CITY HALL — City Council members heard the first reading of an ordinance Tuesday night that will allow $33 million in what officials refer to as “ransom payments” to the state to keep the doors of the city’s Redevelopment Agency open.
Council members convened a special meeting to hear the ordinance to get it passed before the September deadline set by the Legislature and Gov. Jerry Brown in the budget signed in June.
The Legislature tacked on two bills — AB 26 and AB 27 — which proposed to kill the nearly 400 redevelopment agencies across the state and take the money they hold to plug a $1.7 billion hole in the state budget.
The agencies use tax money to fight blight by supporting infrastructure, building projects and affordable housing in specific zones created in cities by ordinance.
If host cities or counties want to keep the agencies in their present form, they have to pay their portion of that $1.7 billion to the state.
If not, the Legislature would begin sifting through redevelopment agencies to find ones out of compliance with the law, and shut them down by Oct. 1, at which point localities would create a new “successor” agency to pay out money for projects that were already committed in contracts.
In Santa Monica’s case, that means $26 million in fiscal year 2011-12 and another $6.4 million in ongoing payments, according to Andy Agle, director of Housing and Economic Development at City Hall.
“Staff recommends that the council adopt this ordinance under protest to continue the Redevelopment Agency,” Agle said.
Santa Monica’s Redevelopment Agency is paying for $276 million in projects, including work already started at the Santa Monica High School campus and renovations on the historic Civic Auditorium, that the City Council agreed to commit to in August 2010, long before the governor proposed the budget that included the dissolution of the agencies.
Although city officials hope that commitment will keep the agency safe through the end of the those ventures, the only way to be sure is to make the payments.
Councilmember Bobby Shriver expressed concern that the city might be getting in over its head in spending money on projects, particularly those contracted just through the design phase, that might never happen.
“We would not have designed projects that we would not be able to finance in a year or two’s time,” Shriver said.
City Manager Rod Gould assured the council that City Hall would be able to follow through with its projects, although it might require a longer timeline and the pursuit of future financing.
Council members approved the initial reading, with reservations, in order to keep the millions of dollars worth of projects rolling.
“By taking this action tonight, we allow ourselves to continue to move forward,” said City Council member Kevin McKeown. “We don’t know how this will play out, we cannot possibly, but our history shows we’ve done pretty darn well in how to handle difficult situation.”
It’s already in question whether or not the “ransom” payments will be necessary.
The League of California Cities, California Redevelopment Association and some individual municipalities filed suit with the California Supreme Court, questioning the constitutionality of the two laws and requesting that the court put a hold on their implementation.
The argument rests on Proposition 22, a voter-approved initiative that restricts the state specifically from taking money from local governments, including redevelopment agencies.
Attorney General Kamala Harris’ office responded, saying that the Legislature had every right to dissolve the agencies, because it moved to establish them in the mid 1940s.
This ordinance is a hedge against the possibility that the California Supreme Court will find in favor of the attorney general, while still including language that will allow Santa Monica to get its money back if it’s forced to make its first payment in January 2012 before the court has reached a final verdict on the matter.