State reform strips redevelopment; agencies must shutter or pay billions 

Cities across San Mateo County are analyzing whether their redevelopment agencies can afford the annual payments mandated by new state laws or whether they will be forced to close.

Each city is handling things differently, but Foster City’s Redevelopment Agency looks sure to perish. Two new state laws order these agencies to surrender $1.7 billion in 2012, and $400 million each year after that. Cities are hoping these changes will be derailed by a planned lawsuit against the state, but if redevelopment agencies fail, they must surrender the funds starting in January.

For a roundup of the funds that will be lost by local municipalities, click on the photo to the right.

“It’s essentially holding a gun to the redevelopment agencies’ head saying, ‘We’ll eliminate all of you, but if you want to give money to us voluntarily, you can stay in business,’” said Kathy Fairbanks, spokeswoman for the California Redevelopment Association.

Established in the 1970s, redevelopment agencies funnel property taxes into development projects in areas where private investors are reluctant to spend.

Foster City’s agency, which has financed major projects over three decades, including the 20-story Metro Center Tower, would owe $6.2 million next year and $1.5 million every year thereafter. But because it recently closed its largest redevelopment area, it only expects revenues of $825,000 next year, Finance Director Steve Toler said.

Yet the new legislation is indifferent to that, and bases payments on 2008 and 2009 property tax revenues — before the development zone closed, and when property tax revenues were much higher.

Although the agency expects to complete two ongoing projects — Miramar Apartments and Marlin Cover Shopping Center — it will have to give up on plans to develop a 15-acre site next to city hall, a big affordable housing development for seniors and upgrades to two aging shopping centers.

Other cities are less certain of their futures, although the pictures are rosier than in Foster City. In San Mateo, Community Development Director Lisa Grote said some downtown projects in the shoreline area might be canceled, while partly funded projects might not go through.

“We are assessing which projects we would need to defund to make that payment,” Grote said. The state’s ruling would leave San Mateo’s agency with just $300,000 a year for nonhousing-related projects, she noted.

Redwood City Mayor Jeff Ira said the reforms could cut funding for downtown police patrols, which get redevelopment money.

“It puts everything in limbo,” Ira said.

If the agency is to survive, it may need infusions from the city’s reserves or budget amendments, the latter of which is “probably more likely,” Ira said.

Belmont Finance Director Thomas Fil noted that if redevelopment agencies cannot afford payments to the state, they may seek life support from their cities or other lenders.

In Millbrae, a number of planned redevelopment projects look likely to get the boot.

“There are long-term projects that we would appreciate the opportunity to use RDA funding to support,” City Attorney Joan Cafsman said. That particularly includes projects around Millbrae’s BART station, which she said are now on hold.

South San Francisco city manager Barry Nagel said that his city is “still analyzing impacts and options at this time.”

Law changes may force Belmont to pull plug on job-creation plans

Belmont officials say their efforts to develop a greater sense of community and create thousands of new jobs could be lost to changes to state law regarding city redevelopment agencies.

Shoreway Place Project — a 300,000-square-foot development along U.S. Highway 101 that was to include two hotels, an office building and a 1,200-spot parking garage — was supposed to create about 1,000 jobs, but that’s no longer certain. The city has a negotiating agreement with Bohannon Development, a company run by Scott Bohannon — the man who last week landed his Cessna on Interstate 280.

“There’s some glimmer of hope that the project will be able to proceed because we entered into it prior to June 29,” City Manager Greg Scoles said.

According to John Shirey, executive director of the California Redevelopment Agency, legislation permits redevelopment agencies to keep funding projects to which they are legally obligated. But the complicated process typical of developments such as Shoreway makes it unclear whether those obligations have been met.

Officials also hope that SunEdison’s pledge to open a 400- to 500-job solar plant in Belmont won’t be threatened. The project is slotted to receive “marginal investment from redevelopment,” Scoles said. Finance Director Thomas Fil said the Belmont Redevelopment Agency faces annual payments to the state that it cannot afford.

Fil said the agency, which earned $8.5 million last year, can afford its 2012 $2.3 million payment to the state, but not the subsequent annual payments of $500,000. So the city is considering options such as loaning money to the agency to keep it alive, he said.

Other threatened Belmont projects include:
- The Firehouse Square development, currently a vacant building on El Camino Real.
- Emmett’s Place, which occupies a block of El Camino Real.
- Belmont Station, near the railroad.
- A development at the corner of Hill Street and El Camino Real.

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Niko Kyriakou

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