'Poison Pill' for Redevelopment

Regardless of whether a lawsuit against the state succeeds, San Ramon's Redevelopment Agency is in for a shakeup.

The City Council on Tuesday will hear an update about two bills Gov. Jerry Brown signed into law when he passed the 2011-12 budget that shut down every redevelopment agency in the state unless they're willing to shell out exorbitant monthly payments.

San Ramon's payments would add up to $2 million in the next year.

But even if a city pays up, it's barred from taking on new debt.

"State lawmakers have added a poison pill that will prevent remaining redevelopment agencies from creating any future funding from bonded indebtedness – [even if the California Supreme Court rules them unconstitutional]," reads a city staff report going before the City Council this week.

The California Redevelopment Agencies Association and League of California Cities filed a lawsuit July 18 claiming that Assembly Bills 1X 26 and 1X 27 are unconstitutional.

The lawsuit asks a judge to halt the legislation by Aug. 15. The central claim, according to the city, is that the new laws violate Proposition 22, a voter-approved constitutional amendment that prevents the state from taking money from local government.

Some redevelopment-related deadlines are fast-approaching, so city leaders are due for an update.

Bu Aug. 31, the city must notify the state if it wants to take over the agency.

By Nov. 1, San Ramon has to make up its mind about making those payments to keep redevelopment alive.

If the city decides to make the payments, the first one is due Jan. 15 in the order of $1 million. Another payment in that amount would be due three months later.

How all this affects San Ramon remains to be seen, according to Marc Fontes, who's in charge of economic development and redevelopment in San Ramon.

However things pan out, San Ramon's set to lose a lot of money. The agency is funded by increases in property tax in areas it redevelops. It won't get that any more. It'll also lose out on affordable housing funds, the city says.

City staff will continue to give updates on the issue at public meetings this summer.

The redevelopment agency in San Ramon has an annual budget of about $10 million. Most of that goes to pay bond debt. Some projects overseen by the agency include , the and the old property nearby.

The argument against redevelopment says that there's little evidence that the 425 agencies in California have added jobs or improved local economies.

"These relatively unknown agencies use their power of eminent domain to forcibly seize places of worship, small businesses and homes only to give them to politically connected developers on the cheap," according to www.stopthemoneypit.com, a website that supports Brown's effort to ax the agencies. "In turn, they use your tax dollars to underwrite development projects – corporate welfare at its very worst."

Use of redevelopment varies widely across the state. On average, California cities give 12 percent of sales tax to the agencies. Those agencies find "blighted" areas – the definition of blight varies, too – and turns them into designated "project areas" to revitalize and increase the property value.

That increase in value goes back to the agency to fund more projects and make sure there's enough affordable housing within the city.

According to the independent Legislative Analysts Office, Brown's plan would redirect those property tax increments to:

• Pay back redevelopment bond debts estimated to cost Californians $2.2 billion
• Give $1.1 billion to schools
• Offset $1.1 billion of Medi-Cal and trial court costs
• Distribute $210 million to cities, counties and special districts

Mayor H. Abram Wilson called Brown's plan a huge mistake. to decry the legislation, which disproportionally affects different cities.

San Ramon , when Brown first proposed ending redevelopment.

The City Council created a legal contract that would shift affordable housing oversight and redevelopment responsibilities to the city. Whether the city will remain the successor agency depends on the pending litigation and final approval from the City Council.

At a glance

WHAT: The City Council will hear a report about the future of redevelopment from Marc Fontes.

WHEN: 7 p.m. Tuesday

WHERE: City Council Chamber, 2222 Camino Ramon

AGENDA: www.ci.san-ramon.ca.us/councilagenda