It looks like the 11th hour for redevelopment agencies has arrived, and the city of San Diego could face an unforeseen multi-million-dollar addition to its deficit.
The state Legislature could take action on eliminating redevelopment as part of Gov. Jerry Brown’s budget package as soon as tomorrow, following a frantic day in Sacramento and in San Diego.
Most importantly, the city could face an immediate hit to its day-to-day operating budgets based on the proposed legislation released late Tuesday.
The Petco Park bond debt the city had shifted to its redevelopment agency could be forced back to its already-strained daily budget. The $11.3 million annual payment would immediately increase the city’s deficit.
The legislation nullifies agreements between the city’s redevelopment agency and its city, which could include the agreement the city signed and recently extended to have the downtown redevelopment agency pay for the more than $200 million in debt to pay off the ballpark.
“All agreements would be at risk,” City Attorney Jan Goldsmith said.
The hit to the day-to-day budget isn’t set in stone. Goldsmith contends that the Petco deal would fall under an exception written into the law for financing agreements. Also, he said, successors to redevelopment agencies — which would be under boards controlled by San Diego County and local educational agencies — could agree to make good on the payments.
The uncertainty surrounding the Petco debt is just one of many issues up in the air now that leaders of the state assembly and senate announced that they plan to vote on Brown’s budget Wednesday.
Also at risk is the deal San Diego made two weeks ago to try to lock up $4 billion in future property taxes for redevelopment projects over the next four decades.
Further, the City Council approved emergency legislation Tuesday afternoon transferring more than $250 million in assets — nearly all 135 properties — from the redevelopment agency to the city itself. Monday night, the council balked at the exact same move, hoping to vote in a week once city staff had done more research on the properties.
Council members blamed the state for forcing their hands.
“It’s the state’s fault,” Council President Tony Young said.
At stake in this redevelopment fight is hundreds of billions of future property tax dollars. Redevelopment funnels that money away from schools and other local governments to improve rundown neighborhoods. The California constitution requires the state to pay the money redevelopment takes away from schools. This year, the state estimates redevelopment agencies are collecting more than $5 billion in property taxes and the governor figures he can save the state $1.7 billion this year if redevelopment goes away.
In the future, all the money that otherwise would have gone to redevelopment would flow to schools and other local governments, including the city’s day-to-day operating budget. The city’s independent budget analyst has estimated the day-to-day budget would receive as much as a $20 million boost a year. That’s much less money than the city would get otherwise, but it could be used for basic services such as police and fire rather than bricks and mortar.
Even if the legislature acts Wednesday, the redevelopment fight is far from over. Boosters around the state have guaranteed they will sue. Goldsmith added that city attorneys up and down the state would be challenging the legislation.
Please contact Liam Dillon directly at liam.dillon@voiceofsandiego.org or 619.550.5663 and follow him on Twitter: twitter.com/dillonliam.