FAIRFIELD — Fairfield ‘s ailing general fund could lose more than $7 million annually because of the state’s successful bid to dissolve redevelopment agencies.
City Manager Sean Quinn gave the City Council the news at Tuesday’s meeting. The city uses $2 million to $3 million of redevelopment agency funds for salaries and programs, he said. Its general fund also receives about $5.8 million annually from the agency to repay loans that the city made to the agency over the years.
Affordable housing program takes a big hit with redevelopment loss.
All of that could be gone with the end of redevelopment, with the redirection of an unknown amount of some property tax income making up only a fraction of the loss.
“We’re going to be faced with some very difficult decisions over the next six months,” Quinn told the council.
City Councilman John Mraz said the city could be looking at layoffs.
“If you think things were bad last year — stand by, they’re going to get worse,” Mraz said.
Meanwhile, the Fairfield City Council will discuss redevelopment when it meets for a workshop Jan. 27 and Jan. 28. Quinn said city officials will present the council with a plan on how to proceed.
“Stay tuned, folks,” Mayor Harry Price said. “These are difficult times.”
Fairfield formed its redevelopment agency in the 1970s. The agency spends subsequent property tax increases within adopted redevelopment areas to improve those areas. Those property tax increases can be used to finance loans to build roads and other infrastructure to spur development and to clean up blight.
The city over the past three decades has used its redevelopment agency to help spur such development projects as Westfield Solano mall, the Green Valley corporate and commercial areas and Solano Business Park. By law, it must set aside 20 percent of its redevelopment funds to promote affordable housing.
California last year moved to dissolve the 400 or so redevelopment agencies in the state to redirect that property tax money back to schools, counties and special districts, as well as cities. The state Supreme Court last week ruled that the state indeed has the power to make this move.
Even though the agencies are to be dissolved as of Feb. 1, agency bonds and other loans must continue to be repaid by property tax income. But, city officials said, loans made by a city to a redevelopment area after the second year of the area’s existence are not considered an “enforceable obligation.” Fairfield’s redevelopment agency owes the city $87 million in principal and interest and city officials fear this money will be lost.
The general fund pays for such day-to-day expenses at police, fire and recreation services. Fairfield estimates its general fund will be several million short in revenues over expenses each year through most of the decade and is counting on $54.8 million in redevelopment agency loan repayments to help fill the gap.
City officials on Wednesday couldn’t give the mix of principal and interest that the agency owes the city for the loans. In past years, the interest has comprised more than 50 percent of the total amount.
Fairfield has a long history of loaning city money to its redevelopment agency. The City Council authorized one of the first loans Oct. 16, 1979. It was looking for ways to move Highway 12 from the downtown on Texas Street to today’s route.
At that time, the council had yet to even form the Highway 12 redevelopment area. But it authorized $3.6 million in loans for the project, in case a planned bond sale was delayed, with future redevelopment agency property tax money to repay the loan at 8 percent interest.
Then-City Councilman Manuel Campos said at the time that the Highway 12 bypass project “is one that the city wants and needs badly.”
The redevelopment agency repaid various Highway 12 project loans by the end of the 1980s. Meanwhile, the city made other loans to its redevelopment agency over the years, many of them to help jump-start the commercial and business development in the Green Valley area. Some of these loans were made at 12 percent interest.
Quinn said the city will pursue legislative and legal means to get the loans repaid.
Meanwhile, some in the state are pushing for redevelopment to be reborn in some other form. The state had given communities the option of keeping a stripped-down version of their redevelopment agencies by paying a fee — in Fairfield’s case, a one-time payment of $11 million and annual payments of $2.6 million — but the Supreme Court ruled this violates Proposition 22.
The California Redevelopment Association isn’t giving up.
“The legislative record is abundantly clear that the legislators did not intend to abolish redevelopment,” association president Julio Fuentes said in a news release. “We hope to work with state lawmakers to come up with a way to restore redevelopment.”
Reach Barry Eberling at 427-6929, or email@example.com.