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

City ordered to distribute $12M in unspent funds

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."

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Former CivicSD president Jeff Graham definitely wanted more affordable housing in San Diego (and he still does). As he told me in an October 2012 interview after becoming president: “Our greatest funding source for affordable housing and neighborhood improvement has been taken away. So we have to see how we're going to fund these improvements.”

Item 202 for Monday's April 6, 2015 City Council hearing should be returned until the Independent Budget Analyst (IBA) completes a review on Civic San Diego's interpretation of the Department of Finance communications.


The problems is Civic San Diego staff is misinterpreting the reason for the loss of $12 million in new LMIHAF Housing Revenue accumulated in FY-2014.

This issue of Unencumbered Cash Revenue on hand has nothing to due with the Long-Term loans or Repayment Agreements.

If you want affordable housing then raise incomes. The business community and especially tourism and retail love affordable housing projects, SNAP, Medicaid, and all the other taxpayer funded welfare programs because it reduces the pressure on them to pay living wages. It is called cost shifting. They rely on the taxpayer to help support their workers thus increasing their profit. Many commenters, especially at the UT, love to say that if you can't afford to live here move. If welfare programs were limited to those who could not work because of physical/mental disability and not available for those who were able to work then they could not afford to stay here. I wonder what the low wage no/low benefit employers would do? They sure would not want their employees living in their parking lots. I would be a great human interest piece " (name of company) had large profits this quarter but their employees still live behind the store in the canyon in a homeless encampment". Employers depend on government programs to do for their employees what they should be doing.

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