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No Winners in State Effort to Redirect RDA Money to Schools
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No Winners in State Effort to Redirect RDA Money to Schools
Local Educators Dubious of Plan to Rob Redevelopment Agencies to Pay for Classrooms
By Linda Fridy
In a state where most public agencies have budget problems, California's nearly 400 redevelopment agencies have money, earning millions of tax dollars from rising property values in areas defined as blighted often decades ago. The state, meanwhile, has seen its income plummet as property values drop and unemployment rises.
Little wonder, then, that for the last two years state leaders – who foot most of the bills for local schools — have tried to gain access to redevelopment funds to help solve their own budget woes.
The result: a bureaucratic and legal mess that leaves schools and local improvement projects wondering how much money they will have.
On the legal side is a lawsuit filed Oct. 20 by the California Redevelopment Association (CRA) on behalf of the many local agencies. It won a similar action last fiscal year, and on Sept. 28 the state dropped its appeal of that decision, freeing up $350 million that agencies across the state had been holding from last year's budgets.
This year's attempted raid, as redevelopment agencies see it, totals $1.7 billion, plus plans for another $350 million in 2010-11. All that money is supposed to go to schools that serve the same areas.
If the RDAs win, the state has a $1.7 billion hole in its current budget, which will further impact schools and other state-funded programs. If the state wins, thousands of improvement projects will be shelved and an estimated 164,000 construction jobs lost, according to the CRA.
Accounting Nightmare
Santa Cruz County's redevelopment areas are poster children for the latest dysfunction in the state's ongoing budget mess. Capitola, Santa Cruz, Scotts Valley and Watsonville each have an agaency. The biggest is the county's project that spans Live Oak through Soquel and was first approved in the '80s.
Under last July's amended budget, the county RDA must turn over $10.89 million in May 2010 to the districts in its project area.
Each of the four cities' agencies will also have to surrender amounts from about $700,000 in Capitola to $3.7 million in Santa Cruz.
The problem is figuring out where the money goes.
The county's project area is served by two elementary districts that handle students from kindergarten through eighth grade, who then move into Santa Cruz City's high school district.
Some schools are in the project area, which are the neighborhoods within the specifically adopted RDA boundaries.
For instance, in Capitola, the RDA boundaries include a small portion of Wharf Road and most of 41st Avenue – with very few residences within the borders.
However, the law provides some exception — students that live in it or in affordable housing supported by the RDA qualify to receive the funding.
Capitola's redevelopment area has no schools in it, but its students attend several different schools in different districts. Only one of Scotts Valley's schools is in the city's project area.
And someone has to figure all that out in order to distribute the money — if it can be done.
Graduate Level Math
"Districts must spend the money on schools in project areas or students in project areas. There's virtually no way to track spending down to the student or even school level," said Barney Finlay, assistant superintendent for business at the County Office of Education.
Those calculations and tracking come on top of a 15-part flow chart Finlay received explaining how the money will get from redevelopment agencies to the state.
If the schools can figure out a way to match money to students residing in the redevelopment area, problems could still arise.
"It goes to the crux of the constitutional argument, possibly resulting in unequal distribution of funds for school purposes. …There could be completely disproportionate spending depending on which students are in which programs," said Betsey Lynberg, director of the county's redevelopment agency.
The California Redevelopment Association understands that difficulty and included the implementation problems in its lawsuit.
"Your mind almost explodes trying to figure out how to implement this kind of legislation," said association director John Shirey.
Local Projects on Hold?
Redevelopment agencies use local property tax money to undertake local projects, explained the county's Lynberg.
Her agency has spent much of the last six months working with residents to develop the next five-year plan for projects in Soquel and Live Oak. The first draft of the plan that came out of those many workshops will be presented Nov. 10 at Live Oak Elementary.
Support for economic development was a leading desire of neighbors.
"The loss of these funds would definitely hinder our ability to generate jobs and bring needed goods and services to the area," Lynberg said.
Losing the $10.89 million would halt work on such new projects, because the agency needs much of its income to pay interest on the bonds that already built facilities. These include the Simpkins Swim Center, Live Oak library and Anna Jean Cummings Park and road improvements along Capitola Road and in Soquel Village, she explained.
Scotts Valley should still have enough redevelopment money to move ahead with its plans to renovate the Scotts Valley Sports Center to create a larger library branch, said city manager Steve Ando. His agency stands to lose nearly $1.5 million this year.
Other efforts may have to wait, though. Scotts Valley is currently paying the bond interest on Skypark, improvements to Scotts Valley Drive and the purchase of the community center, he said.
The ability of redevelopment agencies to issue and pay for bonds is at the center of the legal fight, said Shirey. Some agencies in the state do not have enough money to cover the state payment and their own bond obligations. That threat could devalue bonds issued by agencies around the state.
"They can't plan [if they can't count on the tax income], and if you can't plan, then you can't do development and investment," he said.
Where Should the Money Go?
CRA director Shirey said it is unfair that state officials have pitted RDAs against schools.
"We do care about schools. We just think state laws specify how schools are to be funded and how RDAs are to be funded," Shirey said. "It's a shame that we have to spend good money and everyone's time to force the state to follow its own constitution."
The state constitution requires that property taxes received by redevelopment agencies may only be used to pay redevelopment debt. That requirement won the day for RDAs in the last legal challenge, and Shirey believes the state is still in violation.
"We've been told this legislation was drafted to work around the weaknesses in last year's legislation," said county auditor-controller Mary Jo Walker, who has been focusing her attention on the more immediate state borrowing of 8 percent of all agencies' property tax income.
State Senator Joe Simitian defends the legislation as a way to keep further cuts away from schools.
"It is fair to say that this ought not to be done under ordinary circumstances, but these are extraordinary circumstances. The easy choices are long gone," he said.
That fact is not lost on local officials.
"Obviously, our agency would want to keep our money and use it on our projects. But without it, the state has a $1.7 billion hole in its budget," said Scotts Valley's Ando, who described any victory by the RDA agencies as bittersweet because of its impact on schools and other state-funded programs.
School officials have some sympathy with the redevelopment agencies, having sued the state themselves over funding issues. They knew this legal challenge was coming.
"If [RDAs] were upset about $350 million last year, you know they're going to fight $1.7 billion this year," said the COE's Finlay.
Schools already get a portion of most RDA tax money as a pass-through, most of which is restricted for use on "bricks and mortar" facility projects similar to the kind of building and improvement undertaken by an RDA, Finlay explained.
"We're using part of it for acquisition of this building," Finlay said, referring to the Harvey West-area headquarters the COE purchased for $7 million in 2007.
Similarly, Soquel Union Elementary School District has ample restricted facility money to move ahead with plans to build a preschool at Jade Street Park even as it has made painful general fund program cuts.
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