City Moves to Safeguard $100 million from State Cuts

By Jorge Casuso

Jan. 7 -- In a race to safeguard more than $100 million in funds from potential State budget cuts, the City Council is expected to sell the six public Downtown parking structures and shift several major projects to the City's Earthquake Redevelopment Agency at a special meeting Thursday night.

The unprecedented move would come on the eve of Gov. Gray Davis' public unveiling Friday of a plan to bridge an historic $34.8 billion budget gap. The plan -- which is slated to go to the Assembly's Budget Committee next week -- will likely preclude redevelopment agencies from incurring future debt.

The local funds -- which would be diverted directly to the state -- have been earmarked to retrofit and rehab the Downtown parking structures, assist in building a new Main Library and the new Civic Center Parking structure and shore up the Palisades Park bluffs.

"Based on the knowledge that it is likely to be in front of the Assembly Budget Committee next week, we took action," said Jeff Mathieu, the City's head of resource management and staff director of the redevelopment agency. "There is a chance none of this will fly, but putting the local community at risk without taking preventive measures just didn't seem prudent."

Under the plan City staff has been feverishly hammering out, the redevelopment agency would purchase the six Downtown parking structures for approximately $60 million. The agency would be charged with retrofitting and rehabbing the structures, as well as conducting other related work.

In addition, the agency would enter into a cooperation agreement with the City to carry out a variety of community improvements, including shoring up the Palisades Park bluffs and helping to bankroll the new 107,000-sqaure-foot library, as well as the Civic Center parking structure that will hold more than 500 cars just south of the new Public Safety Facility.

City officials were struck by the local implications of the governor's budget plan last month when Davis floated the idea of using all unencumbered housing dollars to help bridge the shortfall. City staff began planning its current recommendation after the governor proposed imposing an 18-month moratorium on local redevelopment agencies entering into debt agreements.

"We kept close to the issue in the middle of December and in late December we heard about this one," Mathieu said. "We wanted to insure that the governor's office wouldn't impact the redevelopment agency's ability to retrofit and repair the parking structures we had committed to the community."

Of California's more than 830 redevelopment project areas, Santa Monica's is one of the largest revenue-producing, with an assessed valuation of nearly $6 billion, according to City officials.
The area generates revenues by directing increases in property assessment taxes since the earthquake to the City's earthquake redevelopment fund.

In most cases, cities need the additional funds to rebuild the blighted area because property values decrease after a natural disaster. But in the case of Santa Monica, property values have skyrocketed within the earthquake zone, which encompasses most of the city -- roughly from Pico Boulevard (including the college) to Montana Avenue and from the beach to 26th Street. The zone encompasses about 80 percent of the earthquake damage to the city.

In fact, the assessed value of property in the area has risen by between $3.5 billion and $4 billion from the $3.9 billion when the City created the zone shortly after the January 1994 temblor.
While the City continues to receive 14 cents on the dollar based on the 1994 assessed value, which is frozen, one percent of the increase in assessed value has resulted in nearly $20 million a year for the City's earthquake redevelopment agency.

Under the governor's proposal, "the incremental increase would be directed the State, which would be incredible to contemplate," Mathieu said. "It's funding we had projected would flow to Santa Monica."

Property tax revenue from the earthquake redevelopment area now exceeds the general property taxes the City receives overall, which total nearly $16 million a year. The revenues generated by the redevelopment district -- which will be in place through 2039 -- will increase annually if property values continue to go up.

Under state law, the City must allocate 20 percent of those redevelopment funds for low and moderate-income housing, 60 percent for earthquake redevelopment projects within the area and 20 percent to 12 different taxing agencies, including the county (11 percent), the City (3 1/2 percent), the school district (3 1/2 percent) and the college (1 percent).

In 2000, the City used $53 million in redevelopment funds to purchase the RAND Corp. property, where it is planning to build housing and parks. The redevelopment agency's revenues, however, cannot be used for normal City services and programs.

The special City Council public meeting will be held Thursday night at 7 p.m. in the auditorium of the Main Library, 1343 6th Street.