The City Council voted unanimously Monday night to keep its redevelopment agencies alive by authorizing a payment of nearly $70 million, which a high-ranking city official called a "ransom payment" to the state government.
Chief Operating Officer Jay Goldstone called the remittance "the lesser of two evils" after Gov. Jerry Brown last month signed into law a pair of bills that eliminated the agencies effective Oct. 1 unless the payment was made.
The amount accounts for about 40 percent of the tax revenue made by the city's Redevelopment Agency, the Centre City Development Corp. and Southeastern Development Corp. Agency officials said they would have to delay some future projects and scrap others, so they could make the payment and keep up with current obligations.
The agencies make their money when their projects increase the property tax base in their areas, and put it toward future projects. They also set aside 20 percent of the income for affordable housing.
State officials say the money is better used in city's general funds.
San Diego's Independent Budget Analyst said the city stood to gain $14 million to $18 million of extra tax money from the elimination of redevelopment, but that would be offset by the end of various payment agreements with the agencies. Subtract that income, and the net impact on the general fund would be anywhere from a $3.5 million increase to a loss of a couple hundred thousand dollars.
"It's really killing me that we've got to write a check for $70 million," City Council President Tony Young said.
The question of whether the check is actually filled out is likely to be decided by judges.
Also on Monday, the League of California Cities, California Redevelopment Association, city of San Jose and Union City sued to have the Supreme Court declare the state bills unconstitutional under voter-passed Proposition 22, which was designed to prevent the state from seizing local government revenue.
The decision by the City Council to make the payment came despite token opposition by area labor leaders, who asked for a delay to discuss reforms to the development process.
Several council members said they had to make the payment or there would be nothing left to reform.
"We have to have options -- if we don't (approve the payment) now, we have no options," Councilwoman Marti Emerald said.
Emerald proposed a large-scale reorganization of the city's redevelopment agencies several months ago. Elements of the plan are under review.
The exact amount each agency will owe to stay in business is scheduled to be announced by the state Aug. 1.
