News - February 16, 2011

City tries to counter state plan to kill redevelopment agencies

by Sandy Brundage

Emergency legislation proposed by Governor Jerry Brown to stop redevelopment agencies from tying up local funds in new projects inspired a fast response from Menlo Park. The city's next step in the chess game between state and city over redevelopment assets was to create new funding agreements and a housing authority to tie up the agency's assets before the emergency bill could pass in March.

Although state Proposition 22, which passed with 60.7 percent voter approval in November, made it unconstitutional for the state to take money from local funds such as redevelopment revenue, the state now appears to be saying that if there's no redevelopment agency, there's no revenue for a city to protect.

Approved unanimously by the City Council on Feb. 8, the new agreements cover public improvements, housing, and blight remediation activities. City Attorney Bill McClure said the agreements don't commit the council to approve any project on the capital improvement list, but instead makes those projects eligible for funding. Likewise, the council would still need to approve any contracts worth more than $50,000 for projects that have already gotten the green light.

Code and narcotics enforcement are two of the police programs that will receive an estimated $1.5 million a year in advance funding through 2021, for a total of $15 million from the redevelopment agency, under the terms of the new agreements.

The housing authority allows the transfer of $16.4 million in uncommitted housing funds, 2 acres the city owns on Hamilton Avenue, and any housing program income from the redevelopment agency to the new authority. That money must be used to support Menlo Park's affordable housing plan <0x0214> a plan the council asked to review within the next five months to evaluate its effectiveness.

According to city staff, however, no one knows if playing this kind of shell game with redevelopment funds will work. The state could declare the agreements invalid.

"It seems that the governor could either honor those agreements or decide to make an attempt to take the funds and assets anyway and put the ball back in the cities' hands to react," said City Manager Glen Rojas. "(It's) very hard to know or speculate since this is unexplored territory."

Governor Brown has proposed $12.5 billion in budget cuts for the state. Eliminating redevelopment agencies, he has argued in public statements, would redirect property tax revenue to schools, public safety services, and county programs. Cities would receive a small percentage of the money, perhaps up to 20 percent.

Menlo Park would lose about $17 million in redevelopment reserve funds, and an ongoing $1.4 million a year, according to Mr. Rojas. "We'd basically get $600,000 in return for losing millions," he told the council at a budget meeting on Jan. 27.


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