Funds for schools or jobs downtown?

This corrects an earlier version of the story: The City Council will discuss, but not vote on, the downtown RDA issue at its Tuesday, Jan. 18, meeting.

Some City Council members would like to subsidize a grocery store downtown, but Gov. Jerry Brown’s budget, announced Monday, might pose a problem for that.

Brown’s proposal to tackle the state’s $25 billion shortfall with budget cuts and tax increases includes the elimination of redevelopment agencies across the state. Brown wants to permanently shift the taxes that flow to the city’s redevelopment funds to schools and other local services, but Mountain View City Council members may object to that in their meeting next week.

The council happens to be discussing on Tuesday whether to extend the downtown redevelopment agency (RDA), which is one of the oldest in the state — it’s set to expire after 40 years this June. Last year the council discussed extending the downtown RDA for two years to subsidize a long-desired grocery store on a city-owned lot at California and Bryant streets.

Mayor Jac Siegel said that extending the downtown RDA would help create jobs downtown through its funding of future projects, including the “neighborhood serving” grocery store downtown.

But with funding for basic state and city services scant these days, Brown proposes to get rid of redevelopment agencies altogether. The agencies, for the purposes of economic development, have shifted property taxes away from school, city and county services for decades.

If Brown’s proposal is approved by the legislature Mountain View would lose the downtown RDA, its only redevelopment agency and one that has funded improvements since 1969. By concentrating property taxes on parking, sidewalks and lights, it helped increase downtown property from a total assessed value of $22 million in 1969 to $418 million last year.

Had the downtown RDA gone away entirely last year, there would have been another $700,000 in property tax revenue for core city services such as police and the library, while the city’s elementary and middle schools would have received another $832,000 in property tax revenue.

Siegel said the council needs to consider whether extending the RDAs life makes sense for the community. “What else do we need to do or what should we do before this is totally gone,” he said.

The downtown wouldn’t be left completely high and dry by Brown, however. He proposes an amendment to the state constitution that would allow the city to continue funding economic redevelopment and infrastructure projects through more easily attainable voter-approved bonds. Those bonds would only require a 55-percent approval from voters instead of the two-thirds vote now required.

City officials say that would mean a time consuming extra step in economic redevelopment projects when it’s often the case that “time is of the essence,” said economic development director Ellis Berns. But it could also mean a new funding source for projects in other areas of the city.

Brown’s plan would eliminate RDAs in June, but cities would continue to receive funds to pay off RDA debts. If all of the RDA money went to paying off the downtown’s debts if would take about eight years to clear, city officials say.

City officials remind everyone that the improvements made possible by the downtown district has raised the entire city’s property values, and hence, property tax revenue for schools.

But in his budget proposal, Brown told cities that “RDAs were not intended to become a permanent source of business subsidies” and that their original intent was to “relieve blight” in a “limited amount of time.”

If the council decides not to extend the downtown RDA, the city’s core services, schools and the county could begin receiving additional property taxes in 2019, when bond payments finish, city officials said last year.

But that may be delayed under Brown’s proposal. Brown proposes to use the funds “freed up” from RDAs in 2011-12 to fund the state’s general fund services, including schools and MediCal.

Since last year the council has been considering an extension of the downtown RDA for up to two years. That extension is currently allowed by the state because it borrowed nearly $2 million from the downtown RDA this year and last year, said finance director Patty Kong.

Other than the impact on the downtown RDA, city officials said their preliminary analysis of the governor’s proposals has yet to find any other significant impacts on the city. While there has been lots of talk about shifting funds and responsibilities to local governments, that appears to mostly have to do health and human services, which the county would take on, Kong said.

While the downtown RDA would go away under Brown’s proposal, it is unclear whether it would end another special tax district, a much more lucrative one of the city.

Shoreline tax district untouched?

“The governor has a tough nut to crack,” said Vice Mayor Mike Kasperzak. “Everybody is going to have a sacred cow.”

If Mountain View has a sacred cow it’s the Shoreline Community Fund, which functions like an RDA to pay for Shoreline Park maintenance and improvements to the surrounding area, now home to Google. It was created by special state legislation with no sunset clause, meaning it could exist forever. Whether Brown would do away with the Shoreline Community is uncertain, but so far city officials are pointing out that his budget proposal specifically mentions RDAs, which would exclude the Shoreline Community.

However, last year the state took $1.7 million from the Shoreline Community, along with raiding the state’s RDAs, to help meet its obligation to schools. Finance director Patty Kong said the Shoreline District was addressed by the state as a unique authority, not an RDA.

Elementary school officials have been eyeing the Shoreline Community, which pulls in $5 million in taxes that would otherwise go to the city’s local elementary and middle schools annually. City officials have defended the Shoreline Community however, saying that has created a neighborhood that is now the city’s “economic engine.” It has funded the Stevens Creek and Permanente Creek trails, the creation and maintenance of Shoreline Park and a new fire station on Shoreline Boulevard to be constructed this year, among other things.

But it appears that the new governor has a different view.

“The expansion of redevelopment agencies has gradually shifted property tax away from schools, counties, special districts, and city general purposes,” Gov. Brown’s budget proposal states, adding that “the state’s investment in local economic development and redevelopment agencies is less critical than other activities.”