City asks for $70M to cover leftover redevelopment costs

With the Feb. 1 deadline for dissolving local redevelopment agencies looming, Glendale this week laid out a plan to fulfill outstanding obligations that could end up totaling almost $70 million.

Glendale’s redevelopment agency is one of about 400 throughout the state that got the ax after the state Supreme Court upheld a law eliminating the agencies on Feb. 1 — a hallmark of Gov. Jerry Brown’s plan to fill a multibillion dollar budget shortfall. Property tax dollars that once went to help build the Americana at Brand and affordable housing in the city will instead go to schools and other public services.

However, some money can be used to pay for enforceable obligations and administration costs for the Redevelopment Agency as it the winds down.

The payment schedule approved by the City Council on Tuesday includes bonds, consulting services, veteran rental assistance, employee compensation and administrative costs. Through June 2012, the so-called allowance to pay those obligations, drawn from redevelopment funds, could total about $69.9 million.

The obligation schedule still must be approved by a seven-member oversight board and the Department of Finance. A city union member will have a seat on the oversight board — a bone thrown to labor since several jobs will be lost as redevelopment dries up, City Manager Scott Ochoa said at the meeting.

“They could be working themselves out of a job,” Ochoa said about the employee’s role on the oversight board, adding that about 50 city jobs could be affected by redevelopment’s shut down.

The list of obligations came with expressions of frustration as city officials laid out next steps for dissolving the agency.

“This is difficult for you. This is difficult for all of us,” Chief Assistant Director of Community Development Philip Lanzafame told the City Council. “We’re in unchartered territory. Nobody knows exactly how this is supposed to work.”

Ochoa characterized the situation as ridiculous.

Of the $69.9 million, the city plans to spend about $18.8 million, or 27%, on administrative costs to run the Redevelopment Agency and employee compensation, including retirement benefits. That is in addition to the maximum $1 million the agency could receive in the first year of dissolution to pay for administrative costs connected to the shutdown, Lanzafame said.

The employee benefits were included on the list so as to not saddle the city’s General Fund with the costs, he said. If the city doesn’t use redevelopment agency money to pay for the 129 listed items, the money will have to come from somewhere else.

After the court confirmed the state law last month, the city had estimated about $21 million in obligations, but in the evolving world of redevelopment dissolution, that number has increased.

About $15 million, or 22% of the payment schedule, includes bond-related payments. Going forward, the city is likely to get its allowance in six-month chunks. But it may need to double up as some bond payments may be due prior to the next dole-out.

Some city officials have said they are hopeful for new state legislation to save parts of redevelopment or postpone its demise, but Councilman Ara Najarian said the future looks dim.

“I think people don’t understand it and a lot of elected officials aren’t ready to toe the line and support an ordered winding down and a re-creation [of redevelopment] in some other form,” he said.