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Santa Clara City Desk: June 26, 2013

Santa Clara County Continues RDA Asset Grab

June 4’s hour-and-forty-minute meeting of the Santa Clara Redevelopment Agency Successor Agency Oversight Board added nothing new to that body’s yearlong illustration of the cynical adage that democracy is two wolves and a lamb deciding what’s for lunch.

That afternoon the Oversight Board, made up of five county appointees and two city representatives, voted 5-2 that the City of Santa Clara owed $34 million in clawbacks – money that the county claims was improperly diverted over the 50-year life of the RDA from county taxing entities. Santa Clara city officials counter that the correct obligation is about a tenth of that – $4 million.

The amount demanded by the county as RDA income this month includes:

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  • $19 million in property rent payments to the city
  • $2 million in Sports & Open Space Authority property rent payments
  • $5.6 million committed to 49ers stadium
  • $1 million committed to city capital improvement projects

When the state legislature shut down California’s redevelopment program in 2011, it ignited conflicts between the state’s municipalities and counties over the assets and legitimate obligations of the defunct agencies. Increasingly, it seems unlikely these conflicts will be resolved outside a courtroom or any time in the near future.

“The process has been uneven, disappointing, filled with unexpected and inexplicable decisions, and fairly adversarial,” executive director of the League of California Cities Chris McKenzie told the Sacramento Bee last February.

This adversarial process is clearly at work in Santa Clara County. The most current accounting – the Recognized Obligation Payments Schedule (ROPS) – claims that Santa Clara’s total clawback obligation is roughly $240 million – with $34 million due now. This includes about $10 million of RDA money committed to the Santa Clara stadium project, despite a court ruling that the agreement with the 49ers Stadium Company (StadCo) was, in fact, as legal obligation.

Although his verbal maze left listeners in some doubt about what he was actually saying, County Attorney James Williams seemed to be telling the board that it could decide not to comply with the ruling.

“I believe that the board should deal with that item in the context of however the board chooses to deal with the litigation,” he said. “And that is an issue that I think the board should deal with through its counsel as part of whatever happens in the course of dealing with the issues that are presented on remand or otherwise in the context of the litigation.”

“I’m confused by the county’s continuing to urge… that the payments…pursuant to the stadium agreement were unlawful and should be returned,” responded StadCo attorney Harry O’Brien. “The court has found exactly the opposite…The county is asking you to act in direct disregard to a superior court order.”

The board nonetheless voted to expropriate the $5.6 million.

Santa Clara Assets Demanded by County Clawbacks

Another dimension of this adversarial process is becoming clear as well. That’s the county’s belief that its legal reach extends beyond the RDA tax increment – money that county agencies are aggrieved about because it was diverted from normal property tax distribution. If an RDA played any role in a property’s development or management, the county seems to feel entitled to make a grab for it.

For example, Santa Clara Finance Director Gary Ameling challenged the county’s claim to the city-owned land under Great America (the RDA managed the property). “Not one dollar of tax increment money was used for the Great America purchase,” said Ameling. “Instead, lease revenue bonds were issued [to pay] for the park.”

“But that doesn’t mean it wasn’t a redevelopment agency asset,” Williams responded. “There’s nowhere [in the law] it’s said that there is to be a difference between those assets purchased with tax increment and those assets purchased that were funded…through other monies.”

Although the city was clearly out-voted, City Manager Julio Fuentes insisted on putting Santa Clara’s protest on the record. “We’re dealing with issues of equity, and, [the question is:] Is it right for agencies to be unjustly enriched? A limited amount of investment has been made by the former agency in these projects and the city has made a substantial amount of investment in these projects.”

“It’s not true…the RDA was taking money away from the agencies at this dais,” added Ameling. “Rather, it was generating future income for the taxing entities later on in their lives…Those agreements helped to foster economic development. The Irvine project is bringing taxes, jobs and great buildings to the city. There’s no reason people should look at it and think that we did something wrong.”

Two Sides to the RDA Coin

For others at the June 4 meeting, redevelopment was a zero-sum game where economic gains came at the expense of school children – K-12 schools receive about 40 percent of property taxes.

One of them is SCUSD Board President Christine Koltermann, who noted that she was speaking at the meeting as a private citizen and not as a representative of SCUSD.

“For decades Santa Clara Unified has been starved by the Santa Clara and San Jose Redevelopment Agencies because the RDAs diverted tax dollars away from our schools,” she said. “According to our former chief business officer [Jim Luyau], about one quarter of our total budget every year has been siphoned off for decades. That’s about $32 million a year…that could have been used to serve our children. We’ve had a decade of devastating budget cuts, furlough days, layoffs of staff and increased class sizes.

“We would be one of the better-funded school districts in California, were it not for the bleed-off of so many property tax dollars,” Koltermann continued. “Now that governor Brown has wisely dissolved the RDAs, please expedite getting Santa Clara Unified our money.”

Santa Clara County’s $240 Million Demand

In the most recent accounting, Santa Clara County is demanding a total of $240 million in clawbacks from Santa Clara’s shuttered RDA, to be distributed among the local taxing entities. The chart above shows the items comprising that hefty sum.

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The Mlnarik Law Group, Inc.

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