Tempted not to make a “loan” payment demanded by the state, the city council decided the penalties for not complying with the order were too severe. The $1.92 million check was delivered Monday to Sacramento.
The legislature announced the raid of all statewide redevelopment agencies last summer, a move to help balance its own budget, and set the 2010 payment deadline. A legal challenge to stop the ‘taking’ was denied last week.
Missing the payment deadline would have triggered “the death penalty,” said City Attorney Jeffrey Walter. The Community Development Agency (CDA) would be shut down for new projects and business investment while incurring significant administration costs, among many other impacts.
“The severity of consequences are draconian,” said Walter. “Intentionally, the goal is to make it hurt if you don’t comply.”
City council members were outraged at the state’s action but ultimately decided the cost of defiance was too high. With a 4-1 vote, the payment, and another $395,000 already due to the state next fiscal year, was approved.
The lone dissent was Councilmember August Sebastiani. “It’s not the city’s or the cities job to bail out the state. There are different ways to be business friendly.”
Mayor Steve Barbose countered, “The consequences of not doing it are far worse. “
The non-payment penalties would have endangered support of the Visitors Bureau and the economic development partnership, and halted planned improvements to the library, parks, streets and bikeways. Another element, related to a city housing fund, would have cost the city $233,000 annually.
Though stated as an interest-paying loan, the council expressed little faith the state would make good on its promise to pay back the money. In fact, members expect Sacramento to make another grab of local property tax revenue.
“We’ve been robbed,” said Council member Joanne Sanders, a reluctant ‘yes’ vote. “As long as we continue to pay, they’ll keep coming after us.”
Council member Ken Brown also voted in favor, but said he’d fight the probable future raid. “Once they get a taste of our money, it’s like Dracula – they won’t be able to live without it.”
This year at least, the city is in relatively good shape to absorb the hit. It will suspend deposits to, and essentially loan itself money from, available housing funds. Even so, the maneuver will cost $380,000 in interest over the next five years.
Two cities that have decided not to pay the state, Richmond and Pittsburg, are too broke to comply.
