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City Sets To Dismantle Redevelopment Agency

USETHISCITYSEALBy Leon Worden/SCVNEWS.com

California redevelopment agencies might be dead, but their debt lives on to be repaid another day.

On Tuesday the Santa Clarita City Council will consider tasking the city with the responsibility of managing a little over $93 million in debt incurred by its redevelopment agency.

It’s move that cities up and down California are making in the wake of recent state legislation terminating the agencies that were first established after World War II to curb urban blight. Santa Clarita’s redevelopment agency was created in 1989, two years after the city was formed, and its primary project since 1997 has been the transformation of downtown Newhall from an abandoned urban center into a thriving Old Town.


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The new state law requires cities and counties that have a redevelopment agency to name a “successor agency” to manage its outstanding general and affordable housing-related financial obligations. Most cities have chosen themselves for the job – and that’s the recommendation Santa Clarita’s city staff is making to the council.

As planned, the city would be responsible for paying the agency’s bills with money that would otherwise have accrued to the agency – and it would be paid a management fee. As the successor agency, the city would collect a minimum of $250,000 annually – up to 5 percent of the the property tax within the Newhall Redevelopment project area this fiscal year and three percent each year thereafter – to administer the payments.

Using essentially the same funding source the redevelopment would have used, the city would take on the duty of making the interest payments on $57 million in outstanding general-purpose bonds, as well as $12 million left on a loan from the city (which the agency has been repaying) for redevelopment start-up costs and certain construction projects, plus another $5 million the agency borrowed in 2009 and 2010 for other Newhall-related capital projects.

In addition, the city would manage payments owed to contractors for services relating to Newhall's new streetscape and other projects including the so-called “Newhall roundabout” that would change the intersection configuration at Newhall Avenue and 5th Street – although with the cancellation of redevelopment, the future of the roundabout is up in the air.

In a separate but related move, the city must name a successor agency before Feb. 1 to manage the redevelopment agency's affordable housing set-aside funds, or the county of Los Angeles would become the successor housing authority by default under the legislation.

The city has $17 million in outstanding housing debt. It's got $9 million in the bank - partly tax revenues ($4 million), partly bond sale proceeds ($5 million) - earmarked for an affordable housing project on Newhall Avenue that hasn't yet materialized.

Under the new law, even though affordable housing remains a stated goal of the state, the city won't be able to use the $9 million  for an affordable housing project. Instead, according to the city staff report, it must hold onto the money and use it for future debt service. In other words, it borrowed $5 million of the  money and now it can't do anything with it except give it right back – over time, with interest.

Finally, the new state law requires the city and the redevelopment agency to sign a resolution stating whether the agency forgave any debt to any public agency in 2010 or 2011. It didn't, the staff report states.