Supreme Court decision dooms redevelopment agencies, leaves cities reeling.
Thursday, January 12, 2012
Marina’s share of the former Fort Ord offers unparalleled views of long-delayed development.
There’s Marina Heights, the 248-acre swath slated for over 1,000 homes, which was approved in March 2004 but remains undeveloped. There’s the ongoing Dunes development off Imjin Parkway, where two hotels and more than 1,200 homes were scheduled to come online by 2020, but currently boasts just one of its first phase goals: a big-box retail complex and wellness center off Highway 1. And at least six other redevelopment projects on over 1,000 acres within Marina city limits have been stalled or developing at a snail’s pace for years.
The California Supreme Court’s Dec. 29 decision to dissolve redevelopment agencies, which fund infrastructure projects through property tax revenue, will further prolong Marina’s misery.
“It’s huge,” says Marina Mayor Bruce Delgado of the high court’s ruling. “It’s hard enough with a good economy and a redevelopment agency to motivate private investment dollars.”
Now, the nearly $1.5 billion in redevelopment taxes Marina was banking on for the next 30 years is up in the air, along with the fate of similar projects statewide.
The League of California Cities filed suit last summer after Gov. Jerry Brown signed AB 26, the law eliminating local redevelopment agencies, and AB 27, an accompanying bill allowing redevelopment agencies to stay alive if they pay remissions to the state to help fund public safety and school districts. Numerous Monterey County cities, including Gonzales, Monterey and Salinas, supported the League lawsuit in hopes it could lead to a repeal.
The high court upheld AB 26, but simultaneously struck down AB 27. The justices agreed with the League that remission payments would violate Proposition 22, which voters passed last November to prevent the state from seizing local funds.
“The only good news is that we don’t any longer have a $1 million payment due [to the state],” Delgado says.
But it also means the state won’t reap the $1.7 billion it had hoped to collect from cities to help close its yawning budget gap, and it means redevelopment agencies are gone for good, unless lawmakers pass a new law in the next few weeks.
“This is our worst-case scenario,” says Deanna Sessums, the League’s Monterey Bay spokesperson.
Local officials don’t yet know the exact impact on city coffers, but most agree it will be devastating for job creation, public staffing levels and cities’ general funds.
Seaside alone anticipates a $1.5 million shortfall in its general fund.
Pink Slip City
Public jobs hit the chopping block when redevelopment agencies fold.
General Fund shortfall: unknown
General Fund shortfall: $2.8 million
Potential layoffs: 1.5
General Fund shortfall: unknown
General Fund shortfall: $1.5 million
General Fund shortfall and layoff estimates (in full-time equivalents) are based on the assumption that local redevelopment agencies are dissolved.
Sources: Marina Development Services Director Doug Yount, Monterey Finance Director Don Rhoads, Salinas Budget and Finance Director Matt Pressey, Seaside Redevelopment Project Manager Lisa Brinton.
On Jan. 5, outgoing City Manager Ray Corpuz directed all department heads to implement an immediate spending freeze until the city can sort out just how to cope with the impending fiscal crisis.
Corpuz says his staff is working on potential restructuring plans in the wake of the court decision, which he calls “a stunning blow.”
“The plans may include reorganizations, reductions and/or eliminations of programs, and wage or benefit concessions,” Corpuz wrote in a Jan. 5 email to city staff.
Salinas Redevelopment Agency Director Alan Stumpf says in-progress improvements to East Market Street are in jeopardy, as is the Chinatown Renewal Project, a multi-agency effort to transform the blighted area into a thriving mixed-use community.
“The city will be able to provide bare-level assistance at best,” he says.
Stumpf says his staff was in the process of expanding the redevelopment areas from 8 percent of city acreage to 25 percent. That process is effectively dead.
“We feel [the state] just took away our best tool for addressing future needs of the city,” he says.
Under AB 26, redevelopment agencies are currently set to be dissolved Feb. 1. But their debts, obligations and affordable housing responsibilities won’t disappear. Cities have until Jan. 13 to appoint successor agencies to take care of the unfinished business.
The vast majority of cities statewide are passing resolutions making themselves successor agencies, Sessums says. Marina, Salinas and Seaside passed such resolutions at their city council meetings earlier this week, and Monterey is set to do the same Jan. 12.
But Monterey Housing and Property Manager Rick Marvin says the city is still undecided as to whether it will take on the affordable housing component of its redevelopment projects, or pass the buck to the county housing authority.
“We’re working on evolving the necessary programs we’d have to operate if we became a successor housing agency,” Marvin says.
In addition to losing the 20 percent of redevelopment tax revenue set aside for affordable housing projects, cities may see cuts of up to 40 percent in grants from the federal Department of Housing and Urban Development.
“The biggest impact will be on our ability to provide grant funding to community service organizations focused on low-income, under-served communities,” Marvin says.
The city provided $105,000 to such organizations last fiscal year.
State legislation introduced last week could give cities some breathing room, Sessums says.
Senate Bill 659 would extend the expiration date for redevelopment agencies until April 15, 2012, buying cities some time to decide just how they’ll wind down their agencies’ operations and, Sessums hopes, continue the conversation in Sacramento about a new program to focus on job growth and blight elimination.
“But there’s still so much confusion about what happens next,” she says – including how cities pay off their redevelopment agency debt if they lack the funds to do so. “Without clarity in the law, we’re going to spend a lot of resources in court.”