sr-022211-3hCity Council Meeting: February 22, 2011
Agenda Item:
To: Mayor and City Council
From: Andy Agle, Director of Housing and Economic Development
Subject:. Resolution Opposing the State Proposal to Abolish Redevelopment
Recommended Action
Staff recommends that the City Council adopt a resolution opposing the State budget
proposal to abolish redevelopment agencies in California.
Executive Summary
As part of the Governor's proposed California budget for fiscal year 2011-2012,
redevelopment agencies would be eliminated as of July 1, 2011. This resolution formally
opposes the current State budget proposal to eliminate redevelopment, citing the
following reasons: voters' interests in keeping funds local as expressed by Proposition
22; less anticipated financial benefit to the State than the Governor's Administration
estimated; the elimination of numerous projects of public benefit in Santa Monica
without redevelopment funding; negative effects on the local economy, including less
job creation; inhibited ability to ensure smart urban development; and severely limited
opportunities for affordable housing development.
Background
On Monday, January 10, 2011, Governor Brown issued his State budget
recommendations for Fiscal Year 2011-2012. Under the Governor's proposal,
redevelopment agencies statewide would be statutorily eliminated and would therefore
be required to cease creation of new debt obligations. Existing contractual obligations
would be protected, and local governments would designate a successor agency to
retire current debt obligations. The Governor's Administration estimates that these
changes would make available $1.7 billion to be redirected to the State's General Fund
in FY 2011-12 and used for Medi-Cal and trial courts. Any remaining funds would be
distributed to cities, counties and schools according to their proportionate share of
current property tax. In subsequent years, all tax increment funding, net of existing debt
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obligations, would go to cities, counties; and schools. Any existing redevelopment fund
balances for affordable housing would be shifted to local housing authorities on a one-
time basis.
Discussion
The implementation of the Governor's proposal would have significant negative impacts
on Santa Monica. It would severely limit local efforts related to affordable housing,
public improvements, and economic development activities, including local job creation.
The production and preservation of affordable housing, a longstanding priority in Santa
Monica, would be severely curtailed, since redevelopment is the dominant funder of
Santa Monica's affordable housing development program. To date, .Santa Monica's
Redevelopment Agency has contributed or committed funding toward the creation of
nearly 1,700 affordable residences throughout Santa Monica. But for the governor's
proposal, redevelopment is expected to continue to serve as the primary funding
sources for affordable housing in Santa Monica for many years to come.
Numerous projects planned for the near future will not move forward if redevelopment is
abolished, including:
• 300 additional affordable housing residences;
• the Palisades Garden Walk public park;
• the Pico Neighborhood Library;
• the Civic Center Early Childhood Education Center partnership with Santa
Monica College;
• pedestrian, bicycle and other access improvements related to the Exposition
Light Rail line;
• renovation of the Civic Auditorium;
• joint-use improvements to Santa Monica High School; and
• the public park and cultural amenities adjacent to the Civic Auditorium.
Over the next five years, the Governor's proposal would deprive Santa Monica of an
estimated $283 million worth of planned investments in Santa Monica's future.
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There are several other reasons that the Governor's proposal is problematic. It runs
directly counter to Proposition 22, which was passed by 61 percent of voters in
November 2010 in an effort to end State takings of local funds, including redevelopment
funds. In addition, the Legislative Analyst's Office has questioned the Governor's
assumption about redevelopment agencies' existing debt obligations, meaning that the
intended financial benefits to the State could be overstated. There are also several
legal questions about the constitutionality of eliminating redevelopment agencies, and
the implementation of the Governor's proposal may result in lengthy and costly legal
proceedings.
In summary, the Governor's proposal to abolish redevelopment agencies would have
clear negative impacts on the City of Santa Monica, and may not result in significant
ongoing savings to the State. This resolution formally opposes the current State budget
proposal to eliminate redevelopment agencies. It cites several reasons to oppose the
proposal, including: voters' interests in keeping funds local as expressed by Proposition
22; less anticipated financial benefit to the state than the Governor's Administration
estimated; the elimination of numerous projects of public benefit in Santa Monica
without redevelopment funding; negative effects on the local economy, including less
job creation; inhibited ability to ensure smart urban development; and severely limited
opportunities for affordable housing development.
In anticipation of State budget deliberations, city councils statewide are voicing their
opinions about the. proposal. The League of California Cities reports that the following
cities have adopted or are in the process of adopting similar resolutions opposing the
State budget proposal: City of Bellflower, City of Artesia, City of Commerce, City of
Lakewood, City of Lathrop, City of Norwalk, City of South EI Monte, and City of West
Covina. They anticipate that many other cities will take similar action as they are able to
schedule such items for their upcoming city council meetings.
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Financial and Budget Actions
There is no fiscal impact from the recommendations in this report.
Prepared by: Sarah Johnson, Administrative Analyst
Approved:
Andy Agle, Direct
Housing and Economic Development
Attachments:
Attachment A: City Council Resolution
Forwarded to Council:
`~ ~
Rod Gould
City Manager
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Reference Resolution No.
10564 (CCS)