10:49 PM PDT on Wednesday, July 6, 2011

By DUANE W. GANG
The Press-Enterprise

Local officials across the Inland region are facing a dilemma: Pay out tens of millions or see their redevelopment agencies go down the drain.

California’s new budget, signed last week by Gov. Jerry Brown, eliminates redevelopment agencies but creates a voluntary program to replace them.

To keep their redevelopment agencies, cities and counties statewide collectively must pay $1.7 billion to the state this year, money that helps balance an $86 billion general fund budget.

If they don’t, their agencies — which keep a greater share of an area’s property tax revenue to fund everything from roadwork to community centers — will cease to exist.

That means they won’t be able to take on additional bonds and start new projects, although they would be allowed to pay existing debt.

The League of California Cities and the California Redevelopment Association plan to sue.

Chris McKenzie, the league’s executive director, called the legislation extortion. The payments amount to a “ransom,” he said by telephone Wednesday.

Some agencies will be able to make the payments or delay projects to come up with the money, McKenzie said. Others will have to shut down.

“In each case, it is going to impose very substantial hardships,” McKenzie said.

For Inland agencies, the cost is estimated at a combined $360 million this year, according to projections from the redevelopment association.

Riverside County would have to pay about $31.7 million this year to keep its redevelopment agency alive, nearly a third of its $100 million in gross redevelopment revenue. For the city of Riverside, its $19.4 million payment represents more than one-fourth of its redevelopment revenue.

A sampling of other Inland agency payments, according to the California Redevelopment Association: Fontana, $32.6 million; city of San Bernardino, $14 million; Lake Elsinore, $7.8 million; Moreno Valley, $6.2 million; Temecula, $4.8 million; Murrieta, $2.5 million.

Local officials continue to analyze the legislation to gauge its effect. But to come up with the money, they will have to halt or delay planned roads, housing and other community improvement projects, they say.

‘INTIMIDATION FACTOR’

Solutions range from depleting Riverside County’s affordable housing fund to make the payment to halting a planned pavilion at a Riverside city park.

“It really smacks of an intimidation factor,” Riverside County Supervisor John Benoit said Wednesday.

The redevelopment association, which represents agencies statewide, and the League of California Cities are more critical. They called the move illegal and vowed a lawsuit. Prop. 22, the two groups contend, prevents raids on local government funds.

Redevelopment agencies receive funding from what is known as tax-increment revenue. The money comes from property tax increases that result from improvements and new development within a redevelopment zone, or project area.

Redevelopment supporters say the agencies create thousands of jobs, and the money funds a host of worthy projects that improve blighted communities.

But critics say job-creation figures are inflated and redevelopment agencies often strong-arm local property owners with the use of eminent domain.

Brown first proposed eliminating redevelopment agencies when he unveiled his initial budget proposal in January. He wanted to use $1.7 billion in redevelopment revenue to help bridge the state’s massive budget gap.

The plan became one of the most controversial aspects of Brown’s budget proposal. Local officials rallied to defend redevelopment.

As a budget deadline loomed, Assemblyman Bob Blumenfield, D-San Fernando Valley, introduced legislation that would spare the agencies, provided they make payments this year equaling what the governor first hoped to receive by eliminating them.

In subsequent years, the agencies would have to make annual payments totaling a combined $400 million.

Redevelopment agencies dissolve on Oct. 1, under the legislation. Local officials have until Nov. 1 to formally agree to make the payments.

“Gov. Brown supported the complete elimination of redevelopment agencies because they siphon billions in local tax dollars away from critical public needs like education and law enforcement,” Brown spokesman Gil Duran said Wednesday.

“These two bills represent a compromise that will redirect over a billion dollars to critical public services and prevent the most egregious abuses of taxpayer money,” he said.

Cutting Projects

“It’s not fair,” said Benoit, a former state senator. “It is not good government.”

The county’s redevelopment agency has funded worthy projects and been managed well, he said.

But Benoit said making the payments is better than ending redevelopment.

“It is not a beautiful picture but better than it could have been,” he said.

Tom Freeman, a spokesman for Riverside County’s redevelopment agency, said in an email that officials will recommend the county make the $31 million payment from the agency’s housing fund, a step allowed in the legislation for this year only.

The amount represents the Riverside County agency’s entire housing fund for one year, he said. Next year’s payment is estimated at $7 million, Freeman said.

In the city of Riverside, paying to keep redevelopment could delay projects and downsize others.

“Generating that money in order to give it to the state … will mean that we’ll have to sacrifice some projects,” Riverside Development Director Emilio Ramirez said.

City Manager Brad Hudson told City Council members late last month that they could cover most of that with existing funds. But making the payment could create a deficit of $3.3 million for the agency.

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