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Santa Monica Will Pay $57 Million to End Battle with State Over Redevelopment Agency Funds

Santa Monica Real Estate Company, Roque and Mark


Harding Larmore Kutcher & Kozal, LLP  law firm
Harding, Larmore Kutcher & Kozal, LLP

By Jason Islas
Staff Writer

October 25, 2013 -- The City Council agreed Tuesday to pay $56.7 million to end a protracted battle with Sacramento over how much Santa Monica’s former redevelopment agency owes to the County.

While the settlement assures that the State Department of Finance won’t go after Santa Monica’s sales and property taxes for more money, officials said the deal seals the fate of projects like the aborted $50 million renovation of Santa Monica’s 55-year-old Civic Auditorium, for which the City had hoped to pay with redevelopment agency (RDA) money.

“What this really did was eliminated any opportunity” to fund projects like the Civic renovation or the construction of a new fire station, said Director of Housing and Economic Development Andy Agle.

Agle said that the City had adopted a cautious policy -- no longer planning to use RDA money for those projects -- shortly after the State adopted legislation in 2012 that shut down California’s 400 RDAs as part of Governor Jerry Brown’s plan to solve California’s budget crisis.

“We’ve wanted to be conservative in this regard, particularly after the State Legislature adopted legislation that the State could go after sales and property taxes,” he said.

City Attorney Marsha Moutrie told the City Council Tuesday that she recommended the “unusual step” of settling at such a high amount because it would “save the City at least $10.7 million.”

Over the process of dissolving Santa Monica’s RDA, she said, the State’s estimate of what the bayside would have to pay to the County has varied. But, she said, the Department of Finance has argued the City owed as much as $81 million in former RDA money. (“State Reduces Santa Monica's Former RDA Bill by $23 Million,” April 10)

Since the end of the Second World War, municipalities in California have relied on RDA money to develop blighted areas. In Santa Monica’s case, the City depended largely on the tens of millions of dollars that flowed into its RDA’s coffers annually to pay for affordable housing and fund projects like the City’s new $42.3 million Tongva Park.

But with the money for RDAs coming out of property taxes that would otherwise be paid to the County for health services and schools, State money had to be allocated to make up funding gaps created by the agencies. (“Where Santa Monica's RDA Money Goes,” February 23, 2013).

While Tuesday’s decision may spell the end of a battle, the war is ongoing.
“Although (this is) behind us, we still have the State Controller’s audit,” said Agle. And there’s no guarantee that the State Controller will make the same conclusion as the Department of Finance, he said.

Then, there’s the question of the properties held by the former RDA, including six parking structures in Downtown Santa Monica.

The RDA's successor agency, which took over management of RDA's assets, will have to draft property management plans for the parking structures. The Department of Finance will then have to approve the plans.

While City officials believe it is unlikely, Sacramento could require the City to sell off those properties and pass on the money to the County. (“For Santa Monica to Keep Vital Properties, More Obstacles Ahead,” August 23)

The RDA dissolution law exempts property used for government purposes, like libraries or parks. But, Sacramento ruled that Santa Monica’s parking structures don’t qualify for the exemption.
Agle said that City officials will meet with State representatives to discuss the status of those properties in a few weeks.

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