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State's redevelopment grab costly

 

It will cost the City of Sonoma an estimated $1.7 million to "opt-in" for the continuation of its Community Development Agency, the city council-directed body that administers tax-increment property tax revenue for projects like renovation of the Sonoma Valley Library and the affordable housing project on Sonoma Highway.

Opting in, means the state will allow an RDA (redevelopment agency) to continue doing business, as long as it pays a percentage of its redevelopment revenue to the state.

The logic behind that requirement is that state budget analysts concluded too much property tax revenue was being drained off by redevelopment districts that could otherwise help close the state's enormous budget deficit. So the state decided to terminate redevelopment agencies, but that proposal ran into a wall of opposition from cities and counties that use RDA funds to pay for everything from police stations to sporting arenas, with a lot of affordable housing thrown into the mix. So the plan was modified to allow RDAs to "opt-in," continuing to collect redevelopment revenues as long as they pay a percentage of those dollars corresponding to the amount the state would lose if they didn't. Altogether, state analysts have budgeted $1.8 billion from the state's 400 redevelopment districts.

For Sonoma, the opt-in payment is estimated at $1.7 million, with an annual, on-going assessment that is expected to be several hundred thousand dollars but city officials don't yet have a definitive figure. Early indications are that a majority of the cities in Sonoma County intend to opt-in, to continue their redevelopment programs, as does the county government itself.

Redevelopment funds are generated by a process called tax-increment financing, which uses increases in property taxes, arising from the increased value of redeveloped properties, to pay off bonds that were sold to pay for the redevelopment investments.

All the Highway 12 improvements in the Springs have been, and probably will continue to be, paid for through tax-increment financing.

The opt-in cost for the Sonoma County Redevelopment Agency is estimated at $2,994,807, which covers its three redevelopment areas - the Springs, Russian River and Roseland.

Kathleen Kane, executive director of the Sonoma County Community Development Commission, said the Springs' share of the buy-in would be about 20 percent of that $2.99 million, or about $600,000. The Springs Redevelopment Area receives about $2.4 million a year in non-housing revenue.

The county isn't wasting any time in looking at the buy-in ordinance.

John Haig, the county's redevelopment manager, said staff is preparing an ordinance for the buy-in to take to the Board of Supervisors for a first reading on Tuesday, Aug. 9, with a second reading - and hopefully passage - on Tuesday, Aug. 16.

Of the three redevelopment areas in the county, the Springs has the most indebtedness, as it floated $15 million in bonds for the Highway 12 improvement project.

If the county decides to opt-in, it means that the Highway 12 project will be completed as scheduled.

Last month, 1st District Supervisor Valerie Brown said that redevelopment was too important to jeopardize. "I believe that it's in our best interest to pay the opt-in," she said.

"We need to continue our projects," Brown said. "And Highway 12 is our highest priority."

Haig said after the initial buy-in cost this year, it would cost the county an estimated $700,000 a year to continue with its redevelopment areas, which translates into a minimum of about $140,000 a year from the Springs Redevelopment Area.

"The $140,000 is our best estimate of the minimum payment of the project area, assuming we do no new project work and just stay in existence," Haig added. But that fee would go up whenever a new project is started.

Steve Cox, chair of the Springs Redevelopment Advisory Committee, said the $600,000 is a big deal for the community.

"The money comes out of the bank," he said. "It doesn't affect the Highway 12 project. But it will affect new projects."

What it means, he continued, is that the committee probably won't be doing any substantial new projects, at least in the coming year or so.

"We're probably going to be looking at smaller projects that we can fund with the money we receive, as opposed to larger projects that are funded by bonds," he added.

Affordable housing monies that the county receives as part of the tax increment would be exempt from the yearly buy-in fees.

The money the state seeks from the redevelopment agencies is slated go to schools, fire districts and transportation districts.

The City of Sonoma will not consider the op-in option until its Aug. 15 meeting, at which point city staff hope to have prepared a comparison of the financial impacts of opting in and opting out.

City Manager Linda Kelly explained that city staff needs to give the council a list of pros and cons for either choice. She said that, at one level, the choice is also one over keeping or giving up local control over local tax dollars. Opting out, she said, would allow a state-created oversight board, with a minority of city votes, to determine issues such as the disposition of the Patten Street fire station.

The city has been in negotiations with a Sacramento-area development company interested in buying the property, and with a willingness to convert it into uses appropriate for the location and the architecture of the surrounding area. An oversight committee not controlled by the city, said Kelly, could simply sell the property to the highest bidder.

Opt-in decisions must be made by Oct. 1, but Kelly said that jurisdictions will be able to opt out at any time, simply by refusing to pay the state's annual increment.