The state Department of Finance has reversed previous rulings and will allow the city of San Diego to use leftover redevelopment funds to pay for construction projects benefiting homeless and low-income families, the City Attorney's office announced today.
The decision means that the city's general fund -- which covers basic government costs such as public safety and library -- won't have to bear a cost overrun on the Connections Housing project, a permanent shelter for the homeless at Sixth Avenue and A Street, or the price of building an affordable housing development at Ninth Avenue and Broadway.
The state abolished redevelopment agencies last year and now decides whether leftover funds can be spent on projects that were already in the planning stages. State finance officials had not only rejected redevelopment funding for Connections Housing and the affordable housing project, but also for paying off construction bonds for Petco Park and a previous expansion of the San Diego Convention Center -- along with a potential future stadium for the Chargers.
City of San Diego officials are concerned that such decisions will plunge their general fund budget back into the red, less than a year after solving a structural deficit.
City Attorney Jan Goldsmith said the city sued the state last Friday to reverse its decision on $4.3 million of funding for Connections Housing.
Without that money, a domino effect would have been created in which the city would have lost as much as $15 million, he said.
"Adapting to the new world of redevelopment has been very challenging for the city, and we decided to file the lawsuit to test the boundary of redevelopment law in this state," Goldsmith said. "We are heartened that the DOF has since reversed its decision which would have placed the city's homeless population -- the third-highest of any city in the country -- in jeopardy."
The Connections Housing project, slated to open in a couple of weeks, is in an 86-year-old building that required an extensive overhaul. The funding initially rejected by the state was to cover a cost over-run -- caused by structural problems and asbestos -- from the initial $32 million budget.
Goldsmith said the lawsuit over Connections Housing was filed after two months of negotiations failed. The court action will be withdrawn, he said.
He said the reversal for the $20.2 million affordable housing project came about from talks with state finance officials.
