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Council to Vote on RDA "Ransom" Payments  

By Ann K. Williams
Lookout Staff

August 8, 2011 – The City Council will vote Tuesday on an ordinance to pay the state more than $33 million in Redevelopment Agency (RDA) funds, thanks to two rider bills passed with the California State Budget in June.

AB 26 and AB 27 take away California's cities' redevelopment agencies and then give them back again – in exchange for a hefty fee – in a move Santa Monica City Manager Rod Gould has called “ransom.”

Special counsel for the city, along with the California League of Cities and the California Revelopment Association, say that the bills are “unconstitutional and unenforceable,” and the two organizations have filed suit with the California Supreme Court.

In the meantime, Director of Housing and Economic Development Andy Agle recommends that the council and RDA together approve an ordinance and a remittance agreement – “under protest and subject to reservation” – calling for the transfer of funds from the RDA to the city to pay $26.8 million in Fiscal Year 2011-2012 and $6.4 million in Fiscal Year 2012-2013 to the state's Alternative Voluntary Redevelopment Program.

The money would come entirely from RDA funds, and the city's general fund would not be touched, staff say.

Staff say AB 26 and AB 27 “violate the State Constitution” and are “invalid and unenforceable.”

But they warn that the reduction in RDA funds could “impact the precise timing of construction funding for projects that are currently in design” for which construction payments won't be due until after the AB 27 due dates of January 25 and May 15, 2012.

The council is being advised to act now to make sure projects listed in the RDA's Five-Year Implementation Plan proceed as scheduled – projects including the renovation of the Civic Auditorium, Expo Light Rail Station enhancements, two Civic Center parks, a library in the Pico neighborhood and a joint-use agreement with Santa Monica High School that would revamp the school's athletic facilities.

While AB 27 allows cities to pay the state with RDA money that would otherwise pay for affordable housing, staff recommends against doing that.

“(U)tilizing those funds...would be inconsistent with the City's strong commitment to maximizing affordable housing production,” staff say.

The city's predicament is the result of Governor Jerry Brown's move to increase state revenue by diverting RDA money into California's revenue stream.

In January, Brown presented a budget that would eliminate RDA's throughout the state. Property tax increases would go directly to the state, not to RDA's.

Cities had stretched the definition of RDA's far beyond their original purpose to renew blighted urban areas, Brown said.

The California budget which passed in June, however, had another bill attached that allowed RDA's to continue if a portion of their income was paid into the state's Alternative Voluntary Redevelopment Program.

Between January and June, the council moved swiftly to approve RDA projects and lock in contracts to protect them.

Tuesday, the council and the RDA will be asked to introduce an ordinance to authorize the city to participate in the Alternative Voluntary Redevelopment Program, and to enter into a Remittance Agreement to transfer RDA funds to the city to pay the state.


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