James Rufus Koren, Staff Writer
Posted: 05/09/2010 09:47:42 PM PDT

The state is set to take millions of dollars from local redevelopment agencies today, and officials in some Inland Empire cities said they will have to lay off workers, shutter redevelopment projects for the next year and borrow money from accounts that are supposed to pay for low- and moderate-income housing.

With the economy still unsteady, property tax revenue likely to decline in the coming years and more money owed to the state next year, officials say the financial raid could hamper redevelopment efforts for four or five years. Low-income housing advocates, meanwhile, said the raid will slow down much-needed housing projects.

“We think it will have a crippling effect on (low- and moderate-income) housing in the Inland Empire,” said Robert Dhondrup, a spokesman for the Southern California Association of Nonprofit Housing. “We need moderate- to low-income housing now. We need construction jobs now. We need the state to leverage every dollar it can from the private sector now. We are disappointed.”

Last year, state legislators approved a budget that called for taking $1.7 billion from redevelopment agencies this year. The money technically goes to schools, but a series of funding shifts eventually will put that $1.7 billion in the state’s general fund. Another $350 million will be taken next year.

Redevelopment agencies said the proposed raid was illegal, but a Sacramento judge ruled last week the state could proceed. Agencies are appealing

that decision, but they will still have to pay this morning.

Agencies that don’t have enough money to meet the state’s demands can borrow money from special redevelopment agency funds that pay for housing projects.

Pomona is borrowing $5 million from its housing fund. Fontana is borrowing between $15 million and $20 million, Mayor Mark Nuaimi said.

John Shirey, a spokesman for the California Redevelopment Association, said he expects between 37 percent and 38 percent of the $1.7 billion owed today – more than $620 million – to be borrowed from housing funds.

Julie Spezia, executive director of Housing California, said that much money taken out of housing funds will mean 8,400 fewer affordable homes will be produced this year.

That money should be paid back over the next five years, but Dhondrup said it’s a crippling blow that will leave low-income housing projects in the lurch.

“Redevelopment funds are a critical component of almost any development,” he said. “The money multiplies many times over because it’s used to secure private funding. For every dollar lost (from agencies), there’s many more dollars lost in attracting private investors.”

Spezia said redevelopment agencies represent about one-third of the funds that go into a typical affordable housing project.

City redevelopment officials said they’ll make it through this year, but things will get more difficult over the next few years as property tax revenues, which fund redevelopment agencies, are expected to decline.

“This empties out the reserves we had set aside,” said Rob Steel, Rialto’s economic development director. “By itself, it’s costing us projects but not costing the viability of our (redevelopment) agency. But looking down the road at property values … it may affect our ability to operate.”

For many agencies, the state raid will make it difficult to continue working on redevelopment projects that were set to begin in the coming years. With limited funds, agencies like the Fontana Redevelopment Agency will be able to pay down debt on existing projects but won’t be able to push ahead on new ones.

“Duncan Canyon doesn’t happen,” said Fontana Mayor Mark Nuaimi, referring to a planned interchange at Duncan Canyon Road and Interstate 15 that was supposed to open northern Fontana to development. “We’ll have a management team meeting to see what else doesn’t happen.”

With fewer projects moving forward, Nuaimi said Fontana might have to lay off redevelopment agency employees who work on upcoming projects.

And agencies that borrow money from their housing funds will have to deal with declining tax revenues while at the same time having to put money back into their housing funds. Fontana will have to put between $3 million and $4 million a year back into its housing fund over the next five years, Nuaimi said. Pomona will owe about $1 million a year.

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