City Struggles With $1.3 Million Loss as End of Redevelopment Draws Near

As California cities prepare for the dissolution of their community redevelopment agencies Wednesday, Glendora city officials were left stunned and outraged over the failure of last-minute attempts to extend the deadline they say will at least give cities time to sort out the myriad of current projects, loans and administrative affairs.

But last week, Speaker of the California Assembly John A. Perez and Senate President Pro Tem Darrel Steinberg signaled the end of SB 659, indicating the bill lacked legislative support.

Even as the Senate decides on the welfare of redevelopment funds for low income housing today, come Feb. 1, the state’s over 400 RDA’s will no longer exist as they once had before.

Perez and Steinberg supported the dissolution, saying they believed that instead of delaying the inevitable, focus needed to be on recreating a new set of economic tools in place of redevelopment.

However, City Manager Chris Jeffers said cities are struggling to determine what those new economic tools are.

“AB 1x 26 (the bill to dissolve redevelopment agencies) was not a well written bill as it was never intended to take place because the State was simply looking for Redevelopment Agencies to pay the $1.7 billion so-called voluntary payments to them,” said Jeffers in a press statement. “Now we get rhetoric from those same leaders in Sacramento that everything will be okay and we’ll do something new and better for all – they have no idea.”

As Jeffers makes the rounds to all the city commissions and boards to discuss the impending shutdown, the city must decide on how to deal with a projected loss of $1.3 million for the 2012-2013 fiscal year.

According to Jeffers, redevelopment’s demise will also wipe out loans cities have made to RDA’s.

Jeffers said the cities made these loans to help agencies with start up cash for economic development projects or with borrowing costs incurred when issuing bonds.

Jeffers said the practice was considered a “win-win” situation where they could lessen the costs of issuance, legal review, fiscal agent and borrowing.

Instead of paying the interest that would go to bondholders, lending to the RDA would be paying to money back to the city and into local municipal projects, said Jeffers.

 However, the “win-win” situation seems more like an all-around loss for the city as there will be no longer an RDA to repay the loans.

Gov. Jerry Brown called for the redirection of $1 billion of redevelopment funds to help close a severe state budget gap.

Driving the plan is the belief that the agencies, which were intended to improve city blight and fund capital improvement projects, have been ineffective. The state Controller’s Office conducted an audit on 17 RDA’s around the state and cited projects considered abuses of the program – including $17 million that was used to clean up a  

"The fact that the RDA continues to insist that a 4.5 star golf course to be blighted further illustrates our point that virtually any condition could be construed to be blighted,'' the report states.

During the Jan. 10 Glendora city council meeting, Councilmember Joe Santoro blasted the state Controller’s report, saying the 17 cities cited in the report did not represent all 425 RDA’s in the state, and that most RDA’s were critical in boosting economic development and maintaining cities.

He recommended that the city research other states without redevelopment agencies and how they sustain develop and services.