Assembly Panel OKs Pasadena Bailout Bill

A bill allowing the City of Pasadena to use $45 million in tax revenue from downtown redevelopment to rescue its ailing fire and police retirement system was unanimously approved by a key Assembly committee this week, clearing the way for a final solution to the city’s most pressing financial problem.

The Housing and Community Development Committee approved the bill in less than 20 minutes Monday, with barely a trace of opposition.

The committee’s approval, along with the broad range of support that has been painstakingly gathered after months of negotiations and compromise, virtually guarantees final approval of the bill, which is expected late next month.

“It was a delight, a climax to months of work,” said Pasadena Mayor John Crowley, the main architect of the rescue plan. “It is very rewarding that the city can now look forward to the possibility of financial solvency well into the next century.”

The city spent $24 million in the early 1970s to build the Pasadena Convention Center. Under state law, the city is allowed to recoup money it spends on redevelopment projects by collecting increased property taxes generated by redevelopment.

Since it will take years to recover the $24 million, the bill (SB 481) would allow Pasadena to collect interest on its investment in the Pasadena Convention Center and use it to bolster the retirement system. The interest is expected to be about $45 million.

Under current law, 20% of increased property taxes from redevelopment projects must go to build low- and moderate-income housing. The bill would allow Pasadena to divert the 20% to the retirement system.

Housing advocates had initially opposed the measure, contending that the bailout plan should not come at the expense of the poor and elderly, many of whom have been displaced by redevelopment projects.

Objections Defused

Their objections were largely defused when Pasadena officials promised earlier this month to provide $20.5 million for low- and middle-income housing over the next three decades.

But despite the lack of opposition Monday, several groups have voiced concerns about the long-term impact of the bill.

Many Pasadena housing advocates say they are worried that changing political or financial winds could jeopardize the $20.5 million promised for housing.

Christopher Sutton, a private attorney who originally raised concerns about the bill but spoke in support of it Monday, said he wonders if the Board of Directors will remain committed to low-income housing.

“You just can’t trust what the board is going to do,” he said before the committee hearing began. “Can the leopard change its spots?”

Sutton said the repeated revisions of the bill to satisfy the complaints of critics made it extremely difficult for most people to understand what, if any, pitfalls await them in the future.

“There are protections in the agreement, but a lot depends on who is interpreting them,” he said. “We just have to be alert for the next 27 years.”

Crowley said he believed the bill contains sufficient restrictions to force future boards to honor the city’s commitment to housing.

‘A Problem That Doesn’t Exist’

“He’s looking for a problem that doesn’t exist, as far as I’m concerned,” Crowley said.

The Los Angeles-based Western Center on Law and Poverty, which still opposes the bill, has also raised concerns that the $20.5 million will significantly shrink in value if inflation goes above the city’s 7% estimate for the next three decades.

But Crowley said the city’s inflation estimate is “reasonable” and has been used in all other financial forecasts for the plan.

The County Supervisors Assn. of California also objected to the measure, saying it would set a precedent for other cities to use redevelopment funds for purposes other than rebuilding their cities.

“Some city will eventually come along and say, ‘Hey, if they can use that money, why can’t we?’ ” said Dan Wall, a lobbyist for the association. “Redevelopment money is a prime target. We would rather there wasn’t another route for people to get at it.”

Sen. Newton R. Russell (R-Glendale), who sponsored the bill, said the measure is “very narrowly drawn so there are no other cities that could fit under the umbrella of the bill.”

But Wall said there is nothing to prevent other cities from pursuing their own “narrowly drawn” bills to tap into the redevelopment money.

If that happened, the big losers would be county governments, which delay collecting their share of the increased property tax in a redevelopment area until the city’s redevelopment debts are paid off.

Problem Created in 1969

Pasadena’s retirement fund problem was created in 1969 when voters approved an unlimited cost-of-living increase for retirees, linking their benefits to the consumer price index, said city Finance Director Mary Bradley. Before then, benefits could rise no more than 2% a year.

The retirement system has been closed to new employees since 1977, but there are still 451 working and retired police and fire employees enrolled.

The fund has $27 million and is meeting its benefit obligations, but an independent audit last year determined that it would have to be $125 million larger--$152 million--to generate the income needs to pay out a projected total of $781 million before the last worker or family member dies about 80 years from now, Bradley said.