News - July 6, 2011

State kills redevelopment agencies, kinda

• Regional associations say they will sue.

by Sandy Brundage

The state simultaneously killed California's redevelopment agencies (RDAs) and offered them a chance at resurrection when the governor signed two bills on June 29. Menlo Park officials said they're still analyzing the impacts, even as two regional associations prepare to sue the state.

The nearly 400 RDAs in the state were eliminated by AB-26, effective Oct. 1, but another bill, AB-27, offers an expensive alternative to dissolution — the agencies can pay the state annually to stay open. The money would go to special districts and county educational funds.

Redevelopment agencies were formed to fight blight. Gov. Jerry Brown pushed for their elimination, arguing that diverting $5 billion in property tax revenue to RDAs left the state short on money needed for schools.

Losing its RDA would cost Menlo Park about $17 million in redevelopment reserve funds, and an ongoing $1.4 million a year, according to city officials. But paying to keep the agency isn't cheap.

"Specifically, for Menlo Park's RDA the 2011-12 payment would amount to approximately $3.5 million," said Carol Augustine, the city's finance director, in an email. After that, the city would pay about $800,000 annually depending on tax increment revenue.

The operating budget for redevelopment-related programs such as affordable housing and code enforcement for this fiscal year is about $2.7 million total. "Needless to say, future services, programs, and capital improvements in the project area could be greatly curtailed," Ms. Augustine said.

The League of California Cities and the California Redevelopment Association confirmed on July 1 that they will file a lawsuit challenging the constitutionality of the bills. Proposition 22, passed in November by 60.7 percent, made it illegal for the state to take money from local funds such as redevelopment revenue. But the state bills passed last week imply that if there's no RDA, there's nothing for a city to protect.

In February, the Menlo Park City Council unanimously approved the creation of new funding agreements and a housing authority to transfer assets out of its RDA and out of the state's grasp. City officials said it remained to be seen whether the state would honor those agreements.


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