Five cities sacrifice funds to the state

Five cities in San Luis Obispo County have sent more than $3.6 million to the state following a court ruling that Gov. Arnold Schwarzenegger can take local redevelopment funds to help close the state’s budget deficit.

Sacramento County Superior Court Judge Lloyd Connelly ruled May 4 that the governor and lawmakers could shift $2.05 billion through 2011 in redevelopment money toward local education obligations.

City officials decried the ruling, which prevents local governments from using money for projects aimed at revitalizing areas deemed as blighted.

Cities and counties may form redevelopment agencies, which then use a portion of property taxes to finance redevelopment programs.

Connelly, in siding with the state, said California could use that money to help support schools located within redevelopment agency boundaries because it served a public purpose.

The ruling means cities will delay or curb projects from street improvements to parking lots to marketing efforts designed to stimulate their economies.

They have little hope of recouping the money, though the California Redevelopment Association, the lead plaintiff in the case, has said it will appeal.

Several city officials turned their ire at Sacramento.

“It’s incredibly narrow-minded of Sacramento to reach into the pockets of local redevelopment agencies, one of the state’s strongest job-creating engines, at a time when job creation and economic development are desperately needed,” Bob Kelley, chairman of Atascadero’s Community Redevelopment Agency board, said in a harshly worded news release.

Atascadero had to turn over $1.3 million. Doing so wipes out money the city could have used to buy more property for parking, redesigning existing parking lots to create more spaces, and building a pedestrian bridge over Atascadero Creek that would connect Colony Square to the Sunken Gardens, Assistant City Manager Jim Lewis said.

The projects are not going to happen now, he said.

More than $431,000 of Arroyo Grande’s redevelopment fund was also depleted — money that could pay for efforts to increase tourism, to attract new businesses in green industries to a “green corridor” along El Camino Real, and to buy more property for parking on Le Point Street, City Manager Steve Adams said.

Additional money has already been set aside for specific projects.

“Now that the state and the court have determined they can legally do this, what’s to stop them from coming back” in future years, Adams asked.

The loss will have long-term effects for cities as well. Grover Beach borrowed money from its low- and moderate-income housing fund to pay the state $379,000. The housing fund is part of the city’s redevelopment agency, but is not affected in the governor’s and lawmaker’s plan.

“The long-term impact is that it eats away at our fund balances, leaving less and less available for redevelopment projects,” Grover Beach City Manager Bob Perrault said.

Paso Robles also borrowed the $1.2 million it had to pay from the housing fund. Doing so means the city has no money available for low- and moderate-income housing projects.

“It’s not a debilitating hit because we had that money sitting there, but that was just a happy circumstance,” City Manager Jim App said. “The real impact is just not having cash available to help those types of projects if they come along.”

Both cities have to repay their housing funds by 2015.

The Associated Press contributed to this report. Reach Cynthia Lambert at 781-7929. Stay updated by following @SouthCountyBeat on Twitter.