"Midnight tonight is the execution, no more redevelopment authorities tomorrow," said Mayor Mike Kasperzak on Tuesday. "I am infuriated by what the Legislature has done," he said, questioning the benefits.
Like 400 other redevelopment agencies in the state, the City Council-controlled downtown Authority will stop receiving property taxes Wednesday, some $4.4 million a year from a 16-block area of downtown. The 1969 tax district is credited with transforming Castro from a nearly deserted street to a popular, vibrant destination. City officials had hoped to do more with the money, such as improve broadband access downtown, assemble more properties for redevelopment and fund the facade improvement of Ava's Downtown Market, which is struggling to transform itself into the popular downtown grocery store residents have demanded for years.
As was Gov. Jerry Brown's intent, the Authority's money will now be distributed to local schools and government agencies, and used to pay off the Authority's $36 million in debt until 2019. But it remains unclear whether there will be a benefit for schools. Kasperzak, also president of the League of California Cities, claims there won't be.
"Many of the schools think they are going to be getting a windfall, but all this means is the state is no longer is going to be back-filling" school budgets, Kasperzak said. "They'll be getting the same money, from a different source. It's going to be a big surprise to people. People will say, 'Where is the money?'"
Lost funds, lost property
The law disbanding redevelopment agencies also nullifies the last-minute transfers of downtown property (an acre estimated to be worth $5 million) and funds ($5.5 million) from the Authority to the city last March, not long after Brown proposed to shut redevelopment agencies down. The move was part of a wave of last-ditch efforts by cities before Brown's proposal was approved by the state Legislature.
The oversight committee could uphold the transfer, but the possibility of losing the property, now pieces of parking lots on Bryant and Franklin streets, in a state-ordered "fire sale," is frustrating to city officials.
"Investors are going to get a steal and taxpayers are going to get the short end of the stick," Kasperzak said. "It's nuts."
The Authority had been assembling the six parcels downtown for redevelopment since 1989. The properties include half of the parking lot at California and Bryant streets (.67 acre), and a piece of a parking lot on Franklin Street between Dana and Villa streets (.27 acre). The downtown property is worth about $5 million an acre, according to one real estate broker.
The Authority bought the properties using loans from the city. In a staff report, city officials said one reason for the transfer was that "the value of the six parcels is at least equal to the debt amount." The city was still owed $2 million, half of which was interest.
As for the redevelopment funds transferred to the city in March, the council transferred the $5.5 million to the city's capital improvement budget to allow the city to continue its strategic property acquisitions downtown.
New committee usurps city
By May 1, the city hands control of the Authority's funds and obligations to an oversight committee of school, county and city officials who will have the final word on how to pay off the Authority's debts, liquidate any assets, and disburse as much as $10 million in unspent funds. It will have seven representatives: two from the County Board of Supervisors, one from the County Office of Education, one from the Chancellor of California Community Colleges, a former employee of the Authority appointed by the mayor, another mayor appointee and a representative of the largest special district in the area.
"We're still having some discussion about who the largest district is," said Mountain View's economic development director, Ellis Berns, who added that it could be the Santa Clara Valley Water District or the city's downtown parking district.
Despite the loss of funds and potential loss of property, city officials say the loss of its redevelopment agency is a smaller loss for Mountain View than other cities. The Authority had been set to sunset in 2011, and was granted a two-year extension to "wind down in an orderly fashion." The city's general fund is expected to take a hit of only $580,000 in taking on the ongoing expenses of the Authority, mostly in administrative expenses in order to retain Berns and his assistant Tiffany Chu.
"We had really strived towards sun-setting the agency in an organized fashion," Berns said of the city's previous plans, which would have paid off the city's debts a few years earlier, by 2016. "What this legislation has done is create some confusion and lack of clarity in what exactly are the steps. And it takes control away from our local community."