SOLANA BEACH — Solana Beach is the latest city that has chosen to keep its redevelopment agency should the state Supreme Court uphold two recently passed laws to eliminate the organizations.
Council unanimously approved the introduction of an ordinance at the Aug. 24 meeting opting into the Voluntary Participation Act, which exempts the redevelopment agency from dissolution and requires the city to annually forward a specified sum of money to the county controller for deposit in two special funds.
Redevelopment began in 1945 as a post-war blight removal program that used federal urban-renewal grants to clean up blighted urban areas. In 1966 there were only 27 projects in the state and most ranged from 10 to 100 acres.
With the use of tax-increment financing authorized by voters in 1952 and fiscal restrictions imposed on local governments by Proposition 13, redevelopment has become a key local financing tool.
There are now about 400 redevelopment agencies statewide and many encompass thousands of acres. Funding comes from freezing the property tax base in an area that has been designated as blighted.
All affected taxing entities, such as schools, fire and police departments or special districts, continue to receive the same share of property tax they received the year the tax base was frozen and the redevelopment plan took effect.
Improvements in the revitalized project area presumably increase property values, which lead to higher property taxes.
Instead of going to the county or state, any additional property tax revenue generated above the base year, which is called tax increment, goes to the redevelopment agency.
These funds must be used for redevelopment improvements within the project area, however, there is some flexibility, especially when it comes to affordable housing.
In an effort to reduce California’s $26 billion budget deficit, Gov. Jerry Brown proposed eliminating the agencies. On June 15, legislators passed a law immediately suspending all redevelopment activities and dissolving the agencies as of Oct. 1, 2011.
They also approved accompanying legislation known as the Voluntary Participation Act, which exempts redevelopment agencies from dissolution if a city enacts an ordinance on or before Oct. 1 and, via the county controller, pays into the Special District Allocation and Educational Revenue Augmentation funds.
Both laws have been challenged and the state Supreme Court issued a partial stay of the first one and a full stay of the second.
Cities that opt into the voluntary program must list all enforceable obligations of the agency, which Solana Beach agreed to do, to ensure compliance with the new laws and guarantee all existing obligations are paid.
To opt in Solana Beach had to decide if the burden of the voluntary remittance payments — $267,019 for the current fiscal year that will mainly come from the general fund and between $63,280 and $64,546 next year — outweighed the benefits of retaining its redevelopment agency.
Some benefits from the redevelopment plan adopted in 2003 have been realized, including the Fletcher Cove Community Center renovation.
However, significant projects such as improvements at La Colonia Park and the train station have yet to be completed.
Premature dissolution of the agency could result in those and other projects being delayed or eliminated.
“If you don’t take this action and the Supreme Court upholds the Dissolution Act, the redevelopment agency is gone,” City Attorney Johanna Canlas said. “That means all the projects…will not be funded with tax increment. You will lose tax increment dollars that were locally earned (and) going back to the community (for) capital improvement projects.”
State law requires redevelopment agencies to deposit 20 percent of their tax increment revenues into low- and moderate-income housing funds. The new law allows the agencies to reduce that allocation for the current fiscal year, but Solana Beach is holding off on that action because of the legal uncertainty, Canlas said.
Councilman Dave Roberts said opting into the new program was a pre-emptive step. “They’ve changed the rules midstream on us,” he said.
“We don’t have too much choice on this situation,” Councilman Joe Kellejian said. “Those robbers up at the state capital continually take money from local governments.”
Should the city decide it no longer wants to participate in the state program, it can withdraw.
“At any given point the council can pull out of this arrangement,” Canlas said.
Other North County cities that previously opted into the new program include Escondido and Vista. Del Mar and Encinitas are the only two cities in the county that don’t have redevelopment agencies.