The city itself will have to pay about $175,000 for a year's worth of costs to “wind down” its redevelopment successor entity next year - a process that is in place only because the state requires it - and that irks some members of the board that is tasked with overseeing the process for other government agencies.
That money could have otherwise been used to fund other basic city services such as a full year of costs to pay, equip and provide benefits for a full-time police officer, according to Mayor Steve Tate who sits on the oversight board.
The oversight board approved the expenses at a meeting Wednesday on a 5-0 vote, with board member and Morgan Hill Unified School District superintendent Wes Smith abstaining because he arrived late and did not hear the entire board discussion. Board member and Gavilan College President Steve Kinsella was absent from the meeting.
When the state of California enacted the law that eliminated redevelopment agencies as of Feb. 1 and ordered their assets to be redistributed to other services, it provided for a maximum amount of the former agency's property tax dollars that can be used to pay for the administrative costs.
That cap, which currently tops out at 3 percent of the former agency's annual continuing obligations and debts, will not be enough to cover the actual costs for fiscal year 2012-2013, according to city finance director Kevin Riper.
The total costs for the year, which include staff costs directed toward completing projects that were started by the RDA but are not yet finished, will be about $29,000, according to city staff. Of that, about $292,000 will be funded by former RDA assets based on 3 percent of existing RDA obligations, and about $60,000 will be paid by the state Department of Finance for debt service and bonds.
The rest - about $175,000 - will come from city funds, and mostly the general fund which finances basic services such as police and fire services, Riper added.
Oversight board member Pete Kutras, who retired as the Santa Clara County executive in 2008, said this shows the state's allowance for these costs is “artificial” because there is no doubt that the expenses are in the same category.
He wonders why the state thinks part of the costs should be covered by former RDA funds and some should not, and said it illustrates a longtime state habit of requiring cities and counties to find a way to pay for the state's costs.
“This is another example of a state mandate, where the state is doing a cost shift to the local agency,” Kutras said. “It’s clear these are administrative costs, and they should be covered, but because of the artificial cap that’s in the law, the city’s got to cover the costs.”
Kutras, who worked for the county for 35 years, added, “I have struggled my entire civil service career with state mandates,” and it’s unfortunate that the city cannot use the money for its original, pre-redevelopment-wind-down purpose - to fund public safety, parks, street maintenance and other services.
Riper added that the city did not figure the $175,000 expense into the budget for the year.
However, city staff did anticipate a “minimum” of $400,000 in extra property tax revenue for the general fund in 2012-2013 due to the elimination of the RDA. The purpose of the state RDA law is to return property tax dollars formerly reserved for redevelopment, back to basic services such as those funded by the general fund, as well as the county, school district, community colleges and special districts.