City Of Santa Monica Reaches $56.8 Million Settlement In State Redevelopment Case

Friday, 25 Oct 2013, 9:30:00 AM

Parimal M. Rohit

A lot of California cities could use $56.8 million from the State to fuel redevelopment projects or pay off existing debt. However, this is one time where the money will travel the other direction as the City of Santa Monica agreed to settle a lawsuit over redevelopment funds.

The settlement, unanimously approved by council members Tuesday, will pay the State an estimated $56.8 million.

City Attorney Marsha Jones Moutrie briefly explained the settlement after council members and City staff returned to chambers and the dais after closed session Tuesday evening.

Directing about $56.8 million to Sacramento in payments during the next two years may seem as a bargain compared to what Moutrie stated the State demanded prior to reaching a settlement.

Santa Monica and the California Department of Finance were party to the litigious matter.

“This lawsuit is about the City’s obligations to repay the Department of Finance cash that we had acquired through our receipt of redevelopment funds,” Moutrie said. “At various times the State has claimed we owed them up to $81 million.”

Moutrie added the recommendation to settle for $56.784 million was made “because it will save the City at least $10.7 million.”

She added the settlement would also “protect the City against what is called a ‘clawback’ of that amount.”

“A ‘clawback’ occurs when the State exercises the authority it has under current law to withhold tax receipts that would otherwise owed to the City” via property or sales taxes.

Finally, a $10 million in loan proceeds to be used for affordable housing was freed up from the State as a result of the settlement.

The money would be returned to the State by 2015.

Some ambitious projects Santa Monica had hoped would already be under construction by now were scrapped as a result of the State ending redevelopment, or RDA, funding in early 2012.

The proposed renovation of the Civic Auditorium was one such casualty of the loss of redevelopment funding – a project possibly completed if Santa Monica received $56.784 million from Sacramento instead of the money going the other way.

Tongva Park, which was christened just recently, was paid for with redevelopment funds. City Hall, which is across the street from the new park, may not be in the clear yet with State officials with respect to the money used to pay for Santa Monica’s newest and most ambitious open space.

Another project built with redevelopment funds – Pico Branch Library – is expected to open in a few months; construction of the newest member of the Santa Monica Public Library system is already under way at Virginia Avenue Park.

During this year’s Biennial Budget deliberations, City staff pointed out the loss of redevelopment also impacted debt service payments on the Civic Center Parking Structure, senior housing voucher costs, and compliance monitoring of affordability covenants for housing.

Last year, the California Supreme Court upheld a legislative move by Gov. Jerry Brown to eliminate more than 400 local redevelopment agencies in an attempt to reduce the state deficit and ultimately balance the budget.

It is unclear whether redevelopment agencies, which were previously established to assist municipalities revive plighted neighborhoods within city limits, would ever return.

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