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Santa Clara Stadium Authority’s Dash to Stash Redevelopment Cash

At an emergency meeting Monday, the Santa Clara Redevelopment Agency (RDA) and Stadium Authority (SA) voted to transfer $4.5 million from the agency into a SF 49ers business entity called Stadco for infrastructure construction described as “predevelopment.” Santa Clara voters approved a ballot measure last June to go forward with a 49ers stadium project.

The RDA/SA, which is also the Santa Clara City Council, voted 5-2 to approve the measure, first announced last Friday and published at 5:00 p.m. on Monday. Council Members Lisa Gillmor, Pat Kolstad, Pat Mahan, Jamie Matthews, and Kevin Moore voted in favor, with Will Kennedy and Jamie McLeod opposing.

The move is the latest in a series of city efforts to shield money allocated to redevelopment agency (RDA) projects, should the state legislature vote to end the state’s 65 year-old redevelopment program.

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The bill (AB 101) currently on the table in Sacramento moves control of redevelopment assets to unspecified local “successor agencies” under the supervision of a county auditor-controller. Revenue from RDA projects would be used to pay off existing debt. Any surplus would be treated as ordinary property tax revenue and distributed to city, county, and state agencies according to current county formula.

For example, if under the proposal, Santa Clara Unified School District will receive its proportional share of north San Jose property taxes. These “tax increments” are currently diverted to the San Jose’s RDA, leaving SCUSD with a potential obligation to serve a student population double its current size, without additional revenue.

Faced with this uncertainty about the post-RDA revenue landscape, municipalities – including Santa Clara – have been rapidly transferring RDA assets and control to other city agencies since the beginning of the year. Now, evolving changes in the proposal are throwing these maneuvers into question. Hence, Santa Clara SA’s move to advance the money to a private entity.

This “predevelopment funding” aims “to ensure that the $4 million previously earmarked for this project, as well as the project tax increment, are protected and are used for the purposes which the Council has identified and the voters have confirmed,” said Deputy City Manager Carol McCarthy, in presenting the proposed resolution Monday night.

In return for the $4.5 million advance, Stadco will pay for “make ready” infrastructure such as demolition, clearing and grading, design, relocating high voltage transmission lines, and regulatory compliance on city-owned land.

“It is expected that the City, as owner of the Stadium site, will benefit from the work installed on and adjacent to the site,” continues the analysis, “however it is possible that the work may not have value for future development, depending upon the nature of future development on the site.”

All of this presents unacceptable risk for Santa Clara, say the measure’s opponents.

“The 49ers LLC is an entertainment business operating in our city,” Santa Clara resident Clysta McLemore told the City Council. “It is not a bank. Our property tax dollars belong in a public agency to be used for the public good. Tonight’s proposal opens the city to absorbing more front-end risk while our city services are being cut, city employees are being furloughed, and school budgets are being decimated.”

“What it looks like from the outside … [is that] you are acting in parochial interests to sequester funds that are ours, not the team’s,” City resident William Ray warned the Council.”

The majority of the City Council, however, expressed no such doubts. “This is an excellent document,” said Council Member Kolstad.

Summary Of Pre-Development Funds Transfer

  • SA advances $4 million to Stadco upon execution of agreement
  • Kept in separate account along with any interest earned
  • May be used only for make-ready work and SA operating costs in accordance with appropriated budget
  • SA will hold RDA potion of development fees in separate account
  • Funds returned/retained by SA if stadium is not built

AB 101 (Committee on Budget)
Community redevelopment.

  • The Community Redevelopment Law authorizes the establishment of redevelopment agencies in communities to address the effects of blight, as defined. Existing law provides that an action may be brought to review the validity of the adoption or amendment of a redevelopment plan by an agency, to review the validity of agency findings or determinations, and other agency actions.

    This bill would revise the provisions of law authorizing an action to be brought against the agency to determine or review the validity of specified agency actions.

  • Existing law also requires that if an agency ceases to function, any surplus funds existing after payment of all obligations and indebtedness vest in the community.

    The bill would repeal this provision. The bill would suspend various agency activities and prohibit agencies from incurring indebtedness commencing on the effective date of this act. Effective July 1, 2011, the bill would dissolve all redevelopment agencies and community development agencies in existence and designate successor agencies, as defined, as successor entities. The bill would impose various requirements on the successor agencies and subject successor agency actions to the review of oversight boards, which the bill would establish.

    The bill would require county auditor-controllers to conduct an agreed-upon procedures audit of each former redevelopment agency by October 1, 2011. The bill would require the county auditor-controller to determine the amount of property taxes that would have been allocated to each redevelopment agency if the agencies had not been dissolved and deposit this amount in a Redevelopment Property Tax Trust Fund in the county. Revenues in the trust fund would be allocated to various taxing entities in the county and to cover specified expenses of the former agency. The sum of $1,700,000,000 of these moneys would be allocated to the various counties for deposit in a Public Health and Safety Fund, which would be used to reimburse the state for health and trial court services in the county. The bill would authorize the county to elect not to administer this fund, in which case the Director of Finance would be required to designate a different entity to administer this fund. Under the bill, if the county elects not to administer the fund, it would not receive moneys remaining in the Redevelopment Property Tax Trust Fund, which would otherwise be distributed to taxing entities in the county. The bill would also require, for the 2012–13 fiscal year and each subsequent fiscal year in which funds are available, each county auditor-controller to allocate to various educational entities a specified amount. By imposing additional duties upon local public officials, the bill would create a state-mandated local program.

  • Under the California Constitution, the Legislature is prohibited, except by a 23 vote, from changing the pro rata shares in which ad valorem property tax revenues are allocated among local agencies in a county.

    Because this measure would provide property tax revenues that would otherwise be received by enterprise special districts from former redevelopment tax increment allotments instead be received by the respective county, and may result in property tax moneys in the Redevelopment Property Tax Trust Fund not being allocated to the county if it declines to administer the Public Health and Safety Fund, the bill would constitute a change in the pro rata share of property tax allocations in that county and require the passage of the bill by a 23 vote.

  • The bill would appropriate $500,000 to the Department of Finance from the General Fund for administrative costs associated with the bill.
  • The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

    This bill would provide that no reimbursement is required by this act for a specified reason.

  • This bill would declare that it is to take effect immediately as a bill providing for appropriations related to the Budget Bill. Yesterday the Senate and Assembly considered AB 101, which is the budget bill that includes the provisions to eliminate redevelopment, per Gov. Jerry Brown’s proposal.  

    AB 101 fell one vote short in the Assembly. It had passed the Senate Budget Committee, 10-7, but, upon failing in the Assembly, it did not come up for a vote in the full Senate. While the Assembly voted on AB 101, the Senate deliberated on SB 77, which is a mirror of AB 101.

    Legislators did, however, approve $7.4 billion in spending cuts. 

    Both houses are expected to reconsider the redevelopment bills in the 11am floor session today. 

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