Redevelopment agency ruling tests cities' funds

As the Feb. 1 deadline nears for the dissolution of redevelopment agencies in California, local officials are trying to figure out how to move forward without the hundreds of thousands of dollars they came to depend on for community projects in blighted areas.

Most of the cities with redevelopment agencies — Arroyo Grande, Atascadero, Grover Beach, Paso Robles and Pismo Beach — will face increased budget deficits as a result of the elimination of their redevelopment agencies.

Many local projects are also in jeopardy, and officials are still figuring out which projects may proceed and which have been brought to a halt.

“It will be a difficult spring,” said Grover Beach City Manager Bob Perrault, whose city will face an estimated $150,000 loss in the general fund next fiscal year on top of an anticipated $200,000 shortfall. On Dec. 29, the California Supreme Court upheld a state law disbanding the approximately 400 redevelopment agencies statewide. Gov. Jerry Brown had pushed to eliminate the agencies as part of his budget proposal, saying their funds should be spent on core government services.

Redevelopment agencies use a portion of property tax revenue to pay for projects in areas that have been labeled as blighted.

City officials in San Luis Obispo County say they are upset and angry at the loss of money they said went to needed projects, such as street repairs and low-income housing developments.

Several cities, including Arroyo Grande, Atascadero and Grover Beach, have voted to serve as the “successor agency” to handle the process of shuttering their redevelopment agencies, including paying off the agency’s debts and disposing of assets. The Paso Robles council is expected to confirm doing so Tuesday.

The Pismo Beach council is scheduled to meet today to decide whether to serve as the successor agency. City Manager Kevin Rice is recommending the city not do so, likely leaving the duties of disbanding the agency to the county.

Some critics have accused the agencies of acting as development slush funds; advocates say they help create jobs and economic growth. Critics have also accused cities of using a definition of blight that is too broad.

“It all depends on how you define blight,” Paso Robles City Manager Jim App said. “It could be economic blight such as empty storefronts compared to something more visual like decrepit, dilapidated heaps of trash. We have economic blight as well as some housing areas that have (visual) blight for the residents there.”

In 2010, Pismo Beach officials moved to dissolve their redevelopment agency, in part because a study found there was no more blight in the agency area, which was formed in 1988. But Atascadero and its agency, formed in 1999, was still working to fix its blight. The city’s blight is both economic, such as vacant buildings downtown that the city is helping to fill through fee waivers to new businesses, as well as visual, such as the spot along El Camino Real where the North County Christian Thrift store burned down.

Redevelopment money also helped fix infrastructure in neighborhoods around El Camino Real and Morro Road, where “roads were full of potholes, parks were nonexistent and roads and gutters were not there,” Redevelopment Chairwoman Roberta Fonzi said.

Paso Robles’ agency, formed in 1987, helped fix its sluggish downtown in the 1990s. Fixes to its downtown park and encouraging Park Cinemas to open were among what some say are the forces behind downtown’s success today. But the city still had plans to help with its affordable-housing projects and help other signs of economic blight. In the coming weeks and months, officials in the other cities will determine what projects can continue and how they’ll fill holes in their budgets.

In Paso Robles, the loss of redevelopment money means a possible hit to a city that’s already in deficit.

About $2.2 million in court-ordered disabled-access improvements to the city’s downtown, originally set to receive redevelopment money, puts the city in a precarious situation.

Because Paso Robles cannot halt the work, general fund reserves may have to be used instead. The project includes curb changes, parking and a new downtown bathroom that has been designed but not contracted for construction, so officials question whether it can be funded without redevelopment money.

In Atascadero, about $10 million in redevelopment money is tied to projects in town, including some parts of the city’s historic Administration Building rehabilitation, fee waivers to lure in new businesses downtown and some low-income housing. Street improvements and a new pedestrian bridge over Atascadero Creek that had been designed but not constructed were halted.

Atascadero will also take over the agency’s affordable-housing duties in the hope of keeping the money within city limits, Fonzi said. Even so, there have been some disappointments.

“We were ready to put money down on properties, and we’re not sure if we can do that now,” she said.

In Grover Beach, Perrault said the elimination of the redevelopment agency there means the city won’t have money to match state and federal funds for improvement projects. Also, $125,000 that has gone to improve local streets each year is gone.

In past years, redevelopment money has paid for improvements to part of West Grand Avenue and funded a storm drain project, low-income housing and efforts to support local businesses.

Arroyo Grande officials are worried that the redevelopment agency’s dissolution means the end of several low-income housing projects, including a Habitat for Humanity project on Brisco Road.

The agency had an interim loan agreement with the organization, but because a permanent agreement was not in place, that project may not go forward and the city may have to sell the property, City Manager Steve Adams said.

Adams said he has also been talking to the property owner of a lot in the 200 block of South Halcyon Road that Adams hoped would become a transitional housing project for homeless individuals or families. It would have been the first facility of its kind in the county.

“It’s one thing for the state to take future money, but to take things away that you’ve been working on for years — it’s discouraging,” he said.

Adams will discuss a strategy at the council’s Jan. 24 meeting to address a budget shortfall of $200,000 to $300,000 this fiscal year and about $900,000 next fiscal year. When asked whether layoffs might be part of the strategy, Adams stressed that doing so would be a last resort but added, “We’re starting the process with everything on the table.”

Reach Cynthia Lambert at 781-7929 and Tonya Strickland at 781-7858. Stay updated by following @SouthCountyBeat and @tstrickland on Twitter.