Sacramento is Taking $2.5 Million from Monrovia Property Taxes to Balance the Budget

Monrovians Unite!  Sacramento is Taking 2.5 Million from Monrovia Property Taxes Designed to go to CRA's to Balance the Budget for California.

According to a report prepared by Mark Alvarado for the City Council Meeting of December 15, 2009:

Assembly Bill (AB) 26, which was passed this summer, authorizes the shift of revenues, which will be deposited in county "Supplemental" Educational Revenue Augmentation Funds ("SERAF") to be distributed to schools to meet the State's Prop 98 obligations to education. For the Monrovia Redevelopment Agency ("Agency"), this takeaway amounts to $2.553 million for the current fiscal year, and $523,000 for fiscal year 2010-11.

For FY 2009-10, the Agency may "suspend" all or part of the required 20% allocation to the Affordable Housing Fund in order to make the payment We also have the option of using accumulated housing funds for the SERAF payment. For Monrovia, neither of these two options is viable because Monrovia consistently uses all of Its affordable housing funds every year to Improve neighborhoods. This is evidenced by our successful Monrovia Area Partnership ("MAP") program. There are no surplus housing funds available to make an estimated $2.5M payment to the State .

The structure for the redevelopment fund shift this year is similar to last year's budget trailer bill, AB 1389. The primary difference is that, in an effort to get around the California Redevelopment Association's ("CRA's") successful lawsuit against AB 1389, the Legislature created a new county "Supplemental" ERAF. Under this new SERAF, redevelopment funds are to be distributed to a K-12 school dlstrlct(s) or county office of education located partially or entirely within any project area of the agency.

The funds distributed to schools or county offices of education from the SERAF must be used to serve pupils living in the project area or in housing supported by redevelopment funds. (It is unclear how an agency is supposed to determine how many students are in housing supported by redevelopment funds). The total amount of SERAF funds received by a school district is deemed to be local property taxes and will reduce dollar for dollar the State's Prop 98 obligations to fund education.

2009-10 tax increment revenue               $8,939,030     
Capitalized interest revenue                     $1,020,000     
Potential land sale proceeds                    $2,000,000

    
Less:         
Debt service payments                           ($6,312,574)     
Personnel and operational costs         ($2,417,625)     
Notes payable/pass thru obligations        ($2,748,340)

   
Available cash to make State payment        $480,491     

Agencies that fail to make SERAF payments are subject to the "Suspension Penalty" The suspension penalty means that our Agency may not adopt a new redevelopment plan, amend an existing plan to add territory, issue bonds, further encumber funds or expend any moneys derived from any source except to pay pre existing indebtedness, contractual obligations, and 75% of the amount expended on agency administration for the preceding fiscal year.  This penalty would last until the required SERAF payments have been made In addition, the Agency must Increase Its Affordable Housing Fund contribution by 5 percentage points on July 1, 2010 or July 1, 2011, whichever is applicable, for the remainder of the time the agency receives
tax increment.

In 1992, the State of California found itself in a serious deficit position.  To meet its obligations to fund education at specified levels under Proposition 98, the State enacted legislation that shifted partial financial responsibility for funding education to local government (cities, counties and special districts) The State did this by instructing county auditors to shift the allocation of local property tax revenues from local government to "  Educational Revenue Augmentation Funds"     (ERAFs), directing that specified amounts of city, county and other local agency property taxes be deposited into these funds to support schools This process has continued over the last 17 years.

In fiscal 2009-10, the annual impact of the previous ERAF shifts has increased to an estimated $7.6 billion from cities, counties, and special districts. In addition, the 2009-10 State budget includes the shift of $1.7 billion of redevelopment agency revenues, with an additional $350 million shift planned in 2010-11 Since their inception, the ERAF shifts have deprived local governments of nearly $90 billion. Counties have borne some 73 percent of this shift, cities have shouldered 16 percent.

It is important to highlight just how critical redevelopment is to local communities.  There are hundreds of communities throughout California with neighborhoods and business districts that are struggling economically and socially The abandoned gas station, dilapidated housing project, the vacant strip mall that is continually vandalized, these are all examples of detenorated and blighted areas. Revitalization of these areas does not happen on its own Often, the private sector is reluctant to invest In such areas because the risk and costs associated with doing so outweigh the benefits. This is especially true in a recessionary economy.   Redevelopment serves as a catalyst for private investment by providing the initial plan and seed money that ultimately breathes new life into areas in need of economic development and new opportunity.

When are we going to elect to office in Sacramento legislators who reduce spending in this State, who will leave in Monrovia the property taxes we pay?  With any luck, this latest attempt to take our local money and use it to free up money in Sacramento will be declared Unconstitutional and struck down.  Meanwhile, we need to eliminate the temptation to steal from local funds by reducing expenses at the State level.

Did anyone else notice that the personnel budget and operations of our Community Redevelopment Agency were more than 2.5 million dollars?