Coronado, CA (August 18, 2011) – The Coronado City Council Tuesday agreed to continue operating its redevelopment agency under new state laws enacted by the California Legislature pending a decision by the state’s high court on whether those new rules are constitutional.
In order to continue operating Coronado’s Community Development Agency, the City Council also begrudgingly agreed Tuesday to pay $3.7 million to the state by January 15, 2012, as well as approximately $900,000 every year thereafter. The payments are expected to increase each year for a total of $18.4 million through 2026, when the City’s redevelopment program is set to expire.
Coronado officials believe, however, that the state relied on information that was incorrect when determining that figure.
The state’s raiding of redevelopment funds resulted from state budget proposals to help close a multibillion-dollar deficit gap California is facing this year.
The California Redevelopment Association and the League of California Cities are challenging the state’s actions to redirect redevelopment money away from their intended purpose of improving local redevelopment project areas. The California Supreme Court agreed last week to hear the case, promising an expedited decision.
Although the state’s Supreme Court has ordered a stay on the dissolution of redevelopment agencies and prevents them from being forced to make the payments until the Court rules on the merits of the case, agencies cannot incur new debt, purchase property or enter into new contracts during that time. The City will monitor the situation for updates.
The Community Development Agency was established in 1985 to remedy the blighting conditions caused by inadequate or nonexistent public infrastructure in the City. The agency established a partnership with the Coronado Unified School District to improve City schools.
As a result of this partnership, the Community Development Agency receives only that portion of tax increment that was the school district’s share. In other words, no other taxing entity has been affected by redevelopment in Coronado.
Over the years, the agency has provided the funding to improve many public facilities that serve the entire community, including school facilities, the Community Center, the Police facility, the Library expansion and the Public Services facility, among others.
To build some of these projects without waiting for tax increment revenue to accrue, the City of Coronado loaned the redevelopment agency approximately $48.8 million so it could construct the projects. One of the new state laws would eliminate the repayment of those loans.
The City decided to continue the redevelopment agency, and pay a portion of its future tax increment to the state, in order to receive the remaining share of tax increment which should be sufficient to repay the City’s loan and honor other funding commitments made by the agency.
The new legislation has placed serious financial constraints upon Coronado, possibly requiring the City to renegotiate the terms of a $20 million agreement it has with Sharp Coronado Hospital to provide funding for capital improvements and other upgrades in return for the land on which it sits. The amount will be the same but the payment schedule may be amended, City officials said.
