South Gate Deals with Debts of Defunct Redevelopment Agency

The Oversight Committee, which is in charge of overseeing the winding down the defunct local redevelopment agency, has agreed with city staff in that South Gate should not be obligated to pay the debts that it has accumulated from the former redevelopment agency.

“These are debts of the former redevelopment agency,” said , Finance Director for the city of South Gate, who said that the debts were in the millions.  “These debts should be paid through the former tax increment that was coming in.”

Community Redevelopment Agencies aided municipalities by revitalizing blighted areas with revenues from local property taxes that would entice private developers to construct projects. The funds assisted communities with developing affordable housing programs, as well as retail opportunities that fostered local economic growth.

In South Gate, the construction of places such as the El Paseo shopping mall, the South Gate Business Industrial Park, as well as the construction of senior housing in neighborhoods like Hollydale, are just some of the various projects that were able to be done because of redevelopment funds.

The California state government decided to eliminate the 400 plus redevelopment agencies to better address its $26 billion deficit. voted in favor of becoming the successor to the Community Redevelopment Agency of South Gate.

“The bottom line is that there are unintended consequences from the actions of the state legislature,” said South Gate Mayor, Bill De Witt. “The state did this in haste.”

South Gate is continuing to work within the framework of the state, despite the disgust of local government officials over the state’s decision.

“The city is doing everything it can to limit or eliminate any financial impact to the city itself,” said Steve Lefever, Community Development Manager for the South Gate. “While at the same time complying with the mandate of the state.”

However, with redevelopment money is no longer there, projects in South Gate like those stated previously, are going to be a lot tougher, if not impossible to do.

Even more so, if the state’s Finance Department does not favor the list of debt obligations that was sent to them after the was approval of the Oversight Committee, where South Gate essentially requests that it not be left with the debts.

Instead, wishing that they be paid by the special state trust that is being set up for the payment of redevelopment agency debts through out California, and that makes use of property taxes to do so. 

The majority of the debt of the former redeveloping agency was in the form of bonds that that are still binding. If South Gate were to be forced to assume these debts, it would result in yearly payments of approximately $3 million, until 2024.

Cook believes this will not happen, but says that this is still a possibility.

“I do not believe that this will happen,” said Cook. “But if the bond holders are not getting paid they will look to somebody.”

For now it still unclear as to how much money this ordeal will cost South Gate. The decision to eliminate the agencies was done by the state government, and the now the payments of the debts is very much controlled by it, warned the Mayor.

 “It is the hands of the state,” concluded De Witt. 

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