CITY HALL — The state’s Department of Finance has taken aim at $57 million of former Redevelopment Agency funds slated for improvements at Santa Monica High School, putting the future of that major public investment at risk.
The trouble stems from payments made by the former Redevelopment Agency that City Hall and an independent oversight board believe are valid under legislation passed in 2011 that killed redevelopment agencies throughout the state.
State officials claim that contracts that City Hall submitted relating to the Samohi improvements, called the Civic Center Joint Use Project, were signed one day after the June 27, 2011 cut off, invalidating the agreements.
That would be bad news for both City Hall and the Santa Monica-Malibu Unified School District, which have already spent more than $2 million replacing the old football field at Samohi with a new synthetic turf and have contracts for more work connected to the project.
The first phase also involves replacing an aging gym and expanding opportunities for cultural activities at the 3,000-seat Greek Theatre.
In a letter dated May 22, Mark Hill, a program budget manager with the Department of Finance, informed City Hall that the joint-use project and three other, smaller obligations did not meet state requirements for funding.
That invalidated two $4,065,000 payments from the former Redevelopment Agency to the school district based on a contract between the agency and the school district dated June 28, 2011.
The first was made in January 2012; the second, set for June 2012, was not approved and not made to the district.
“We prohibited redevelopment agencies from entering into any new contracts with anyone, any organization or group, after the date the bill was signed,” said H.D. Palmer, spokesperson for the Department of Finance.
Brown announced that he had signed the bill on June 29, 2011.
City Attorney Marsha Moutrie responded to Hill’s two-page missive with a detailed analysis of City Hall’s position objecting to the denial.
According to Moutrie, the two payments were listed on a schedule turned in to the state on Jan. 25, 2011, long before the Redevelopment Agency or its successor paid them. State officials did not send the payments back for reconsideration, effectively approving them, Moutrie said.
Moutrie also argued that the date of the contract shouldn’t matter because the agency entered into agreements with the school district about the campus improvements in 2010, well before the legislation’s deadline, and that the legislation could not go into effect before June 30, 2011 in any case because it was part of the state budget.
Assembly Bill X1 26, the bill that dissolved redevelopment agencies across the state, was a budget trailer bill, and could not have been signed into law before the budget itself, Moutrie wrote.
Santa Monica isn’t alone in its disagreements with the state government in Sacramento over redevelopment.
On May 22, the city of Palmdale filed suit against Ana Matosantos, the director of the state Department of Finance, in objection to the dissolution of the over 400 redevelopment agencies in California. It was joined by 11 other municipalities.
The Department of Finance oversees the unwinding of redevelopment agencies across the state. The entities took a portion of property tax revenues that would otherwise have gone to schools and other publicly-funded organizations and instead spent the money on improvement projects.
Critics accused redevelopment agencies of taking money from firefighters and teachers and wasting it on unnecessary projects or spending it corruptly.
On Jan. 1, 2011, Gov. Jerry Brown announced that he intended to kill redevelopment agencies across the state and use the $1.7 billion that they contained to fill holes in the budget.
Two bills were created for the purpose. The first, Assembly Bill X1 26, unraveled redevelopment agencies, allowing only certain projects to continue to be funded.
The second, Assembly Bill X1 27, gave them the opportunity to survive if they paid what many referred to as “ransom payments.”
A December 2011 California Supreme Court decision turned that plan on its head.
The Supreme Court ruled that it was illegal to require payments to sustain the redevelopment agencies under a measure that voters passed in 2010 that prevented the state government from taking local funds.
It also held that the Legislature had the power to dissolve redevelopment agencies because an act of the legislature had created them.
The decision was the worst case scenario for municipalities that depended on redevelopment funding for large municipal projects.
The legislation established a procedure for unraveling the agencies by creating a “successor agency” to take over responsibility for identifying and paying out “enforceable obligations,” or contracts that the agencies had entered into before the legislation took effect.
As it happens, AB X1 26 isn’t very clear and there are numerous interpretations of what constitutes an “enforceable obligation,” said Paul Silvern, chair of Santa Monica’s oversight board.
The oversight board is composed of representatives of the local school district, county, city and special districts impacted by redevelopment. Its job is to check the work of the successor agency ¬ó in this case City Hall ¬ó as it develops a list of projects that can still be funded by redevelopment money under the terms of dissolution.
The board then approves that list and sends it on to the Department of Finance which reviews it and either signs off on the list or sends it back to the oversight agency.
In this case, the oversight board approved City Hall’s payment schedule based on its best interpretation of the bill’s language.
That included the payments to the school.
What happens now that the Department of Finance has signaled its displeasure with the payment is anybody’s guess.
At this point, the state is not asking for the money already spent on the Samohi renovations, although it has proposed legislation that would allow it to do so, said Andy Agle, City Hall’s director of housing and economic development.
That proposed legislation is “draconian,” Agle said, and could include the ability to withhold other state money until the difference is paid.
The bigger issue, however, is the fate of the Samohi improvements and the rest of the Civic Center Joint Use Project, a plan that has been in the works for many years.
“It will put a damper on the way the community had figured out how to fund the first phase of the project,” Agle said.
The district has already sent in a letter objecting to the Department of Finance’s denial, and legal remedies are still on the table, wrote Jan Maez, the district’s chief finance officer, in an e-mail.
“If necessary we will schedule a closed session with the board and our counsel to discuss potential legal actions the district could pursue,” Maez wrote in the e-mail.
ashley@www.smdp.com
