City takes biggest hit yet
Loss of redevelopment funding will hurt big-time, council learns
The seven members of the Chico City Council have had since June, when the Legislature passed a bill dismantling the 400-plus redevelopment agencies in the state, to contemplate the possible dismantling of the city’s RDA. A pending case before the state Supreme Court was holding up the process.
So when city officials outlined Tuesday (Jan. 3) just how it was going to happen, following the court’s ruling that the dissolution was legal, council members were ready for the bad news.
And it was very bad. The city stands to lose around $8.4 million annually in redevelopment funds that otherwise would have gone to paying the notes on bonds that would have financed a wide range of projects, from upgrading roads and building housing for low-income residents to constructing a new police station. Just as important, the money would have been used as matching funds to leverage federal and state grants for other important projects.
“Our understanding is this is real solid … and redevelopment agencies will be dissolved,” City Manager Dave Burkland told the council.
In his presentation to the council, Shawn Tillman, a senior planner who is the city’s resident expert on redevelopment, said the city also stands to lose 20 to 25 full-time-equivalent positions over time.
In a follow-up phone interview, Tillman explained that there are several city employees whose entire salaries come from redevelopment funds, but there are many others—in the Finance Office, for example, or the City Clerk’s Office—who do RDA work as only part of their duties. How the loss of RDA funds will affect them is unknown at this time, he said.
The dissolution process is extremely complicated, Tillman told the council. First the city must become what’s called the “successor agency,” which it is by default. Then an oversight board made up of seven people representing various entities (Butte County, city of Chico, county Office of Education, etc.) will be selected to supervise the dismantling of the RDA. The county auditor-controller must also set up a trust fund to hold the tax-increment funds that heretofore have gone to the city. And then, finally, the successor agency (the city) must submit a “redevelopment obligation payment schedule” listing all the ongoing payments that must be made from that trust fund to pay debts and other obligations already incurred.
Some money—about $1 million—will be provided to the city to administer the dissolution during the first year. “It will be an interesting year to work through this and comply with the law and meet the Legislature’s goals,” Tillman said, understatedly.
The city will be required to sell any properties purchased with redevelopment funds on which no redevelopment contracts have been signed. The city owns several such properties, including 18 acres at the airport and a parcel along Comanche Creek. Because its local share of state property-tax revenues is 16 percent, the city will receive $16 for every $100 the sales bring in.
The full amount of RDA tax-increment funds the city receives each year is $10 million; because 16 percent of that amount is pass-through funds for the city, it will receive $1.6 million for use in its general fund, while losing $8.4 million in RDA money. (As Tillman said, it’s extremely complicated.)
At Councilwoman Mary Goloff’s request, Tillman gave a brief rundown of some of the projects funded by the RDA: the new Municipal Building, City Plaza, the Manzanita Avenue corridor, the renovation of Park Avenue, the rehab of the Old Municipal Building and many more. It’s also leveraged another $100 million in federal and state grants, he said.
“It’s nice to be aware of what the funds have meant,” Goloff said.
Councilman Scott Gruendl asked whether any legislative fixes were in the works. Many lawmakers have stated that they never intended to eliminate RDAs altogether, only to reclaim some of the tax revenues for use by the state.
Tillman responded that, yes, there was “some activity” at the Capitol, “but our perspective is that any changes at this time are highly speculative.”
There was surprisingly little gnashing of teeth on the part of council members in response to what is clearly the biggest financial hit the already beleaguered city has absorbed since the recession began.
But they weren’t happy about it, either. As Mayor Ann Schwab put it, by taking money away from the city, the state had “diminished Chico’s ability to build a better city and to build jobs.”