SAN FRANCISCO — San Diego has shifted $215 million of future debt payments for its ballpark to its redevelopment agency in an effort to skirt the governor’s proposal to help fix a budget crisis by closing RDAs.
Officials hope to save $11.3 million in annual debt-service payments by extending an agreement with the redevelopment agency to pay the city to cover debt service through 2032 on lease revenue bonds tied to Petco Park.
Facing a projected $56 million deficit for the next fiscal year starting July 1, city officials said they needed to make the move to help save money for the general fund that pays for city services such as police and libraries.
But the move is also an effort to shift the burden to the RDA before Gov. Jerry Brown’s proposal to eliminate redevelopment agencies to save billions of dollars for the state comes to fruition.
“The governor’s proposal to perhaps unwind redevelopment project areas all together, if that is successful, then that would preclude our ability to ever seek [redevelopment agency] funds to cover the debt service,” Jay Goldstone, San Diego’s chief operating officer, told the City Council Tuesday. “What’s going on in Sacramento has created the urgency.”
Brown’s plan would guarantee the fulfillment of contracts the RDAs enter into if they are phased out, and many agencies across the state are working quickly to tie up redevelopment revenue into such contracts.
Local governments declare redevelopment areas that capture the increased property tax revenue generated by rising property values in those areas over time. That tax increment often is used to back bonds.
San Diego may be looking to move more obligations. Council member David Alvarez urged city staff during the meeting to look at other projects to finance through tax increments, particularly the city’s convention center.
“I think we should start considering those projects that we can actually make findings for and obligate the debt as soon as possible so that can it can help our general fund,” Alvarez said.
He said Mayor Jerry Sander’s office has already been looking at a proposal related to the convention center.
The $454 million ballpark opened in 2004 and took five years to build. It was financed with $95 million of redevelopment tax-increment funds, $206 million from the city, including $46 million from redevelopment, and $153 million from the San Diego Padres.
San Diego has $146 million of outstanding lease revenue bonds issued in 2007 to refund older bonds.
In 2009, the redevelopment agency, which is run by City Council, agreed to pay debt service on the bonds through fiscal 2013.
The city’s office of the independent budget analyst said the transfer of debt would have a fiscal impact on the redevelopment agency that could delay some projects.
“Ultimately, we feel this issue comes down to weighing priorities of the general fund against the priorities of the redevelopment agency,” budget analyst Tom Haynes told the City Council.
RDA officials said shifting the debt service would add to their anticipated deficit of $33 million through fiscal 2015 and $63 million over the next ten fiscal years.
As a result, the agency would likely issue more tax-allocation bonds starting with $55 million in fiscal 2015 then two sales of $40 million in 2017 and 2019.
Sussan Corson, an analyst at Standard & Poor’s, said the city’s general fund would still likely guarantee the debt service on the lease revenue bonds despite the agency making the payments.
“These types of agreements that are intergovernmental do not normally take priority over debt service payments,” she said.
Moody’s Investors Service rates the lease revenue refunding bonds A2, Standard & Poor’s rates them A-minus and Fitch Ratings rates them A-plus.