When City Council members return from summer break in September they will have to decide whether to pay $2 million a year to keep the downtown's redevelopment funding or be forced to turn over as much as $5 million a year in revenue to other local services.
Under the new state budget, cities must pay what Mountain View officials are calling a "ransom payment" to the state in order to keep redevelopment agencies running. In the case of Mountain View's downtown redevelopment district, the amount is $2 million of the $5 million a year the special tax district has been earning annually in recent years.
With the loss of the lion's share of downtown property tax dollars, the city will lose major funding for economic development, job creation and affordable housing. In particular, the city could lose funding that council members say could help subsidize putting a grocery store downtown. The money is also used for events such as Thursday Night Live, recruiting businesses and acquiring and assembling properties for development, said Ellis Berns, the city's economic development director.
But downtown property taxes will be redirected to other services the state sees as more important: local schools, county services and even city services. Last year a dismantling of the downtown revitalization authority would have brought $832,000 in new property tax revenue to the city's elementary and middle schools and $700,000 in new revenue to core city services such as police and library.
While some local school parents hoped the state could redistribute the property taxes in the Shoreline Community, which acts as a redevelopment agency for the portion of the city north of Highway 101, Assistant City Manager Melissa Stevenson Dile said that the Shoreline Community was created by special state legislation that excludes it from the redevelopment agencies affected by the state budget.
The city budget will also be affected by the loss of $25,000 in library funding and $220,000 in vehicle license fees budgeted this year for core city services such as police, fire and library services. The cuts may not have much impact, however, as the city budgeted $500,000 in reserves to pay for state takeaways this year.
Sunset already planned
The downtown revitalization district was created in 1969 to help revitalize what was then a nearly vacant downtown. One of the oldest such districts in the state, it had been set to expire in April of this year, but City Council members approved a two-year extension in January in order to spend the authority's $5.5 million balance and "wind down in an orderly fashion," said then-City Manager Kevin Duggan.
The state's raiding of the downtown tax district this year is similar to previous years -- both last year and the year before the city paid $2 million a year to the state. But with the passage of proposition 22 last year, cities thought they had made such takeaways illegal. The cities of San Jose and Union City are spearheading a lawsuit against the state under Proposition 22, which would allow the Authority to wind down as planned.
State-created agency takes over in 2013
When the Downtown Revitalization Authority sunsets in 2013, the city will no longer be in control of how the Authority "winds down" under the new state budget. Before it passed, the council planned to pay off the authority's bond debt over a number of years, while continuing to use a portion of the revenue for affordable housing and to provide local schools their share of downtown property taxes in 2016.
But under the new state budget, a new seven-member "successor agency" would decide how the authority winds down, and how its tax revenue is spent. Berns said the new agency would include only two city representatives: Mountain View's mayor and a former employee of the authority (such as Berns or his assistant). The rest of the agency board would include two county supervisors, a representative of the state department of finance, a representative of the largest taxing entity in the district (possibly the local elementary school district) and the chancellor of Foothill-DeAnza Community College District.