If the bills are successful, Oakland Mayor Jean Quan said the city would have to agree to pay about $40 million to the state by Nov. 1 or dissolve the Oakland Redevelopment Agency. After that, the agency would still have to make $10 million in annual payments. Quan said this would force the city into "scraping the bottom of the barrel," wiping out reserves and delaying affordable housing projects.
Quan's comments came at Tuesday night's city council meeting, as she and other city leaders agreed to keep fairly quiet on the issue, expecting that fierce litigation is imminent and concerned that saying too much on the record could compromise the city in a legal fight.
Indeed, the California Redevelopment Agency plans to file a lawsuit with the state Supreme Court "in the near future," while asking for a stay on the legislation so agencies can continue to operate while the court battles unfold, spokeswoman Kathy Fairbanks said.
"This is the third lawsuit filed against the state for trying to take redevelopment funds in the last four years," Fairbanks said. The two prior lawsuits are part of why Proposition 22, passed with a wide margin of public voter support in 2010, includes protection of those funds, she added.
Officials at the state and Oakland redevelopment agencies declined to comment Wednesday on whether the city would be a party in the lawsuit.
"My own opinion is that the (proposal) is not only unjust and destroys jobs, but also is illegal," said Councilmember Rebecca Kaplan (At-Large). The council is expecting a legal briefing Thursday. It was unknown exactly what Oakland's obligations may be, but millions in program dollars largely devoted to low- and moderate-income housing programs could potentially be on the chopping block.
Redevelopment is designed to help cities eliminate blight and revitalize struggling, economically depressed areas by reinvesting local property tax revenues that would otherwise be shared with counties, cities and schools.
For example, the city's Mortgage Assistance Program, which aids first-time homebuyers in Oakland with low-interest, low-pressure loans, has depended on redevelopment funding for $2.5 million annually to help between 50 and 100 homebuyers pull together down payments and other needed cash for homes that cost $503,500 or less.
Program manager Jackie Campbell said the program is especially important now in this era of foreclosures and decreased housing prices. "Redevelopment is our primary source of funding," Campbell added. Other sources tend to be grants, which are often one-time-only resources.
There are about 400 redevelopment agencies in cities and other local governments across the state, and California stands to save $1.7 billion with their elimination, according to budget projections. Cities may choose to pay their individual share of that money in order to keep their agencies alive, but would also have to pay smaller, annual contributions to the state in perpetuity.
Redevelopment opponents have called the program a drain on state funds at a time when state finances are in brutal shape, citing what they say is abuse of program funds that are used for expenses that aren't appropriate, essentially using the redevelopment cash to plug other holes in their budgets.
"We're deeply disappointed that slim majorities in the legislature passed this budget that relies on the illegal extortion of revenues from redevelopment agencies that will never materialize," said John Shirey, executive director of the California Redevelopment Agency, in a statement Tuesday night.
According to the state agency, most East Bay cities would face multimillion-dollar payments. Those include Fremont at $9 million; Hayward at $4 million; Concord at $6.2 million, Alameda at $5.2 million; Emeryville at $13.2 million; and Richmond at $10.4 million.
Cities like Berkeley and Walnut Creek would be called to pay about $413,000 and $1.3 million, respectively, because they have smaller redevelopment agencies.
Contact Sean Maher at 510-208-6430.