Monday, March 21, 2011

Shell Game or Prudent Planning? The latest Santa Clara RDA money shuffle

Despite the ostensible urgency that demanded an emergency meeting of the Santa Clara RDA/Stadium Authority Monday to transfer $4.5 million to a SF 49ers business entity called Stadco, no one seems to know who called the emergency. 

"[I] Can't pinpoint exactly who was the driving force," is how one member of the City staff -- who have been working on the details of the resolution round-the-clock since Thursday -- answered a direct question from Jamie McLeod. Details of the 26-page proposal -- plus about 50, mostly critical, emails -- were not made public until 5:10 p.m. Monday afternoon. 

Despite the fact that no one is quite clear whose idea it was, the City Council was crystal clear in approving it; with Council Members Lisa Gillmor, Pat Kolstad, Pat Mahan, Jamie Matthews, and Kevin Moore voting in favor, and Will Kennedy and Jamie McLeod opposing. "This is an excellent document," said Council Member Kolstad in his ringing endorsement of the proposal.

Predevelopment Agreement for Stadium Site Infrastructure
The move is the latest in a series of efforts to shield money that the City has allocated to redevelopment agency (RDA) projects. Like many other RDAs, Santa Clara is attempting to protect control over RDA assets by transferring them to city government. However, as the legislation continues to evolve, some fear that transfers between municipal agencies may not secure the assets. Their logic is that the only way to protect RDA money may be to put it in private -- not public -- hands. 

The proposal currently on the table in Sacramento moves control of redevelopment assets to currently unspecified local "successor agencies." And those successor agencies are not necessarily city governments. This raises the specter of successor agencies selling parks, libraries and fire stations to private owners.

Further, it's difficult to pinpoint just how the tax increment pie will be sliced, should the RDAs shut down. (Tax increments are the central funding mechanism for redevelopment, and divert the increase in tax revenues resulting from redevelopment back to the RDA). Presumably, after the first year -- where money will flow back to the state to close the budget deficit -- any revenue above what's needed to pay off debt will be divided by the same formula that is used for distributing other tax revenue. 

What won't happen is that all the RDA assets will flow into municipal coffers, although school districts will see more revenue. Combined with California's zany school district boundaries, this fans the fires of  a zero-sum competition between school districts and municipal governments as each vies for a bigger slice of a diminishing pie. 

For example, if the San Jose RDA is abolished, Santa Clara Unified School District will receive its proportional share of north San Jose property taxes. Currently, those property taxes are diverted by the San Jose RDA, leaving SCUSD to deal with a potential doubling of its student population with no additional revenue. Either SCUSD loses or San Jose 

Santa Clara voters approved a ballot measure last June to go forward with a 49ers stadium project. However, the Stadium Authority and Stadco are still negotiating the project's terms and conditions and  the complex financing plan for construction has yet to be completed or approved. Should the project fall through, "the advanced funds that are spent for makeready work will not be recoverable," explains City staff analysis of the measure.

The "predevelopment funding" aims "to ensure that the $4 million previously earmarked for this project, as well as the project tax increment are protected and are used for the purposes which the Council has identified and the voters have confirmed," said Deputy City Manager Carol McCarthy, in presenting the proposed resolution.

The $4.5 million that the Santa Clara Stadium Authority (SA) will advance to Stadco will pay for "make ready" infrastructure such as demolition, clearing and grading, design, relocating high voltage transmission lines, and regulatory compliance on city-owned land. This infrastructure would be needed for any development on the city-owned land, according to McCarthy. The site is currently leased by Great America for overflow parking.

"It is expected that the City, as owner of the Stadium site, will benefit from the work installed on and adjacent to the site," continues the analysis, "however it is possible that the work may not have value for future development, depending upon the nature of future development on the site."

All of this presents unacceptable risk for Santa Clara say opponents of the measure."The 49ers LLC is an entertainment business operating in our city," Santa Clara resident Clysta McLemore told the City Council. "It is not a bank. Our property tax dollars belong in a public agency to be used for the public good. Tonight's proposal opens the city to absorbing more front-end risk while our city services are being cut, city employees are being furloughed, and school budgets are being decimated," adding that "Measure J didn't discuss predevelopment costs."

"What it looks like from the outside … [is that] you are acting in parochial interests to sequester funds that are ours, not the team's," City resident William Ray warned the Council. "And in doing so you are acting against the interests of the people of California, of which we are members. The idea of racing the clock ahead of the governor and legislature is unconscionable," adding that in his previous home of Palm Beach County, FL, three recent county commissioners -- Tony Masilotti, Mary McCarty, and Warren Newell – are currently serving federal prison sentences for corruption and bribery.

Summary of pre-development funds transfer:
Stadco Predevelopment Costs
  • Stadco has incurred a lot of predevelopment costs to date
  • Stadco will advance the sa the $40 million for the benefits of SA
  • Predevelopment costs includes SA operating costs

Payment of Initial Make-Ready Funds:
  • SA advances $4 million to Stadco upon execution of agreement
  • Kept in separate account along with any interest earned
  • May be used only for make-ready work and SA operating costs in accordance with appropriated budget
  • SA will hold RDA potion of development fees in separate account
  • Funds returned/retained by SA if stadium is not built

Does the Monday's Emergency RDA Meeting Violate the Brown Act?

One question that is begged by Monday's short-notice RDA meeting is whether the meeting violates the California's 1953 Brown Act, mandating that public agencies conduct their business in a way that is open to public scrutiny. 

The Brown act requires agencies to post meeting agendas at least 72 hours in advance, in a "freely accessible" location, and to describe each item of business – including items discussed in closed sessions – with "enough information to enable members of the general public to determine the general nature of subject matter." Further, public agencies and boards may not discuss, nor take action on, items that aren't on the agenda.

The law allows three exceptions to the agenda requirements: emergencies, a situation requiring immediate action, and items posted on previous agendas. Closed sessions are permitted to discuss personnel matters, pending litigation, real estate negotiation, and labor negotiations. Minutes from closed sessions are exempt from public disclosure rules.

Technically, the meeting and a one-page agenda were posted on the City website Friday, just within the 72 hour limit. But Friday March 18, 2011 was a furlough day -- City offices were closed. However, according to the City attorney, the one page agenda that was posted on Friday does comply with state law. 

"The people, in delegating authority," says the introduction to the Brown Act, "do not give their public servants the right to decide what is good for the people to know and what is not good for them to know." 
The administrative panic about the threat of RDA shutdown might lead some to think that Santa Clara's City Council doesn't agree.