City, State Dispute $1.7 Million "Ransom" Payment

Based on legal advice from a Sacramento-based consultant that arrived via text message, the Sonoma City Council declined to officially at Monday night's meeting, postponing the decision for a week.

The Sonoma City Council, will reconvene Monday, Aug. 29 at 6pm for a second attempt to make an informed ruling on redevelopment, pending information on whether the issue can be decided before a decision is released from the California Supreme Court.

Tasked with improving the economic viability of urban areas, redevelopment agencies use bonds to pursue urban blight prevention within a 'project area,' repaying the bonds with money skimmed from property taxes.

Gov. Jerry Brown's recent legislation provides community development agencies provides the cities with two choices:

• AB 1X 26 “The Disillusion Act,” ends the redevelopment agency, appointing an independent oversight board to watchdog the process of dissolving assets and making the remaining payments on outstanding bonds. According to the Enforceable Obligation Payment Schedule," enacted in Monday night's meeting, the Community Development Agency (CDA) has $56.4 million in outstanding debt, with a $233,820.17 payment due in August.

• AB 1X 2 "Pay for Play," nicknamed "the Ransom Act," allows a municipality to retain their redevelopment agency after paying a share of a $1.7 billion payment to the state, and an annual fee each year after.  

Unofficial charts, depicting the various breakdowns of redevelopment funds, have been provided courtesy of City staff, at right.

Little is known about the specifics of the the legislation. The Department of Finance estimates that Sonoma would have to pay $1.7 million to the State to retain their agency. The city has filed a dispute, arguing they only owe $14 million. The city has estimated their annual redevelopment payments at $428,000, but the amount would fluctuate along with property values. Much of these payment will likely flow to the , but the amount of funds and their dedication is still unknown.

The matter has been further complicated: on Aug. 11, the Supreme Court of California put a stay on payments following a suit (California Redevelopment Assn. v. Matosantos) filed by the by the League of California Cities and the California Redevelopment Association. The suit argues that both acts violate a proposition passed in Nov. of 2010: Prop. 22, which prohibits state politicians from interfering with revenue expressly dedicated to local government.

A decision from the court is expected by mid-January, almost concurrent with the state's deadline for "ransom" payment.

Several Sonoma County cities have already ruled to opt-in to the Governor's redevelopment plan before the Court's ruling, according to the Santa Rosa Press Democrat.

As part of the state budget passed in June, the Legislature and Gov. Brown dissolved redevelopment agencies but also gave them the option to continue — if the agencies agreed to pay specified amounts for distribution to schools and other taxing entities.

A number of cities — including Santa Rosa, Healdsburg, Cloverdale and Windsor, as well as the county of Sonoma — already have agreed to make payments to keep their redevelopment programs going. But those decisions were made prior to last week's legal moves, which have furthered muddied the waters.

"Opting out is really a monumental decision, essentially with a gun to our head," said Kelly. "There's no way to change to a viable economic model in those few months, opting in at least buys us some time...Let's opt out on our own time-line and terms."

Still, other officials see redevelopment as a vehicle for loading on extra debt to the city, and advocate pulling the plug immediately.

"Contrary to what a lot of people in our community think, it seems we've become addicted to redevelopment," said Mayor Pro Tem Joanne Sanders. "We maxed out the redevelopment credit card because we thought redevelopment was going away. Guess what, it's not going away and we've got all that debt."

Sonoma Mayor Laurie Gallian recused herself from this item, because she is employed by the , which may receive funds from