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Deadlock vote proves fortunate in the end

City must choose if it wants to let its redevelopment agency fold, or pay the county for agency to continue.

July 14, 2011|By Joseph Serna, joseph.serna@latimes.com

COSTA MESA — The Costa Mesa Redevelopment Agency's deadlock vote in March to pay back more than $1 million into the city's general fund was beneficial in the long run, city officials said this week.

Some residents accused agency members — who are also the City Council members — of refusing to pay down $1.3 million of more than $10 million the agency owes the city's general fund from a loan. Critics claimed the agency members were purposely keeping money out of the general fund gap to partially justify the layoffs at City Hall.

As it turns out, the agency's 2-2 deadlock vote in March proved fortunate, Special Counsel Celeste Brady said at the Redevelopment Agency meeting Tuesday.

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Last month, Gov. Jerry Brown signed legislation potentially killing the state's redevelopment agencies. If back in March Costa Mesa's redevelopment agency had approved the loan payment, the bills Brown recently signed could have redirected it to the state instead.

"Interesting that this council, when we were here awhile back, you elected not to pay down that loan," Brady told the board members. "If, in fact, you had, it would all get unwound, if you do dissolve. So you guys were much better soothsayers than I."

The legislation supported by Brown gives Costa Mesa two options: dissolve and watch the agency's $10 million or so evaporate — except for specific debts that would be allowed to be repaid — or pay an estimated $1.5 million this year, and an estimated $400,000 in the next few years, to the county to keep the Costa Mesa Redevelopment Agency going.

Cities create the agencies to target specific community areas for rehabilitation, with a portion of the city's tax revenue being recycled back into those areas. Costa Mesa got its redevelopment agency off the ground years ago with loan of more than $10 million.

Most Orange County cities are leaning toward paying the county and remaining intact, Brady said.

If the redevelopment agency had opted to pay down its loan to the city in March but elected to let the agency dissolve, that payment would potentially be taken by the state.

If the agency chose to pay down the loan to the City Council and remain in existence, the loan payment would likely move forward without issue, officials said.

But Costa Mesa would still have to pay about $1.5 million to Orange County — a requirement of the bills that Brown signed to dissolve the redevelopment agencies.

The redevelopment agency could "backfill" that payment by giving the city's general fund the money afterward, city officials said, but the state would be allowed to limit how it's spent from there.

Because the agency did nothing in March after all, there is no money in limbo with the state, nor the possibility that the redevelopment agency could lose $2.8 million altogether through debt repayments to both the city and county.

The city's only choice in the coming weeks is if it wants to let its redevelopment agency fold, or pay the county and allow the redevelopment agency to continue. In the meantime, city attorneys around the state are looking to sue California over the legislation, Brady said.

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