HAYWARD | Jan. 11, 2012 | While councilmembers in San Leandro and Hayward moved swiftly, but quite reluctantly to take responsibility for the winding down of their respective redevelopment agencies this week, officials in Oakland took extra time to approve the governor’s controversial no-win plan for cities.
Tax municipalities have until this Friday to opt-out from becoming successor agencies to their soon-to-be dissolved redevelopment agencies. The new state law affirmed last month by the state Supreme Court ends the public works and development body as we know it. It also dovetails with Gov. Jerry Brown’s attempt to realign tax revenue through Sacramento.

While cities have vehemently balked at the end of redevelopment, the law is seen a boon for local school districts who stand to receive higher portions of tax increment dollars in coming years.

“I don’t think the residents of Hayward quite realize what has happened here,” said Hayward Coucilwoman Barbara Halliday. “The extra bureaucracy that has been created by the law that was passed by the Legislature, that alone, is going to have mounting costs in added bureaucracy and will accomplish nothing.”

Halliday like most of the Hayward City Council, including staff, has consistently been the loudest and most angry group on the issue in the entire East Bay. Mayor Michael Sweeney and City Manager Fran David have gone to great lengths to paint the redevelopment issue as a brazen attempt by Sacramento, including by their own lawmakers, to stifle their ability to govern at the local level and borne of blackmail and divisiveness.

“It appears to be a deliberate action to pit us against our school district and that’s really sad,” Councilman Olden Henson added Tuesday night.

In San Leandro Monday night, that city’s City Council found less contempt for the state, but concern nonetheless over its role going forward. Although, San Leandro transferred control of $9 million worth of assets from their redevelopment agency last year, there is still doubt over whether the transfer will stand the legal test of a yet-unnamed oversight committee. Other cities including Hayward and Fremont used a similar move last year in an attempt to secure some right to on-going projects.

San Leandro Councilwoman Joyce Starosciak asked city staff what could occur if those transfers are voided. According to a staff member, the assets could be ordered by an auditor to be returned to the wind down of the redevelopment agency and absorbed by the state. They could also be transferred to a third-party, said staff, but the legality of such a move is not known. “It’s a gray area,” said Luke Sims, the city’s community development director.

“I think it is conceptually possible that could be a way of transferring property to our downtown shopping center developer,” said Sims. “We are still evaluating that, to be honest with you. it’s a strategy we are exploring.”

Twenty-one properties in the downtown area were transferred to the city last year, said Jeff Kay, an assistant under Sims. For some cities, the gambit of transferring assets in advanced of the court decision last month comes with some interesting disadvantages. “What some agencies did is that they transferred land, but also projects in partial construction because they had a default on the developer,” said Sims. “Those agency are in an interesting predicament. We are not anywhere close to that type of situation.”

The common refrain at all local cities is the approval of successorships is just the first step of many in the next six months or longer. What is known is sparse, though. According to numerous city attorneys, there is a belief municipalities will not be liable for the work approved in the past by their redevelopment agencies, instead, only on the future allowances of tax increment allotted for the wind down process. For instance, said San Leandro City Attorney Jayne Williams, if a developer chooses to sue the city as successor agency for a project approved, say, last year, the smaller amount contained in the tax increment would likely be the only liability.

Tax increment dollars will also slowly flow to successor agencies to pay administrative costs. Depending on the size of the agency, a minimum of $250,000 could be allotted to cities. San Leandro, for instance, expects around $400,000 for the first year. A larger city like Oakland could expect far more in addition to money already coming to them to close out the agency’s operations.

Officials in Oakland Tuesday night, during a special meeting, appeared far more confused on many of the issues that other East Bay council readily grasped. Although, the council ultimately approved successorship of their redevelopment and housing agencies after an additional 90 minute closed session, it was not without significant confusion beforehand bordering on mistrust of city administration along with a dearth of details at the councilmember’s disposal.

“We could end up voluntarily spending general fund money for the purposes of winding down redevelopment when we didn’t have to,” said Oakland Councilwoman Libby Schaaf. “We need to be mindful that we may be making that decision tonight.”

Some members pushed for the item to be pushed back to Thursday citing a lack of information. Councilwoman Desley Brooks went so far as pledge opposition to successorship for both arms of redevelopment despite acknowledging she had been of the country recently and out of the loop since the Dec. 29 Supreme Court decision.

Most experts and opponents of the redevelopment dissolution plan admit cities are caught snugly between a rock and a hard place when it comes to becoming successor for its wind down, precisely, the risk of losing the small portion of local control still allowed to them under the new law.

Others such as Councilwoman Rebecca Kaplan pointed out the inherent pitfalls of giving up total control of the agency at the expense of another willing taxing authority taking over. “As painful and horrible as this situation already is,” said Kaplan, “the idea of giving these powers to a group that knows nothing about redevelopment would be a complete disaster.”