Friday, September 26, 2008

Budget cuts hit redevelopment agencies

Contra Costa and Alameda counties will lose almost $35 million in redevelopment funds after the state budget diverted — or stole depending on who you ask — local property tax revenue to fill California coffers.

"Redevelopment agencies were robbed — robbed — of $350 million statewide," said John Cullen, Contra Costa county administrator.

The governor signed the $103.4 billion budget Tuesday, 85 days late and leaving local government leaders fuming with heavy cuts to redevelopment agencies and social services.

When asked by county supervisors to assess the state budget, Contra Costa's redevelopment director was blunt.


Jim Kennedy's assessment hit home with many of redevelopment heads in the East Bay. Contra Costa and Alameda redevelopment agencies will lose about $14.5 million and $19.5 million, respectively. Those portions of their property tax revenue will be diverted to the state's Education Revenue Augmentation Fund.

Contra Costa's unincorporated areas will lose about $1.3 million of a $20 million budget. The Contra Costa Centre project in Pleasant Hill alone will lose about $500,000 in funding. Sprucing up the BART station and extending the Walden Park linear green will have to wait, Kennedy said.

"They're shortsighted," Kennedy said of the state. "Redevelopment agencies do many of the public policy objectives we have heard state legislators say is important to California: AdvertisementWe do affordable housing, we do infill development, we do cleanup of sites blemished with hazardous materials and put them back to use, we do smart growth. All those things have huge payoffs in the long run. ... But it allows them to say that we have a balanced budget."

The hardest hit city in Contra Costa is Pittsburg, which will lose almost $3.6 million in redevelopment funds. That's on top of about $3 million the Pittsburg Redevelopment Agency lost already from lower assessed values in the East County city.

"The state just took my problem and doubled it," city manager Marc Grisham said.

Pittsburg's current project activity will not change, though some future projects will likely be scaled back, he said.

"It's going to hurt a lot of communities and it makes it real hard to do some of the things we do," he said.

Oakland City Councilmember Jean Quan, who heads the council's finance and management committee, said the hits to redevelopment particularly hurt older, more urban areas such as Oakland.

"We have so much redevelopment," she said. "A suburb might have a little redevelopment area for a shopping mall or something like that, but we have huge redevelopment areas."

The state's budget will take about $8.5 million out of Oakland's roughly $200 million-a-year redevelopment budget. Quan said the hit leaves the city without any money if redevelopment projects go over budget or for new projects in the next year.

"It limits our possibilities," Quan said. "Let's say we're talking about Jack London (Square) and we're looking at attracting a four-star hotel, we could have used this money to do that. And now this is money we don't have."

The loss of $286,000 for Walnut Creek's redevelopment agency will curb expenditures for the Mount Diablo and Broadway project areas in future years, finance director Fred Marsh said. This fiscal year's costs will be covered by reserves, he said.

The decrease in revenue will also hurt agencies' bonding capacity, Contra Costa's Kennedy said, meaning it will be harder to get larger loans for projects and the interest rate will likely be higher.

The state is shooting itself in the foot, he said, as redevelopment dollars improve infrastructure, boost property and sales tax revenue and provide construction jobs. For every $1 invested, Kennedy estimates the state receives 60 cents back.

The redevelopment chief worries the take-a-way could last for three years.

"They will be lacking in revenue next year ... I would not be surprised if they do it again," Kennedy said.

The diverting of redevelopment revenue may not be legal. Redevelopment revenue is constitutionally protected from leaving its source area, Kennedy said.

"I expect there will likely be a legal challenge to this ERAF diversion," he said.

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