In the summer of 2011, Gov. Jerry Brown proposed cutting redevelopment agencies (RDAs) as a way to help balance the state budget. The agencies redirect property taxes from the state back to the agency to fund development, and have historically been used for economic development and to fight blight. Following the governor’s proposed elimination of RDAs, the California League of Cities filed a suit claiming the action was unconstitutional.
Shortly before the new year, the Supreme Court upheld a bill that eliminated the RDAs, and struck down a measure that would have let cities pay a “ransom” to keep their redevelopment agencies and any tax revenue that remained.
“It was the worst-case scenario,” said Oakley City Manager Bryan Montgomery. “I was surprised that they undid it all.”
Antioch planned to pay $3.1 million, Brentwood $2.7 million and Oakley roughly $1.5 million to keep their RDAs.
Altogether, California will reap about $1.7 billion from its roughly 400 redevelopment agencies statewide. The agencies will dissolve on Feb. 1. On May 1, the state will establish oversight committees to study redevelopment assets and on July 1, auditors from the state controller’s office will start examining every redevelopment agency in California.
The Supreme Court’s decision strikes a major blow to cities’ ability to build and develop properties in the future.
According to Brentwood Finance Director Pam Ehler, Brentwood’s downtown revitalization was paid for largely with redevelopment money. The city is now scrambling for ways to afford improvements on Brentwood Boulevard, which will soon likely be transferred from CalTrans after the Highway 4 designation is permanently assigned to the Bypass. Ehler estimated that the Brentwood Boulevard project will cost $25-$40 million.
She also noted that plans for a second downtown parking structure would likely be nixed, and that over the remaining life of Brentwood’s redevelopment agency (which was scheduled to end in 2036) the city will miss roughly $135 million.
“We will have to come up with another means of financing long-term projects such as Brentwood Boulevard,” Ehler said. “We were hoping that it would be paid mainly by redevelopment.”
Montgomery noted that Oakley would probably use money saved from the “ransom” payment, federal dollars, cash from the general fund and other sources such as the gas tax to pay for its current two major developments. They include renovation of the shopping center across from its City Hall, and a revitalization of Main Street similar to what Brentwood intends for its namesake thoroughfare.
Oakley established redevelopment agencies for two areas: a large sector south of Main Street (the agency ending in 2039) and a sector north of Main Street near Bridgehead Road and two sectors south of Main Street (the agency ending in 2046).
Montgomery and other city officials are still analyzing what the court’s decision means for Oakley. He noted that the city stands to lose millions in property tax dollars over the life of their agencies. While property taxes throughout East County have been falling, Oakley is losing out on potential revenue when the economy bounces back.
“We’re fortunate we spent when we could,” Montgomery said. “I have a feeling that the legislature will do the right thing. They already did once. I hope it just happens sooner than later.”
While Antioch hasn’t planned any developments with redevelopment agency money, City Manager Jim Jakel said the court’s decision kills his city’s ability to do anything in the future. In the past, redevelopment money helped pay for the police station, City Hall, other Rivertown improvements and low-income rent subsidies and housing such as the recently approved Tabora Gardens Senior Housing complex. While the Tabora Gardens project is safe, similar projects will likely be impossible in Antioch.
In the current fiscal year, Antioch’s redevelopment agency controlled roughly $4.8 million in assets, but the state will not get that full amount. “The real change is that there are no new projects,” Jakel said. “It halts future redevelopment process.”
Throughout 2011, local governments across California attempted to transfer properties from redevelopment agencies to cities as a means of keeping whatever they could in the wake of the governor’s proposed elimination of RDAs. In Antioch, city officials were in the process of transferring the historic Roswell Butler Hard House from its redevelopment agency to the city and then to a local nonprofit group that plans to restore it.
That process, said Jakel, is now on hold. Any property transferred after Jan. 1, 2011 is subject to review by state auditors, who could negate the handoff and sell off the property. Jakel believes the transfer to the Friends of the Hard House is safe, since the state is mainly looking for cases of cities dodging taxes.
Properties formerly owned by redevelopment agencies not reviewed or approved by auditors will fall under control of their cities.
“It’s sad for the state,” Ehler said. “We have worked so diligently to not be wasteful – and do what you’re supposed to.”