SLO County projects and redevelopment funds in jeopardy
July 7, 2011
Under two new state laws, San Luis Obispo County’s five redevelopment agencies stand to lose a combined $4.5 million within the next year alone and several projects may be in jeopardy—that is if the law prevails over looming legal challenges and the cities’ agencies opt-in to an alternate “pay-to-play” deal.
“It will likely require the city (Arroyo Grande) to cease all economic development efforts,” said Arroyo Grande City Manager Steve Adams.
Under the community redevelopment law ABX1 26 that went into effect last week, the state’s approximately 400 redevelopment agencies that receive $5.5 billion in taxpayer funding each year will be dissolved effective Oct. 1. The enacted legislation is a part of a budget solution for California’s multi-billion dollar deficit and a way to funnel $1.7 billion to school districts and local governments.
If a city wants to avoid total elimination of its agency it must inform the state by Nov. 1 that it will opt-in to the alternate “pay-to-play” program that would create a new redevelopment agency, authorized through the second rule ABX1 27. The catch is that it would require the agency to “voluntarily” give away a large portion of its revenue, currently earmarked to combat blight and support affordable housing, to local school districts and governments.
Redevelopment agencies are intended to revitalize deteriorated areas of towns where neighborhoods and business districts are struggling socially and economically. Agency revenues, which come from increased property taxes due to property improvements in the redevelopment zone, can be leveraged as seed money to help jump start private investment which can ultimately breathe new life into blighted areas.
The new law also sets a March 1 deadline that requires county controllers to audit the validity of each agency’s actions—a test some California cities have previously failed under the scrutiny of the State Controller’s Office.
While San Luis Obispo County’s five redevelopment agencies have not formally decided whether to opt-in to the alternate program to keep their agencies active, those cities’ officials are evaluating the options of doing so and four local agencies have solid reasons to survive.
The El Paso de Robles Redevelopment Agency, which receives approximately $1.6 million in taxpayer funds per year, would be required to pay out more than $1.7 million for the 2011-2012 fiscal year under the new alternate program, according to the California Redevelopment Association (CRA).
Paso Robles officials say they have three current projects that are “critical to the city” that could be adversely affected by a total dissolution of its agency or the transfer out of revenue.
Redevelopment money is expected to fund handicapped access improvements including new curb ramps on Spring Street and in the downtown area, in addition to the construction of new fully-accessible restrooms in City Park.
“If we are not able to use redevelopment funds for these improvements, there could be significant fiscal impacts as the improvements were ordered by the court as a consequence of litigation,” said Paso Robles City Planner Ed Gallagher.
In addition, the city’s agency has reserved $1.325 million in low-moderate income housing funds to assist in the redevelopment of Oak Park Public Housing, and $270,000 to help Habitat for Humanity build five single-family homes for very low income households.
Paso Robles officials are not looking to see their agency abolished, as it is credited with catalyzing the revitalization of the city’s downtown and creating 222 affordable housing units, among other successes.
The city plans to evaluate its options over the next two months.
The Atascadero Community Redevelopment Agency, which receives more than $3 million in taxpayer funds each year, has channeled and leveraged significant sources of funds for dozens of local projects and services including the Main Street program, Sunken Gardens improvements and the new city streetscapes.
Atascadero would need to turn over more than $1.5 million for the 2011-2012 fiscal year to avoid extinction, according to CRA.
It’s a price tag that could affect Atascadero’s future improvements because redevelopment bond revenues are core to the funding for the Historic City Hall repairs. And redevelopment set-aside funds are expected to support low and very-low income housing projects.
In Arroyo Grande, the elimination of its redevelopment agency will cost the city more than $300,000 for staffing and operational costs currently paid by the agency.
“Therefore, additional measures will need to be devised to address this increase in the general fund shortfall if the state is successful, which will likely impact other projects and services,” said Arroyo Grande City Manager Adams who also serves as the agency executive director.
Enrolling in the alternate redevelopment agency plan proposed by ABX1 27 would mean a nearly $480,000 loss of funds for 2011-2012, according to CRA, which would be siphoned out as part of the deal.
The city’s agency, which receives more than $1.1 million from taxpayers each year, will lose funding allocated for improvements to the Car Corral public parking lot in the Village, and the Police Station project. The city may also need to sacrifice its efforts to help fund affordable housing projects and marketing programs designed to attract new businesses and provide incentives for others to go “green.”
“It is disappointing that at a time of slow economic growth, the state would try to eliminate the primary economic development tool we have,” Adams said. “It is not fair that cities have to find ways to continue to provide services with dramatic decreases in our own revenues and at the same time the state is continually trying to take our revenues to address the shortfalls in their budgets.”
In Grover Beach, Mayor John Shoals has been outspoken about the devastating effects the elimination of the city’s redevelopment agency would have on the coastal town where the top priority for the council has been economic development.
The Grover Beach Improvement Agency which receives an estimated $1.1 million each year in revenue would be required to turn over nearly $376,000 for the 2011-2012 fiscal year, according to CRA.
The lone exception to local opposition of the new redevelopment laws is Pismo Beach which has nearly completed its redevelopment plan for its project area and paid off all bonded debt.
The city says its initial cost benefit analysis does not justify keeping an active redevelopment agency. At the rate of around $400,000 a year its obligation under the alternate deal would leave little money for feasible improvements after taking into consideration the costs for administration and new projects.
On Sept. 6, the Pismo Beach Redevelopment Agency Board plans to decide whether or not to remain an active agency.
Constitutionality called into question
The League of California Cities and CRA are preparing to file a lawsuit challenging the constitutionality of the new redevelopment laws which is also expected to include a request for injunction, which if approved, would enable the agencies to continue operating while the case is being decided.
Meanwhile, agencies are prohibited from entering into any new agreements until the organization has enacted an ordinance committing to make the payments as required by ABX1 27.
Some local cities are joining the fight, including Arroyo Grande which has already provided a small financial pledge of support.
“We believe it clearly violates the provisions of Proposition 22, which was passed by the voters and specifically protected redevelopment,” Adams said.