Local California RDAs Fighting To Keep Revenues From State

ALAMEDA, Calif. — Some California redevelopment agencies are already working to undermine a plan by Gov. Jerry Brown that would phase them out and use their surplus revenue to help balance the state budget.

Local officials in Los Angeles, Long Beach and Riverside County are among those trying to encumber their surplus revenue to keep it for their own use.

Brown’s plan calls for the Legislature to pass a law abolishing existing redevelopment agencies, while creating successor agencies responsible for managing the existing contractual commitments of the redevelopment agencies, primarily tax-increment bonds.

Redevelopment agencies, known as RDAs, function by capturing the incremental growth in property taxes after a redevelopment area is created. They use much of that tax increment to repay bonds that finance improvements in those areas.

If Brown’s proposal is enacted, tax increment not already pledged to bonds or other contracts would be used to help balance the state budget in fiscal 2012, then distributed to local agencies in subsequent years. It’s not clear whether the proposal will be enacted, but RDAs are already trying to tie up as much tax increment as they can.

Los Angeles redevelopment commissioners held a special meeting Friday to approve agreements to encumber $930 million, by signing a contract with the city pledging the next five years of tax increment revenue. That pact would commit the redevelopment agency’s $344 million of available cash plus its expected tax increment five years into the future, according to the staff report. The City Council must also approve it.

The state’s primary teacher and firefighter unions, who want to increase the share of the state budget pie for their members, denounced the move.

“The redevelopment agency is basically saying that developer profits are more important than schools, public safety, ­libraries and other core services,” said Lou Paulson, president of California Professional Firefighters. “This rushed action deliberately thwarts California’s effort to restore fiscal sanity and accountability to government.”

Long Beach wants to grab 10 years of future tax-increment revenue. The City Council, which governs the city’s redevelopment agency, was scheduled Tuesday night to vote on a plan to pledge Long Beach’s expected redevelopment-tax take through fiscal 2021, which amounts to more than $1 billion.

They aren’t the only RDAs looking at preemptive action. Riverside County supervisors, for example, voted Tuesday to authorize $155 million in tax allocation bonds for that county’s redevelopment agencies.

That is precisely the scenario that the state’s Legislative Analyst’s Office warned about last week in its review of Brown’s proposal.

“Redevelopment agencies could take actions that increase their bonded indebtedness and contractual obligations,” the report said. “These new financial obligations could constrain the state’s ability to redirect redevelopment revenues.”

The Legislative Analyst’s Office suggested that lawmakers pass an urgency bill imposing a moratorium on new RDA debt while the issue is being debated.

The proposal to bring an end to redevelopment in California is credit-neutral for the state’s outstanding tax-increment bonds, according to a Standard & Poor’s bulletin issued Tuesday. “If a moratorium goes into effect, it would have the effect in our view of closing the lien on existing tax increment debt, which could boost tax-increment bond coverage to the extent that assessed value in each district increased,” analyst David Hitchcock wrote in the report.

California’s redevelopment agencies had $18.1 billion in outstanding tax increment bonds, and almost $1.5 billion in revenue bonds, as of June 30, 2009, according to the most recent report from the state controller’s office.

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