take steps to tear down the unfinished shopping center as a public nuisance if the delay drags on.

But The Village developers hope that new financing from a Phoenix-based lender can get their shopping center back on track, according to their Aug. 5 letter.

“We're waiting for them to provide the financial assurances,” Daniels said. “We want to give them a chance to do this, and I know they're working to secure financing on this.”

Daniels said city staff is still gauging how much time they should give Schmidt and the co-developers.

Mission Lakes resident Loyce Crisp, who travels to Palm Springs to shop, was skeptical.

“Everything they start in Desert Hot Springs, they don't complete,” Crisp said Wednesday. He's lived in the area since 1992.

“The city has been telling (developers) it's OK.”