Santa Cruz County Grand Jury • 2003-2004

Review of Redevelopment Agencies in Santa Cruz County

Published: January 29, 2004 26 pages
Ver PDF original

Findings and Recommendations 21 findings

F1
RDAs are intended to generate funds for redevelopment projects in blighted urban areas. Response: Santa Cruz County Board of Supervisors AGREES Response: City of Capitola AGREES Review of Redevelopment Agencies -35 Response: City of Santa Cruz AGREES However, Section 33030 of California Redevelopment Law (Health and Safety Code) provides the definition of blight, which includes both physical and economic blight, and includes situations such as inadequate public improvements, lack of parking among many situations, and others which lead to economic decline. Response: City of Scott Valley AGREES Response: City of Watsonville AGREES
No recommendations for this finding
F2
Because RDAs generate significant additional revenue, many local governments are tempted to form RDAs in areas that do not fit the intended purpose of an RDA or to expend such funds on projects that only tangentially serve the purpose of relieving urban blight. Response: Santa Cruz County Board of Supervisors Without further information, the County can neither agree nor disagree with this finding. Response: City of Capitola DISAGREES The City of Capitola created a Redevelopment Agency and is in the process of expanding the project area of that agency for purposes that are consistent with Redevelopment Law. The City of Capitola uses the proceeds from its RDA in a manner that best serves the City of Capitola and that is completely consistent with Redevelopment Law. The City of Capitola does not know whether the uses of RDA funds in other jurisdictions do not fit the intended purposes of an RDA, nor whether the projects of other jurisdictions only tangentially relieve urban blight. Response: City of Santa Cruz DISAGREES The City of Santa Cruz’ RDA projects meet the definition of blight as set forth in the legislation. AB 1290 was adopted by the State Legislature in 1994 and SB 211 in 2001 to curtail redevelopment abuses. SB 211, in particular, gives the State Attorney General the power to seek legal action in the adoption of redevelopment projects which do not follow the prescribed legal procedures or have inadequate findings of blight. Response: City of Scotts Valley DISAGREES Scotts Valley disagrees since we have no knowledge of other agencies reasons for forming RDA’s. In the City of Scotts Valley, the Redevelopment Agency was established for a specific purpose in a blighted area. Many of those projects were to improve the infrastructure such that economic development could occur, thus eliminating the blighted conditions. -36 Review of Redevelopment Agencies Response: City of Watsonville DISAGREES The City and Agency uses its redevelopment funds to relieve economic and physical blight. Language in AB 1290 has eliminated any ambiguity that may have existed in the past in the specific requirements governing what conditions are required in order to declare an area blighted.
Related Recommendations (1)
R1
Each RDA should examine its projects to ensure they are of a type that should legitimately receive RDA funding. Response: Santa Cruz County Board of Supervisors This recommendation has already been implemented under the requirements of state law. Under State law, redevelopment agencies are required to adopt implementation plans every five years and update those plans in year three of the five-year cycle. The plan is required to show how the proposed projects and programs will serve to reduce the blight that was identified in the original redevelopment plan that established the redevelopment project area. As individual expenditures are approved by the agency’s board of directors, various findings must be made, including that the project or program is consistent with the adopted five year plan. This process establishes the legitimacy of individual agency expenditures and projects. Response: City of Capitola This has been implemented. Response: City of Santa Cruz Review of Redevelopment Agencies -51 This recommendation has been implemented through the adoption of the City of Santa Cruz’ 2000–2004 Implementation Plan. Response: City of Scotts Valley This City has implemented this recommendation. Response: City of Watsonville AGREES
F3
The county and all four cities in Santa Cruz County each have their own RDA with one or more project areas. Response: Santa Cruz County Board of Supervisors AGREES Response: City of Capitola AGREES Response: City of Santa Cruz AGREES Response: City of Scotts Valley AGREES Response: City of Watsonville AGREES
No recommendations for this finding
F4
The county RDA includes the largely residential areas of Live Oak and Soquel and concentrates on improvements to neglected residential infrastructure such as streets, bridges, sidewalks, and trees. The county has numerous large fully developed residential areas. Because it lacks the corresponding commercial areas usually found in city centers, the county does not have the revenue base required to provide infrastructure improvements in these residential neighborhoods. The county has turned to an RDA in Soquel and Live Oak to, at least partially, solve this problem. In fiscal year 2001/2002, the RDA generated $9,854,577 in increment for capital projects and $3,254,876 in increment for affordable housing projects. The RDA is expected to complete its projects sometime between 2015 and 2020. Response: Santa Cruz County Board of Supervisors PARTIALLY AGREES The County’s projects have served to improve infrastructure for both the residential and commercial areas. While expanded commercial areas could serve to increase tax revenues to support services to the Live Oak and Soquel areas, it is unlikely those revenues would also support the cost of upgrading the area’s infrastructure. Under the current redevelopment plan, the Agency has until 2027 to complete its projects.
No recommendations for this finding
F5
The Scotts Valley RDA includes the main city corridors of Scotts Valley Drive and Mt. Hermon Road and concentrates on improvements to traffic flow in this area. Significant improvements have been completed which have transformed a small town’s main street into the necessary traffic route required to support recent growth and development. Another priority has been the purchase of a large parcel on Mt. Hermon Road for future development as a Civic Center and retail complex. RDA funds have also been used for the construction, renovation and preservation of historical and government buildings such Review of Redevelopment Agencies -37 as the Hollins Stables Barn near the Borland Complex. In fiscal year 2001/2002, the RDA generated $989,309 in increment for capital projects and $663,693 in increment for affordable housing projects. Response: City of Scotts Valley AGREES
No recommendations for this finding
F6
The Santa Cruz City RDA has two project areas which encompass nearly all of the commercial areas of the city. Traditionally, the RDA was concerned with flood control and the rebuilding of the downtown shopping area after the 1989 Loma Prieta earthquake. Recently, they have expanded their projects to include: • major improvements to Mission Street, the major traffic route on the west side of the city • general business promotion and street improvements in the eastside business district • transformation of industrial areas along River Street and in Harvey West to large store retail use • renovation of the Del Mar Theatre The RDA has been working to develop an arts center in the historic Salz Tannery property, which is located along River Street north of Highway 1. In fiscal year 2001/2002, the RDA generated $3,920,501 in increment for capital projects and $1,980,987 in increment for affordable housing projects. Response: City of Santa Cruz AGREES
No recommendations for this finding
F7
Most RDAs finance their operations through bonds to be repaid through increment financing. The City of Santa Cruz RDA is almost entirely funded through loans from city enterprise funds and a $1,000,000 loan from the city’s Community Trust. This is a practice not available to county governments. RDA officials assert that significant savings are realized through this practice because of the high costs associated with issuing and administering RDA bonds.3 However, these enterprise funds are collected from ratepayers for the purpose of providing services such as water and sewer facilities. Theoretically, they are intended to be held for some time in order to finance future capital improvements or emergency repairs. However, it is not clear that ratepayers are generally aware of this practice. City officials left us with the impression that they had not considered what would happen if the enterprise fund suddenly needed access to its reserves. Presumably, repayment terms would be governed by the documents associated with the loans. When questioned they responded “Well, I guess we would have to pay it back.” Response: Santa Cruz County Board of Supervisors 3 The City’s Community Trust was created from funds generated by the sale of the city owned Skypark Airport property in Scotts Valley. City officials commented that an added advantage of this arrangement was that it prevented the city from spending the money thus preserving it for future generations. -38 Review of Redevelopment Agencies This finding concerns the City of Santa Cruz Redevelopment Agency. The County has no knowledge of issues related to this finding. Response: City of Capitola PARTIALLY AGREES Redevelopment projects are frequently financed through debt. The activities of the City of Santa Cruz RDA are beyond the jurisdiction of the City of Capitola. Response: City of Santa Cruz DISAGREES The City of Santa Cruz disagrees with this finding particularly with respect to the statement “is almost entirely funded through loans from City enterprise funds and a $1,000,000 loan from the City’s Community Trust.” With respect to an explanation on the RDA’s borrowing activities, please see below. a. The RDA has one loan from an enterprise fund—the Water Fund—which has a current outstanding balance of $45,851, the background of which is explained in Recommendation #3 on . This loan pays interest to the Water Fund at an interest rate set by the City Investment Portfolio, which is the same rate these monies would earn in the Water Fund. The loan at current interest rates will be repaid in seven years. b. The loan from the City Council Trust Fund is for the Mission Street Under- grounding Project and was approved by the City Council and RDA at public meetings. The funds in the City Council Trust Fund have been derived from the sale of City-owned real estate. The City Council Trust Fund has no relationship to any of the City’s enterprises. c. The major debt instrument of the Merged Project is a Tax Allocation Bond originally issued in 1989 and refunded (refinanced at lower interest rates) in 1996 in the amount of $4.2 million. The bulk of the RDA’s other debt instruments as reported on the annual Statement of Indebtedness filed with the County Auditor are obligations through Owner Participation Agreements and Cooperation Agreements with the City of Santa Cruz. Response: City of Scotts Valley GENERALLY AGREES However, we are unable to comment on the City of Santa Cruz RDA and their loans through the enterprise funds. Response: City of Watsonville NEITHER AGREES NOR DISAGREES The City of Watsonville doesn’t have the information necessary to comment of the Santa Cruz RDA’s method of funding its projects. Review of Redevelopment Agencies -39
Related Recommendations (2)
R3
The City of Santa Cruz should fully disclose to its enterprise fund ratepayers the terms and conditions of its loans to its RDA. Additionally, if city officials wish to continue this practice, guidelines for protecting the interests of the ratepayers should be developed. Response: City of Santa Cruz Review of Redevelopment Agencies -53 This recommendation has been implemented. The City RDA has one enterprise fund loan in the amount of $45,851 from the Water Fund to the Eastside Project Area. This loan was approved by the City Council in 1997. At current interest rates this loan will be repaid in seven years. The loan pays an interest rate set by the City Investment Portfolio, which is the same rate the monies would earn if they were in the Water Fund. The loan was made to accommodate the Water Fund refinancing of a previously issued Certificate of Participation which was jointly funded by the RDA and Water Fund to finance the purchase and development of the Eastside Parking Lot and various water projects. In 1997, the Water Fund chose to refinance the Certificate of Participation (to gain a lower interest rate) and the amount of funds for the redevelopment project were not included in the Certificate of Participation, but as a loan from the Water Fund to ease their refinancing of the Certificate of Participation for the Water Fund. In the event that the Water Fund was in a deficit situation, this loan could be repaid from RDA funds.
R4
At a minimum, future proposals to invest enterprise funds in local government operations should be fully disclosed to ratepayers prior to approval. Response: City of Santa Cruz This recommendation has been implemented as this information is, as previously mentioned, made available to the City Council and RDA when any such loan is made. At this point only one loan is outstanding.
F8
The City of Capitola RDA encompasses the retail areas along 41st Avenue between Highway 1 and Capitola Road. Historically, the RDA has concentrated on the development of the commercial areas located along 41st Avenue. Recently, they have had difficulty identifying suitable projects. Currently, they are discussing the renovation of the Rispin Mansion into a bed and breakfast inn. In fiscal year 2001/2002, the RDA generated $707,943 in increment for capital projects and $351,390 in increment for affordable housing projects. Response: City of Capitola PARTIALLY AGREES The initial focus of the Capitola RDA was on the 41st Avenue area, including RDA action to provide for Clares Street between 41st Avenue and Capitola Road. The City Council disagrees with the statement that the Capitola RDA has had difficulty identifying suitable projects. Redevelopment increment has been used to provide ADA accessibility improvements within the project area, has been used to develop 31 new units of very low income housing, and has allowed the Loma Vista Mobilehome Park to become resident- owned. Possible road/bridge improvements to address traffic congestion along 41st Avenue are currently being studied. Affordable housing needs continue to be of major concern to the City Council. It should also be noted that in fiscal year 2001-02 $484,353 of the capital projects tax increments was used to pay debt service for qualifying redevelopment projects and activities that have already occurred.
Related Recommendations (1)
R6
The City of Capitola’s RDA should not initiate further projects or project areas and the RDA should be terminated as soon as is prudently possible. Response: City of Capitola This recommendation will not be implemented. The City of Capitola Redevelopment Agency is an excellent tool for the City and offers still considerable resources, about $40 million, for the construction and implementation of eligible projects. Such projects include: 41st Avenue traffic congestion studies and improvements; affordable housing projects; the Rispin Mansion project; and other pedestrian and public works projects. Finally, it should be noted that the tax increment dollars used for these projects do not diminish any revenue from any other local agency. In fact, the Capitola RDA increases those revenues.
F9
The Rispin Mansion Project is of particular note. The mansion is a decrepit, 1920’s-era home located on a six-acre parcel in the City of Capitola outside of the original RDA project area. This run down structure has been vacant for decades and has, by latest reports, been the subject of 140 police calls over the last year. The City bought the mansion in 1985 and since 1997 has been in negotiations with local developers to remodel it into a bed and breakfast. Recently, the City has proposed selling the property to its RDA for $1.35 million. Ostensibly, this is to facilitate redevelopment of the property, but it is unclear why these efforts would require RDA ownership of the property since other projects do not. However, the sale has other advantages. For example, the city proposal does not require the immediate payment of the purchase price. Instead it proposes the RDA pay interest on the debt at 8% providing the city with over $100,000 annually in additional revenue, with the principle to be paid in a lump sum prior to June of 2017. Presumably, this debt and the interest payments it generates would be paid for with increment financing. Response: City of Capitola PARTIALLY AGREES The Rispin Mansion is an important historical asset to the City of Capitola. The reason it is necessary to sell the property to the RDA are several: 1) the preservation of this blighted property is the business of an RDA and should not encumber the limited resources of the city’s general fund; 2) because the curing of blight is the proper business of the RDA, the impacts from current blight such as vandalism, fires, trespass and issues of liability are also the province of an RDA. To accommodate these two goals requires RDA ownership of the property. The sale has been approved by the RDA Board and City -40 Review of Redevelopment Agencies Council in exchange for a note in the amount of $1.35 million and at an adjustable interest rate at the current rate of 5%.
No recommendations for this finding
F10
Since the Rispan property is not located in the current project area, the city will be required to amend its project area or create a new project area with sufficient increment to support the project. Presumably, since the Rispin property is owned by a local government agency, it will generate no property tax at all, so it is hard to see how it will generate sufficient increment on its own to support the any desired projects. Response: City of Capitola PARTIALLY AGREES The meaning of this finding is unclear, but the facts are these: a) The Rispin property is currently in an amended preliminary project area, with the intent to amend the original project area to include the Rispin property; b) Once the project is developed the RDA has the option to lease or sell the property. If the property is sold, tax increment will be generated. If the property is leased, tax increment will also be generated through the possessory interest tax process. Response: City of Watsonville NEITHER AGREES NOR DISAGREES The Rispin property is not within the Watsonville City Limits.
No recommendations for this finding
F11
Many RDAs hold property or the rights to income from property such as rents or, in the case of the Rispin proposal above, the right to collect the transit occupancy tax generated by the property. These revenues generally show up as income to the RDA. However, in the case of the City of Santa Cruz RDA, they appear as a deduction to RDA administrative costs. Response: Santa Cruz County Board of Supervisors This finding concerns the Santa Cruz City and Capitola Redevelopment Agencies. The County has no knowledge of issues related to this finding. Response: City of Capitola PARTIALLY AGREES The right to collect transient occupancy tax is solely that of the city (or county), not the RDA. Such revenues must by law show up as income to the city (or county). The City of Capitola has no knowledge of the City of Santa Cruz’s accounting practices. Response: City of Santa Cruz DISAGREES If any rental income is received, it is booked as such and reported that way on the appropriate State forms. As of the Fiscal Year 2001–2002, there was no rental income received by the RDA. The lease agreement on the Del Mar Theatre, which was effective in Fiscal Year 2002–2003, provides for the lease payments to be placed in a reserve fund to be used for building improvements. Review of Redevelopment Agencies -41 Response: City of Scotts Valley AGREES Response: City of Watsonville NEITHER AGREES NOR DISAGREES The Rispin property is not within the Watsonville City Limits and we can’t comment on another agency’s specific method of accounting for expenses.
Related Recommendations (1)
R5
To allow for the better evaluation of the performance of the agency, each RDA should clearly present in its annual financial documents its administrative costs without deduction for income from properties held. Response: Santa Cruz County Board of Supervisors This recommendation has already been implemented. The County Redevelopment Agency in past years did combine general administrative costs with property income and expenses. As part of the FY 2003-04 budget, property income and expenses have been set aside in a separate budget unit in order to provide more flexibility in the use of revenues. Response: City of Capitola This has been implemented. City of Capitola administrative costs to the RDA is based on city staff time, materials and overhead used by the RDA. Response: City of Santa Cruz -54 Review of Redevelopment Agencies The recommendation will not be implemented because this comment does not apply to its RDA inasmuch as the RDA does not deduct property income from its administrative costs and is unclear as to the origins of this claim. Response: City of Scotts Valley The City has implemented this recommendation. The City of Scotts Valley does not receive any income from properties. Response: City of Watsonville NEITHER AGREES NOR DISAGREES The Watsonville RDA does not offset administrative costs with income from properties.
F12
The City of Watsonville RDA encompasses the central downtown business district and the west side industrial area of the city. It has been significantly expanded in recent years to add 1,300 acres to the project area. The RDA concentrates on the revitalization of the downtown commercial district, which sustained significant damage after the 1989 Loma Prieta earthquake, and the development of job producing businesses in the city’s industrial areas. The city also has plans to use RDA funding to finance its long planned Civic Plaza Project which calls for a four-story complex on the 200 block of Main Street which includes city offices, a City Council Chamber, library, and county court space. In fiscal year 2001/2002, the RDA generated $2,435,276 in increment for capital projects and $801,804 in increment for affordable housing projects.4 Response: City of Watsonville The Agency partially agrees with this finding. The Watsonville Redevelopment Agency’s Annual Financial Report for fiscal year ending June 30, 2002, states the RDA generated $3,207,042 for non-housing purposes and $801,804 for low and moderate-income housing projects. Of this, the Agency had to “pass-through” $771,766 to other taxing entities from the money received that was available for non-housing purposes together with an additional $668,894 that was required debt service on prior tax allocation bonds. Accordingly, the Agency only received $1,800,833 that was available for capital projects.
No recommendations for this finding
F13
RDAs are required by state law to allocate 20% of their available increment to the development of affordable housing. In some cases they allocate more. For example, the City of Santa Cruz allocates and uses 25%, but many RDAs throughout the state fail to utilize the entire 20%. Response: Santa Cruz County Board of Supervisors This finding does not pertain to the Santa Cruz County Redevelopment Agency. Response: City of Capitola PARTIALLY AGREES The City allocates 20% to its low/moderate income housing fund. The City of Capitola does not monitor such allocations from any other agency. The City of Watsonville has also been designated a federal “Enterprise Zone” which provides it with significant advantages in attracting business development. -42 Review of Redevelopment Agencies Response: City of Santa Cruz AGREES Response: City of Scotts Valley AGREES Most RDAs in the area must collect a significant amount of affordable housing funds in order to assist in the production of units. While it is apparent that some jurisdictions have not been able to spend all of the affordable housing monies, Scotts Valley has made significant progress in meeting our affordable housing goals. A significant investment of over $4 million was made for a 46 unit very low income apartment project adjacent to City Hall. We have implemented a successful silent second program and worked with developers to provide additional affordable housing units within inclusionary projects than is required. Due to the costs of development and property values, Scotts Valley has had to collect funds over a period of time in order to make projects feasible. Response: City of Watsonville The City has noted this finding.
No recommendations for this finding
F14
It is unclear how effective these affordable housing programs are. For example, the Santa Cruz County RDA, in conjunction with South County Housing, a non-profit housing developer, recently completed the first phase of a 99 unit affordable housing project off Airport Boulevard next to Corralitos Creek. The first phase of this development, known as “Corralitos Creek Townhomes”, contains 23 four-bedroom units priced at $287,100 and 12 three-bedroom units at $272,100. There were originally over 200 applicants who applied for a lottery for these homes, but most of the applicants did not meet the financing requirements to be eligible purchasers. Therefore, in early April of this year, the RDA notified local governments of the opportunity for their employees to apply for these townhomes. South County Housing was to begin soliciting additional applicants as well, with the homes scheduled to go on sale at the end of June. Response: Santa Cruz County Board of Supervisors PARTIALLY AGREES The evidence does not support the initial comment that, “It is unclear how effective these affordable housing programs are.” With almost 1,000 affordable housing units assisted by the County Redevelopment Agency since its inception with a substantial leveraging of outside funds, the County believes that the housing assistance efforts have been extremely successful. Response: City of Capitola PARTIALLY AGREES Without doing thorough research it is unclear how effective various affordable housing programs are. The City of Capitola has done no research on the “Corralitos Creek Townhomes” project. However, we note that the identified sales prices are well below market prices for new single family homes, and adjustments to marketing efforts will likely lead to identification of a sufficient number of eligible purchasers. Response: City of Santa Cruz Review of Redevelopment Agencies -43 The City has no comment on the above example. However, for further information with respect to this comment, the City RDA has provided on the following page a listing of where a substantial amount of redevelopment resources to the development of affordable housing has been made during the life of the Merged Project Area. These projects have created a mix of 831 low- and very low-income and market-rate household units in both for-sale and rental housing units as follows: Affordable Housing Projects - Completed, Rehabilitated or Under Construction Neary Housing Coop 95 Low- and Very Low-Income Rental Co-op Units Arbor Cove Seniors Project 35 Low- and Very Low-Income Units Sycamore Street Commons Project 60 Low- and Very Low-Income Rental Units 12 Moderate-Income 1st Time Home Buyer Units Mariners Cove Project 72 Market-Rate Buyer Units 14 Low- and Moderate-Income Rental Units 155 Chestnut Street 82 Market-Rate Rental Units 511 Swift Street Artist Live/Work 9 Moderate-Income Live/Work Units Project 515 Leibrandt Avenue 7 Low- and Moderate-Income Rental Units 43 Very Low- and Moderate-Income Rental Units 1010 Pacific Avenue 70 Market-Rate Rental Units 83 Low- and Very Low-Income Rental Units 1280 Shaffer Road 123 Market-Rate Rental Units 47 Low- and Very Low-Income Rental Units – Replacement of Substandard Non-Affordable 136 Leibrandt Avenue Housing Units 1 Moderate-Income Rental Unit 405 Low- and Very Low-Income Rental Units Total 47 Replacement Affordable Units 342 Market-Rate Rental & Owner Units Affordable Housing Projects - Start of Construction July 2003 211 Gault Street Seniors Housing 37 Low-Income Units Project 37 Low-Income Units Total -44 Review of Redevelopment Agencies Response: City of Scotts Valley PARTIALLY AGREES We are unable to comment on the specific project in Santa Cruz County. However, it should be noted that the effectiveness of affordable housing projects varies with each project and program, and in each jurisdiction. Scotts Valley has been able to achieve several housing opportunities both with rental units and with for sale units where families successfully qualified and have purchased or are renting units. Purchasers are also further assisted in Scotts Valley through our Silent Second program. We also encourage potential purchasers to pre qualify for units through a local mortgage company to ensure that they can purchase a unit. For rental units, we also provide a program to assist with the first month’s rent and provide a security deposit guarantee. Both of these programs have been very successful. Response: City of Watsonville PARTIALLY AGREES The City realizes just how difficult it is to satisfy the myriad of redevelopment requirements that govern the development of affordable housing projects. Redevelopment Law governs, along with other aspects of the sale of a specific low and moderate income housing unit, the sales price, the maximum income of the purchasing family, and the maximum percentage of that family’s income that can be spent on all housing costs. Special legislation that applies solely to Santa Cruz County became effective on January 1, 2002, which recognizes the difficulty Agencies have in qualifying buyers according to all the provisions required under RDA law, especially in high housing cost areas. Even with the provisions of SB 459, it is still difficult to meet all the required standards.
No recommendations for this finding
F15
Faced with a substantial state budget deficit, the Governor has proposed, in current negotiations, to take unused housing funds away from RDAs who fail to utilize them. Response: Santa Cruz County Board of Supervisors PARTIALLY AGREES The Governor did propose such a transfer, but the proposal was resoundingly defeated in both houses of the legislature. Response: City of Capitola DISAGREES The Governor has approved a budget without such a provision. Response: City of Santa Cruz AGREES The City RDA does not have any unused housing funds. Response: City of Scotts Valley AGREES Response: City of Watsonville Review of Redevelopment Agencies -45 The Governor had originally proposed this, but that proposal died due to extensive opposition from communities, housing advocates and legislators. Subsidized housing projects typically require complex and sophisticated financing from a number of different sources. Projects can take years in the making in order to secure both the required funding and development entitlements. Therefore, just looking at a fund balance does not give a true picture of how an Agency has anticipated using housing funds because anticipated projects are frequently somewhere in the conceptual or development pipeline.
No recommendations for this finding
F16
By law, RDA project areas are limited to a fixed term of existence. In effect, this means that some RDAs are likely to be closed out in the next two decades unless new blighted areas are identified. While new project areas can be formed, changes to state law make new projects less attractive than in the past. Response: Santa Cruz County Board of Supervisors AGREES Response: City of Capitola AGREES Response: City of Santa Cruz AGREES Response: City of Scotts Valley AGREES Response: City of Watsonville PARTIALLY AGREES RDA project areas are limited to a fixed term of existence. More recent legislation has tightened the criteria that must be met before a project area can be formed, but “legitimate” redevelopment project areas are likely to continue to be formed.
Related Recommendations (3)
R2
Each city and the county should require its RDA and community development staff to prepare a presentation at a future public meeting that • describes the proposed time table for the wind-up of the RDA project areas currently in existence • outlines the financial impact to the jurisdiction to be expected on termination of each project area. • provides a road map for future RDA wind-up planning • identifies the risks to the jurisdiction posed by potential drastic cuts in RDA increment revenue should the state decide to redirect RDA funding to other priorities Response: Santa Cruz County Board of Supervisors This recommendation has in part already been implemented, and other aspects will not be implemented for the reasons described below. In addition to regular public meetings to review project designs, the County RDA periodically holds general community meetings to seek feedback from the community on projects completed to date and future project needs. As part of these meetings, the time line for completing project activities is discussed, and when the Agency approaches the end of its activity (2027), those meetings will focus on an orderly transition to a time where redevelopment funding will not be available. For the County RDA that time is many years away and therefore such
R13-20
City of Santa Cruz RDA 1-3, 1-5,7 90 Days 6-7,11, (Sept 30, 2003)
R13-21
City of Capitola RDA 1-3, 1-2,5-7 90 Days 7-11, (Sept. 30, 2003)
F17
The state budget crisis poses a significant threat to the stability of RDA funding for capital projects. Actual and threatened cuts of funding for RDAs have caused the cancellation or postponement of projects and put into question the ability of RDAs to meet current obligations to repay bonds over the long term. Although RDAs are theoretically independent agencies responsible for their own debts, it is virtually inconceivable that a local government would let its RDA go bankrupt except in the direst of circumstances. Response: Santa Cruz County Board of Supervisors PARTIALLY AGREES While it is true that the state budget crisis could pose a long term threat to RDA funding, it is not currently clear whether that will in fact become a problem. There will be some limited impacts from the cuts contained within the current state budget, but there will only be significant impacts to agencies’ activities in the event that the state continues to make such cuts in future years. It is not clear whether the current cut will be a one-year or ongoing transfer of RDA revenues to the state. Response: City of Capitola PARTIALLY AGREES -46 Review of Redevelopment Agencies Fortunately the City of Capitola has never been put into such a position. The policy tension would be using general fund money to alleviate a credit problem created by the State of California, or preserving the level of services provided to the city residents through its general fund. This would not be an easy decision to make especially if health and safety issues were involved. Response: City of Santa Cruz AGREES Response: City of Scotts Valley AGREES Response: City of Watsonville AGREES
Related Recommendations (3)
R2
Each city and the county should require its RDA and community development staff to prepare a presentation at a future public meeting that • describes the proposed time table for the wind-up of the RDA project areas currently in existence • outlines the financial impact to the jurisdiction to be expected on termination of each project area. • provides a road map for future RDA wind-up planning • identifies the risks to the jurisdiction posed by potential drastic cuts in RDA increment revenue should the state decide to redirect RDA funding to other priorities Response: Santa Cruz County Board of Supervisors This recommendation has in part already been implemented, and other aspects will not be implemented for the reasons described below. In addition to regular public meetings to review project designs, the County RDA periodically holds general community meetings to seek feedback from the community on projects completed to date and future project needs. As part of these meetings, the time line for completing project activities is discussed, and when the Agency approaches the end of its activity (2027), those meetings will focus on an orderly transition to a time where redevelopment funding will not be available. For the County RDA that time is many years away and therefore such
R13-20
City of Santa Cruz RDA 1-3, 1-5,7 90 Days 6-7,11, (Sept 30, 2003)
R13-21
City of Capitola RDA 1-3, 1-2,5-7 90 Days 7-11, (Sept. 30, 2003)
F18
Because commercial uses also generate sales tax revenue, they are often given more assistance from local governments and RDAs than less “profitable” but job generating properties. Response: Santa Cruz County Board of Supervisors DISAGREES To the extent that the County RDA has provided assistance to proposed commercial projects, that assistance has been targeted to both sales tax and job generating projects, the County cannot agree with this finding. Response: City of Capitola DISAGREES The City of Capitola makes every attempt to provide the same level of prompt and helpful customer service to all who come to the development counter. State law and then local policy governs who may receive assistance from RDA funds. The City of Capitola has not withheld assistance because any project was less profitable. Response: City of Santa Cruz DISAGREES The City RDA has given assistance to both sales tax-generating projects and job- producing projects. Response: City of Scotts Valley DISAGREES The City of Scotts Valley provides assistance to all businesses on an as needed basis. We have a variety of programs in our Economic Development Plan that assist existing and new businesses, as well. We do not provide financial incentives. Response: City of Watsonville AGREES The City agrees with this finding in general, although, not in the case of Watsonville.
No recommendations for this finding
F19
Some high dollar volume properties such as car dealerships and “big box” retailers can be particularly profitable to their local government hosts. For example, the proposed Home Review of Redevelopment Agencies -47 Depot on Green Valley Road in Watsonville is expected to begin generating $360,000 in sales tax for the city by 2005. Response: Santa Cruz County Board of Supervisors AGREES The County agrees with the first statement of this finding, but has no knowledge of expected sales tax income of the Watsonville store. Response: City of Capitola AGREES The City of Capitola is not familiar with the details of the Home Depot project, but retailers with a high dollar volume can contribute significantly to the city’s general fund revenue. Response: City of Santa Cruz AGREES Response: City of Scotts Valley AGREES Response: City of Watsonville PARTIALLY AGREES However, it must be clearly understood that this was a private transaction, with no involvement or participation from the Watsonville RDA.
No recommendations for this finding
F20
Consequently, many local government and redevelopment agencies offer financial incentives to these businesses to encourage them to locate in their jurisdiction. This practice can result in local governments bidding against each other to direct the location of particularly lucrative businesses within their borders with no net gain to the local area as a whole. This is especially true when one jurisdiction uses its financial resources to attract local business to relocate within the local area, sometimes just a few miles in order to cross a local jurisdiction boundary.5 Response: Santa Cruz County Board of Supervisors Without more specific information, the County is not in a position to either agree or disagree. As is pointed out in the footnote to this finding, state law strictly limits redevelopment agencies’ ability to provide financial assistance to lure high sales tax generating projects from surrounding jurisdictions. To our knowledge, while there have been efforts by some business interests to pit local agencies against each other for new retailers in the areas, those efforts have not been successful in Santa Cruz County, largely due to the close working relationships between the local jurisdictions. This topic has been the subject of reform efforts at the state level. Numerous proposals have been made to encourage the sharing of sales tax revenue on a regional or per capita basis. Additionally, SB 214, which has passed the State Senate, proposes that local governments be forbidden from subsidizing relocations by large retail stores within 25 miles and car dealers within 40 miles of their current location. -48 Review of Redevelopment Agencies Response: City of Capitola PARTIALLY AGREES The City of Capitola is aware that this may happen, but the City of Capitola has never agreed to any such incentive. Response: City of Santa Cruz DISAGREES This finding is no longer valid inasmuch as the State Legislature has specifically limited the type of bidding for commercial projects, which are mentioned above with the passage of AB 178 in 1999 and other legislation which has been considered by the State Legislature in the current session. Response: City of Scotts Valley PARTIALLY AGREES Scotts Valley does not provide any financial incentives to new businesses to encourage them to locate in our jurisdiction. We do understand, particularly in other counties, that local governments may bid against each other to direct the location of retail businesses. However, we have not observed that this has occurred in our County. Response: City of Watsonville PARTIALLY AGREES The City can’t speak to the incentives to businesses offered by other jurisdictions but agrees that this type of “bidding war” has occurred in the past. There is new legislation which specifically prohibits redevelopment agencies from providing incentives to “Big Box” retailers and auto dealers who are relocating from within the same market area. The Watsonville Redevelopment Agency has not offered incentives to attract local business to relocate within the same market area.
Related Recommendations (1)
R7
Local government jurisdictions should negotiate equitable agreements to share sales tax revenues and to promote regional development planning. Response: Santa Cruz County Board of Supervisors This recommendation has been partially implemented, and part of the recommendation cannot be implemented. State law currently limits the ability of local governments to share sales tax revenues. Recent legislation proposed to provide a test of a shared sales tax system in the Sacramento area was not approved. The local planning and redevelopment directors meet regularly to discuss regional planning and development issues. City and County administrators also coordinate responses to specific inter- jurisdictional financial issues as they arise. Response: City of Capitola This recommendation requires further analysis. With regard to sharing sales tax, depending upon the source and nature of sales tax, in certain respects this has already been implemented. The transit and library districts share in sales tax (transit .50%, and Library .25% of each eligible retail transaction.) Furthermore, should AB 1412 become law, which would allow certain cities and counties to increase sales taxes by vote, there Review of Redevelopment Agencies -55 would be more of an incentive for the City to consider sharing sales taxes with other jurisdictions. With regard to promoting regional development planning, CEQA does play a role in requiring a certain amount of regional input into the development process. However, it is understood that more cooperation is desired. The difficulty is that each jurisdiction has its own special vision for its community, and these visions can differ significantly. In some cases it is the differing visions that created the separate jurisdictions in the first place. Response: City of Santa Cruz The recommendation will not be implemented. The City of Santa Cruz believes that there is legislation in place which addresses this recommendation. Response: City of Scotts Valley The sharing of sales tax will not be implemented because it is not warranted at this time. In the County of Santa Cruz we feel that reasonable development planning is not driven by sales tax revenues, but more by land availability and transportation and labor opportunities. In the County of Santa Cruz there also exists disparities in property tax distributions, so therefore, prior to any sales tax re-distribution, the property tax would also need to be studied, which in itself presents major obstacles. City planning decisions require financial stability to engage in the meaningful long- range planning needed to deal with the difficult issues of urban growth. The current revenue structure for local government has no stability beyond the next state budget cycle. The redistribution of local sales tax revenues should not go into effect until measures are placed on the ballot to provide constitutional protection of local government revenues. Response: City of Watsonville PARTIALLY AGREES The City would be interested in participating in such discussions. -56 Review of Redevelopment Agencies
F21
In the past, the Santa Cruz area has had its share of competition for retail businesses. Today, local officials are less willing to use their resources for this purpose. Response: Santa Cruz County Board of Supervisors Without more specific information, the County is not in a position to either agree or disagree. While the meaning of this finding is not completely clear, the implication is that local governments in some past period were open to using their financial resources to encourage retail business to come to the area and that somehow that era has passed. We are not aware of any era where such assistance has been encouraged, with the brief exception of immediately after the 1989 earthquake. In general, local governments in Santa Cruz County have been reticent to provide financial incentives to attract retail businesses and have worked cooperatively on issues associated with the relocation of tax generating businesses. Response: City of Santa Cruz AGREES Review of Redevelopment Agencies -49 The city of Santa Cruz agrees with this finding as it relates to the City of Santa Cruz. The City cannot comment regarding other agencies. Conclusions
No recommendations for this finding

Conclusions 13

No Responses Found 5

Government entities assigned to respond to this report. No response documents have been linked in our database.

Capitola City
Santa Cruz City
Santa Cruz County County
Scotts Valley City
Watsonville City