Council Would Pay $5 Million 'Ransom' to Keep Redevelopment Funds

It’s hard to enter Redwood City without noting the vibrant downtown and Courthouse Square bustling with activity. The funding for this revitalization? Redevelopment funds.

The City Council unanimously voted Monday night to pay the state a $4.91 million remittance, or “ransom,” on Jan. 1, 2012, to keep the redevelopment funds. The city would also pay $1.2 million annually each year thereafter.

In an effort to reign in its increasing debt, the state in June eliminated cities’ redevelopment agencies through the Dissolution Act, slashing millions of dollars from local budgets.

The state immediately suspended all new redevelopment activities and presented redevelopment agencies with the option of surviving under an alternative program. If Redwood City did not opt in to the Volunteer Alternative Redevelopment Program, its redevelopment agency would be dissolved on Oct. 1, and the city would only have slightly more than $1 million in discretionary dollars.

“The conclusion is that the city is clearly better off continuing the redevelopment agency,” Finance Director Brian Ponty said.

The cuts aren’t the end to the financial crisis. The state still has not decided how much cities will pay to which agencies should they decide to keep their funds.

Ponty highlighted three scenarios if the agency continued. The best case would not hold the city responsible for repaying $2.7 million in low-income housing funds and $1.6 million to the Legal Aid Society. The middle case requires the city to pay back the Legal Aid Society $1.6 million over 10 years for the housing it has provided, and the worst case would require the city to pay $2.7 million for statutory housing set aside funds over a five-year period.

Ponty said the city would continue discussions with the Legal Aid Society and continue to monitor state legislation, then return to the council with firmer numbers.

Despite the high price tag, councilmembers pointed to the advantages of holding on to the redevelopment funds.

“There’s still lots of blight in our communities,” said Councilmember Ian Bain. “Redevelopment is a tool to fix this in the coming years.”

Councilmember Rosanne Foust added: “We’ve done a lot of good with our redevelopment dollars. We’re nowhere near the abuses that Southern California has seen.”

The council also approved new Community Development Director Bill Ekern’s recommendation to identify the city as the successor agency to prevent the money from going into other hands. The council also approved the city’s ongoing financial obligations until the end of the year, including debt services and construction contracts.