City, School Officials Bemoan Losses, Uncertainties in State Budget

With a new fiscal year beginning July 1 and a budget in place, state lawmakers may be breathing a sigh of relief. Local leaders, on the other hand, aren’t feeling so relaxed. 

Three elements, in particular, have San Leandro city and school officials concerned: 

• The elimination of the local redevelopment agency (although there are several possibilities for its revival);
• Potential mid-year cuts to K-12 schools; and
• The redirection of vehicle license fee revenue from the city to the state. 

The $85.9 billion budget — which was approved in both houses on Tuesday without Republican support, and signed by Gov. Jerry Brown on Thursday — relies on a previously unexpected $4 billion in predicted revenue and deep cuts to higher education and courts.

The elimination, or restructuring, of redevelopment agencies is expected to free up $1.7 billion for the state, The Sacramento Bee reports.

The budget also includes deep cuts to the criminal justice system and the closure of 70 state parks.

Redevelopment Agencies: Lawsuits, Lost Projects, and "Pay to Play" 

Brown signed various trailer bills into law along with the budget, including one that eliminates local redevelopment agencies starting July 1 (ABx1 26), and another that gives them a formula for resurrection (ABx1 27) — if they're willing to hand over a hefty sum to school districts and other local agencies. 

Redevelopment agencies are charged with eliminating blight in cities. They are funded by the increase in property taxes generated from redeveloped areas.

San Leandro's redevelopment agency has helped build the Creekside Plaza Office Complex, the new Senior Center, the Broadmoor Plaza affordable senior housing complex, and the new ninth grade campus, among other projects. 

When word came out of Sacramento earlier this year that redevelopment agencies were on the chopping block, the City Council voted to take over  to keep them out of state hands. These included 21 parcels of land and $5.5 million. 

Under the new law, redevelopment projects already under contract are protected. San Leandro Crossings — the transit-oriented development project planned around the downtown BART station — falls into this category. 

Other long-planned projects, on the other hand, may be in jeopardy, said Community Development Director Luke Sims. These include Town Hall Square, a mixed housing and commercial development planned for the corner of Davis and East 14th streets, and Village Marketplace, a commercial development planned for the old Albertson’s lot on East 14th Street between Juana and Dolores avenues.

The city doesn't yet have an enforceable contract with the developer on either of those projects, Sims said. Therefore the state could force a halt.

“It’s uncertain as to how we proceed with either one of those projects,” Sims said. Plans to pave and improve Eden Road could also be in jeopardy, he said. 

Nevertheless, the state budget package includes a bill (ABx1 27) that allows for redevelopment agencies to reorganize, if they're willing to "pay to play" by making large payments to school districts and special districts (via the county), in lieu of the state making those payments.  

Though the numbers are preliminary, Sims estimated that to stay in business under the ABx1 27 plan, San Leandro's redevelopment agency would have to pay around $5 million for the current fiscal year, and about $1.1 million each year afterwards.

The agency's total budget is around $15.5 million, though much of it is encumbered, Sims said.

It's still unclear whether the agency could afford the payments to schools that would allow it to continue operating, Sims said.

But redevelopment agencies have another weapon: the courts. The League of California Cities and California Redevelopment Association plan to sue the state over the two redevelopment bills. San Leandro belongs to both organizations.

"We’re anxious to see a court process result in reversal [of the laws]," Sims said. "That’s the only way we’ll have the kind of resources we need to accomplish our goals and objectives."

Schools Remain in Limbo

As if school officials hadn't lost enough sleep in the past six months, trying to plan their budgets around the state's shifting budget plans, schools still could face hefty mid-year cuts.

If the state's revenue falls short of projections, cuts to K-12 education would be triggered. In that scenario, the academic year would be cut by seven days to accommodate for the funding loss. 

But that may not be possible under schools' contracts with their teachers union. "They can’t override our collective bargaining agreement," said Cindy Cathey, Superintendent of the . 

“What they’re saying is, 'We’ll give you permission to cut more days out of the school year, but you have to figure out how to do that,'" Cathey said.  

Even if mid-year cuts aren't necessary, the budget still postpones about $3 billion in payments to schools.

State to Take Back Revenue From Vehicle License Fees

Among the trailer bills signed by Gov. Brown late Thursday was SB 89, which would redirect $130 million in vehicle license fee revenues from cities and counties to the state. 

The bill came as a surprise to many cities, KQED reports.

The City of San Leandro could lose nearly $300,000 per year in revenue from the change, according to acting City Manager Jacqui Diaz.

Though that's a relatively small chunk of the city's $72 million budget, Diaz said it would still hurt. 

"For us, everything is significant," she said, "We really do count every penny."