April 19, 2012

California Challenges San Leandro's Redevelopment Financial Obligations

According to an article published by California Watch today, the California Department of Finance is challenging the legality of obligations in San Leandro's redevelopment budget.

In a letter dated April 11, 2012, the Department of Finance states that $2 million from a loan from the City of San Leandro was prohibited by California Health and Safety Code Section 34171 (d) (2). That section states, "For purposes of this part, "enforceable obligation" does not include any agreements, contracts, or arrangements between the city, county, or city and county that created the redevelopment agency and the former redevelopment agency."

The $4.3 million loan was approved 7-0 on June 21, 2004, when Shelia Young was Mayor of San Leandro. According to the resolution, the City would loan up to $4,372,774 for the Plaza Project Area, which includes most of downtown San Leandro and the Joint Project Area, which includes a large area around E. 14th Street, Marina Boulevard, and San Leandro Boulevard (see map). As of February 2012, the outstanding balance on that loan was $2 million.

The Department of Finance also objected to $8.9 million in cooperative agreements, based on Section 34153 (b) of the Health and Safety Code, which "prohibits a redevelopment agency from entering into a contract with any entity after June 27, 2011." According to the Enforceable Obligation Payment Schedule, the $8.9 million was allocated as follows:

ProjectAmount
Eden Road Construction$1,500,000
Doolittle Drive Streetscape Improvements$4,193,611
MacArthur Boulevard Streetscape Improvements$1,274,134
Hays Street Streetscape Improvements$2,000,000

These cooperative agreements were approved 4-0 at a special meeting of the San Leandro City Council and San Leandro Redevelopment Agency on Monday, January 17, 2011, the day before the regular City Council meeting. Monday was also the Martin Luther King Jr. holiday. Councilmembers Pauline Cutter, Michael Gregory and Ursula Reed were absent from the special meeting.

In the background material for the meeting, the Staff Report states, "The purpose of the proposed Cooperative Agreement is to contractually bind the Agency to fund and support specified projects outlined in the staff report in order to protect these funds from being taken by the state." It appears that the Department of Finance disagrees that the cooperative agreements are the same as contracts, since no contracts for the actual work had been finalized prior to the June 27, 2011, deadline.

If the Department of Finance prevails on these objections, it means that the City of San Leandro loses $2 million that would have been paid back by the successor to the Redevelopment Agency. Instead, that $2 million goes to the State of California to re-allocate to other agencies. Similarly the $8.9 million would go back to the State and the four projects listed above would not be funded. That could mean more money for schools, which was one of Governor Brown's goals in dismantling California's redevelopment agencies.

City of San Leandro Business Development Manager Cynthia Battenberg issued a memo today that the City will "...take advantage of a clause in AB 1x 26 that allows a Successor Agency to re- enter into an agreement with the City. Staff will be recommending that the City and the Successor Agency re-enter in the legally binding $2m General Fund loan and the portion of the Cooperative Agreement covering Eden Road and Hays Street as the City has already made a significant investment in these projects."

Posted by Mike Katz-Lacabe at April 19, 2012 7:12 AM | TrackBack
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