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Council Okays RDA "Ransom" Payments, Questions Future Project Funding  

By Ann K. Williams
Lookout Staff

August 11, 2011 – The city council held an unusual vacation-time meeting Tuesday to pass an ordinance to pay the state more than $33 million in what city staff call “ransom” money to keep Santa Monica's redevelopment agency (RDA) up and running.

Although city staff emphasized that the RDA will honor its commitments to pay for a host of projects – ranging from parks to renovating the civic auditorium to high school athletic facilities to a new library – doubts were raised as to whether or not construction funding for future projects is a sure thing.

“We've been very careful stewards of the limited funds that we do have and we've taken a number of...wise actions with respect to redevelopment,” said Councilmember Kevin McKeown.

“We don't know how this will play out,” McKeown added. “We cannot possibly. We've done pretty darn well in figuring out how to handle a difficult and unpredictable situation.”

Since January, the council has had to steer a course through uncertainty as Governor Jerry Brown's budget proposals placed the future of California's RDA's in jeopardy.

In June, the budget was passed with two rider bills, AB 26 and AB 27.

“The first bill eliminates all redevelopment agencies while the second bill allows RDA's to continue to operate if they agree to make huge ransom payments to the state,” Director of Housing and Economic Development Andy Agle told the council.

The bills prohibit “any redevelopment actions” until the city passes an ordinance setting the stage for the payments, Agle said.

He advised the council to pass it “under protest,” adding that that the California League of Cities and the California Redevelopment Association have filed suit with the California Supreme Court alleging the bills violate the constitution and asking for a stay until the case is settled.

The ordinance “has a lot of financial repercussions,” said Councilmember Bobby Shriver.

He asked City Manager Rod Gould whether the payments put the city's general fund at risk.

“The sole funds that are at risk here are...tax increment funds,” Gould answered. Tax increments fund the RDA.

“These are separate and distinct from the tax revenues that go into the city's general fund,” he said.

But a year ago, the RDA transferred some of its funds into the city's coffers to transfer responsibilities for RDA projects to the city, Gould said.

A portion of those funds will be re-transfered back to the RDA which will use them to pay the state the money required to keep it in operation, he said.

Future construction funding for some projects may be in question if the courts uphold the state's position, and Councilmember Shriver wanted to know more about that.

He wanted to know “if the state is successful and the money is drawn down, we would not have designed projects that we then would not be able to finance in a year or two's time, and have done millions of dollars of design work that was unbuildable.”

Gould said that staff has done a “cash flow analysis,” and if the state wins it's legal battle, “we would be back before you looking at a number of options having to do with financing and changing the timing of some of the projects.”

But Shriver made it clear that he didn't think the staff report presented a “worst case scenario.”

“We shouldn't be spending any money on things that we're not 100 per cent sure we're going to be able to build, even under our worst case scenario in litigation terms,” he said.

As the council prepared to vote, Mayor Pro Tem Gleam Davis thanked city staff.

“There's nothing worse than uncertainty,” said Davis.

“I want to express my gratitude...to staff for coming up with creative solutions to what was a very difficult process and allowing us to continue to do many of the great things that we're going to do with redevelopment money while other cities are basically shutting down their redevelopment agencies,” she said.

The council voted unanimously in favor of the ordinance, and, in its capacity as the Board of the RDA, in favor of a transfer of money to pay the state.

Davis, Shriver, McKeown, and councilmembers Terry O'Day and Bob Holbrook voted for the ordinance and the transfer.

Mayor Richard Bloom and Councilmember Pam O'Connor were absent.

 


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