State Budget Passes; Local Officials Fear Impact

By Ann K. Williams
Lookout Staff

June 29, 2011 – The California legislature passed a budget Tuesday night
that local officials warn threatens redevelopment agency-funded capital
improvement projects and slashes funding for social programs and education.

Two trailer bills accompanying the budget, ABX1 26 and ABX1 27, put California's redevelopment agencies (RDA's) at risk, while schools and programs to aid the poor, the sick and the disabled will take hits under the budget, even if, as budget supporters hope, state revenues continue to increase.

“The demise of redevelopment is not good for the state's economy,” Santa Monica City Manager Rod Gould told The Lookout Tuesday. “Redevelopment agencies generate hundreds of thousands of jobs statewide.”

As the state's unemployment figures hover around 12 per cent, RDA-generated jobs and their spin-off effects on the economy are vital, Gould said. The state may face a good three years of high unemployment before its economy reaches 2007 levels, he warned.

The City has plans for hundreds of millions of dollars worth of RDA-funded projects that taken together stand to transform cityscape, projects Gould maintains are safeguarded by a cooperative agreement entered into between the City and the RDA last August.

Since Governor Jerry Brown announced his proposal in January to eliminate RDA's to divert money into the state's coffers, the City Council has acted to further protect the projects, city officials say.

RDA funding for many of the capital improvement projects has been appropriated and contractual agreements for them have been approved by the City Council, at city staff's encouragement.

Most recently, the Council voted on contracts Tuesday night for two Civic Center parks and the renovation of the Civic Auditorium totalling $74 million.

“We're moving forward to commit these projects to action,” Gould told The Lookout.

But there are some signs that the city may be hedging its bets.

Santa Monica's budget for Fiscal Years 2011-13 passed by the City Council last week was shorn of well over $150 million in RDA funds. Most of the money was shifted into this year's budget because of the kinds of RDA appropriations and contracts the Council has been okaying recently.

But tens of millions of dollars of RDA funding was taken out of the biennial budget to be appropriated at a later date.

And while the League of California Cities and the California Redevelopment Associate plan to challenge ABX1 26 and ABX1 27 in the courts, the City may need to delay some projects until the litigation is resolved, Gould told the Council last week.

The two trailer bills change the way California cities will be able to use property tax monies to fund redevelopment.

ABX1 26 eliminates California's RDA's, while ABX1 27 allows cities to resurrect them by paying money to the state.

The city is in an ongoing process of reviewing and analyzing the trailer bills, Tina Rodriguez, redevelopment analyst with the city's Department of Housing and Economic Development told The Lookout last week. Gould told The Lookout Tuesday that he still needs more information from RDA counsel before the City decides how to respond to ABX1 27.

Last week, Gould told the City Council that if the City decided to pay under ABX1 27, the first year's payment would be in the neighborhood of $27 million, followed by about $19 million next year.

The “ransom” payments, as Gould called them, would likely increase every year thereafter.

RDA-funded projects aren't all that's threatened by the state budget.

City staff warned the City Council last week it should hold onto discretionary funds for local social services in case they're shortchanged by the state. News sources say that under the proposed budget, health and human services throughout the state face cuts of as much as $5 billion.

Santa Monica College officials have anticipated serious cuts under the state's FY 2011-12 budget for some time now, as have local school district officials. ("Lean Times Ahead for SMC, President Tsang Warns," March 30, and "School District and Board Examine the Books," March 3)

The state budget rests on the expectation that an improving economy will generate $4 in state revenue. News sources say Brown has given up trying to raise taxes to balance the budget.