Nah, don't want to spend it on low-income housing

The city can no longer stash more than $12 million in former redevelopment money intended for building low- and moderate-income housing, says a January 20 letter from California's Department of Finance.

On April 6, the San Diego City Council must transfer between $12.25 million and $12.61 million from a city account to the former redevelopment agency (now known as the Successor Agency), to be used on low- and moderate-income housing projects or to pay down debt. The city and the Successor Agency must do so before any additional tax money from the Redevelopment Property Tax Trust Fund can be collected and disbursed.

Much has changed since governor Jerry Brown dissolved redevelopment agencies in 2012. Millions of dollars being shuffled around from account to account to be spent on loans, debt, and to build projects is now under the watchful eye of the Department of Finance.

Twice a year, the city council, acting as the Successor Agency, is required to submit a "Recognized Obligation Payment Schedule" listing projects and payments owed to third parties with former redevelopment dollars. California's Department of Finance must sign off on the payment schedule before additional cash is allocated.

On January 20, California's Department of Finance finalized its decision on the so-called "unencumbered funds" of $11,905,560 it found sitting in an account. That amount has increased slightly.

"...the [successor] agency did not expend these funds as anticipated during the respective periods. Therefore the agency's authority to expend the funds has expired," read the January 20 letter from the Department of Finance.

San Diego's winding down of redevelopment has not been pretty. The tug-of-war with the Department of Finance over redevelopment tax dollars has resulted in multiple lawsuits and millions of dollars in outside legal fees.

Part of the problem is that certain loans were made between the City of San Diego and the former redevelopment agency when redevelopment tax agencies were in full swing.

At first, the loans were necessary to get projects started before property-tax revenue was collected. But cities such as San Diego continued to make loans to the redevelopment agency and continued to shuffle money from different accounts to pay for other expenses. As part of the dissolution of redevelopment agencies, the state requires that, before being repaid, the Successor Agency must turn over all unencumbered cash from the former redevelopment agencies to the county so it can be distributed to school districts, county, and other municipal governments.

In the past, the city has responded by filing lawsuits to challenge the determinations of the Department of Finance. According to a recent staff report, the city will not initiate a lawsuit in this matter.

"The housing bond reserve funds are not needed," says the city, "because the bond trustee already holds the required reserve amount and the [Department of Finance] has consistently approved the Successor Agency’s payment of the actual debt service for the pertinent housing bonds…. Therefore, the reclassification of these housing funds for use in paying bond-related enforceable obligations...will not result in any default on existing bond obligations, including any minimum reserve thresholds."