San Diego redevelopment agencies will have to loan the state at least $44 million to close its $26 billion budget hole. And the state could end up taking a total of more than $100 million from the redevelopment agencies and the city’s general fund if things don’t go well.

Today, Mayor Jerry Sanders outlined a plan in which the state will immediately borrow at least $44 million, and potentially millions more, from the city’s redevelopment agencies. And, if it turns out that the redevelopment money isn’t enough, the state will come back for another $60 million in gas and property tax revenue after Dec. 1.

The plan is an attempt by the state to borrow money from local governments “in a way that could have potentially less dire consequences,” Sanders said during a news conference. But he also said “we see huge potential for failure.”

Under the state’s plan, San Diego’s redevelopment agencies will give up at least $44 million, and another 10 percent of their budgets if they agree to an incentive program. The incentive is that it if the agencies pony up the extra 10 percent now, the state will give them another 40 years before they’re required to begin sharing tax revenue from their redevelopment zones with the state.

If enough localities bite on the incentive, and the state is able to raise $3 billion from redevelopment agencies by December 1, it will forgo borrowing $24 million in gas taxes and $36 million in Proposition 1A property taxes.

If not, it will tap that money too, Sanders said.

“The deal could greatly reduce the impacts to local governments, but that’s if it works,” Sanders said. “If it does not work—and bear in mind, we see a huge potential for failure—it could be even more disastrous for local governments than a straight taking today.”

That’s because the money would be taken midway through the city’s budget cycle, Sanders said, forcing the city to cut even deeper to close the budget gaps.

“At a minimum, holding onto our tax revenues could create a cash-flow issue for the city,” Sanders said.

By targeting redevelopment agencies, he said, the plan relieves, at least in the short term, the potential for added pressure on the city’s general fund and eliminates the immediate need to cut services like public safety. But he did not rule out the possibility of having to do so if the state doesn’t reach its $3 billion benchmark.

“We are prepared, if we have to, to cut public safety. That’s a place we have not wanted to go in the past but we’re starting to reach that point,” Sanders said.

He said the plan could affect the city’s plans for the downtown main library and a new city hall.

The details of the state’s plan are still being reviewed, Sanders said, and it is unclear whether cities whose redevelopment agencies voluntarily forfeit money beyond what the state is already taking would be treated differently than those that don’t if the state decides to take local tax money.

“We have strongly objected to any plan to take local funds to balance the budget, because of the disastrous impacts this would have on our balanced local budgets,” he said. Sanders said San Diego was among the state’s cities and counties that “will not wait to file a lawsuit to ensure the state does not take those gas tax funds. We’ve made our position very clear. We cannot absorb the budget fallout from Sacramento’s failure to act decisively on its budget.”


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