How Badly Flawed Was the City Council's CRA Strategy?

You might recall that not so long ago the City Council, despite the misgivings of MaryAnn MacGillivray, obligated (or encumbered, as they say) much of the money in Sierra Madre's Community Redevelopment Agency account to a lot of rather unnecessary things. And, as we all know, even unnecessary things do eventually add up. In this case the total spend was in the hundreds of thousands of dollars.

Two of the more controversial spends were for consultant studies. $25,000 was for something called a "Parking Study," which is basically an inventory of all the public parking available in Sierra Madre. The other was a $30,000 spend for a "Market Study," which purports to identify the consumption habits of people in the area so retail businesses here can fine tune their product spread.

Also included in this CRA spending spree was new playground equipment, a glorified outhouse for Memorial Park called a "Kodiak," the permit fee costs for a wine tasting room, plus assorted other not exactly essential things.

MaryAnn's advice had been to wait until the Courts had ruled on the fate of the 400 or so Redevelopment Agencies in California. Her colleagues decided otherwise.

It now seems apparent that Mayor John Buchanan, a man who has long been quite enamored of the League of California Cities, adopted the CRA strategy of that organization for our city. And this unfortunate plan was to spend just as much of the money in our CRA account as possible. Which, given the decision by the California State Supreme Court to uphold Governor Jerry Brown's desire to end CRAs and pull back all redevelopment resources, including ours, has turned out to be an expensive blunder.

The California Eminent Domain Report, which is run by a legal firm called Nossaman LLP, has put together a very good review of the State Supreme Court's decision on ending redevelopment agencies. You can access it by clicking here.

What we want to point out here today from the CEDR article are the consequences of this decision going forward. Here is how they put it:

What Happens Next: Implementation? Moving beyond the technical issues, the real question is what happens to redevelopment obligations and assets. This will be the subject of considerable discussion in upcoming weeks, but here are a few, bright-line rules people should know.

1) For obligations incurred prior to January 1, 2011, the obligations remain valid and binding.

2) For deals under negotiation when the Supreme Court stay was issued, the redevelopment agencies have no power to consummate the deals.

3) Remaining redevelopment assets will be sold.

4) If the agency transferred any assets to its city/county or another public agency after January 2, 2011, the transfer is potentially subject to ABX1 26's "claw back" provisions.

If all of this breaks the way it is described here, a consequence could be that there no longer is $55,000 in CRA funds to pay for those Parking and Market Studies. And since these are signed deals and the consultants are already working on their reports, the City of Sierra Madre is obligated to pay them for doing the job we hired them to do. That money would now have to come from someplace else, most likely the General Fund.

Long time redevelopment critic Steven Greenhut, writing on his always

informative CalWatchDog.com site (click here), had this to say about the arrogant and foolish CRA strategies of the League of California Cities:

The redevelopment groups argued that Gov. Brown's plan to kill the agencies was a violation of Prop. 22, which banned the redirection from those agencies. But the court agreed that the state was well within its rights to end what essentially are state agencies and use the funds for different purposes. We should applaud the incompetence of the CRA and the League of California Cities. Their challenge opened the door for an end of the agencies in their entirety. Had they not challenged the laws - an arrogant move, borne of years of arrogance in their treatment of property owners - most agencies would have bought their way back into existence. Now they are kaput.

When the Buchanan City Council decided to spend most of the money in the City of Sierra Madre's CRA account, the word heard most often was "encumber." Josh Moran repeated the word over and over like it was a mantra designed to ward off the long financial reach of Jerry Brown.

So the City Council did encumber our CRA funds. Or at least they believed they did. After all, that was what organizations like the League of California Cities were recommending. The idea being that it is far better to spend that money here than allow Jerry Brown to give it to public schools or universities. A concept that has turned out to be a myth.

The lack of any effective or insightful leadership on this matter from the then Gang of 4 has led us to where we are now. We could very well be facing a lot of new debt with no CRA money to pay for it.

If so, it looks like the only thing that has been encumbered here are the taxpayers.

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