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$2 million 'ransom' for city to keep downtown tax district

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.

Comments

Posted by Ned, a resident of Old Mountain View
on Aug 5, 2011 at 11:39 am

"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."

That's a strong enough argument to get rid of the agency.


Posted by Mike Laursen, a resident of Monta Loma
on Aug 5, 2011 at 12:51 pm

There IS a grocery store downtown.


Posted by Money Usage, a resident of Cuesta Park
on Aug 5, 2011 at 3:01 pm

I still haven't seen it specifically stated whether the redevelopment money goes to LOCAL schools, city, etc. OR, whether the money goes into a STATE pool for those items that then gets distributed around the state.

DeBolt's story seems to imply it would remain LOCAL, but can someone confirm that's the case.


Posted by Doug Pearson, a resident of Blossom Valley
on Aug 5, 2011 at 9:51 pm

The article and Money Usage's question raise points I am interested in. The idea that the downtown redevelopment district is able to spend money for all the good things they talk about is fine, but where does the money come from?

In the absence of the district, would there simply be less money, i.e., is the money a special tax on downtown businesses that the businesses would no longer have to pay, over and above normal business and property taxes? (I don't think so!) Or is it, instead, a diversion of normal business and property taxes from state, school district and other coffers, which would be reversed in the absence of the district? (No wonder the state wants to shut down redevelopment districts!)


Posted by DCS, a resident of Old Mountain View
on Aug 6, 2011 at 3:44 pm

The grocery store downtown does not have what I want, and I'm sure other people feel the same way.

It's smelly, dirty, and noisy in there too, not a pleasant experience.


Posted by Mike, a resident of another community
on Aug 7, 2011 at 12:48 pm

The downtown redevelopment district is a huge success, but its work is done and it is time to shut it down.


Posted by Mike Laursen, a resident of Monta Loma
on Aug 7, 2011 at 8:37 pm

re: It's smelly, dirty, and noisy in there too, not a pleasant experience.

Somebody is shopping there. Is it the city government's job to go out and find competitor's for existing businesses?


Posted by Save schools and police, a resident of North Whisman
on Aug 8, 2011 at 3:49 pm

The real title of this article should be "A blessing of "Money" for local schools and police department".


Posted by Garrett, a resident of another community
on Aug 8, 2011 at 7:20 pm

Downtown has been up due to the face the RDA's, if it wasn't for this we would have a run down area. Yes the schools need money. We Prop 13, the grab of Sales Tax, DMV funds, all sorts of funds that were produced by the local goverement. In the future what else will they grab.


Posted by Linda Jahnke, a resident of Monta Loma
on Aug 10, 2011 at 9:05 am

The city is right to plan for a grocery store in the downtown area. This is a densely packed community and should have access to local shopping. The current downtown ethic store can be a delight to shop in but is not an appropriate substitute. The same thing of course can be said for the Monta Loma area. A grocery store in the Rengstorff-Middlefield shopping center has been laying vacant for many years. The city should encourage local shopping wherever possible.


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