Last week, I attended the Oversight Board for the Successor Redevelopment Agency public meeting. One person who watched the meeting said it was “like viewing the reading of a will.” That was a fair analogy. In the case of thedeceased RDA (56 years old), the deceased had property it owns but comes accompanied with liens from the County and JP Morgan. The deceased had a substantial income stream but also has debt payments, so revenues collected moving forward will go towards paying the debt of bonds and JP Morgan line of credit.
The meeting also showed that while the deceased was alive, Sacramento poached over $100 million from the estate, which disrupted RDA’s ability to pay planned debt installments over a period of 20 years.
It was a bit startling to see the county representative appear shocked when they understood that no money would be coming to the county soon—bonds must be paid down first. The only potential for the county to get money this year is to sell a RDA property like the Billy DeFrank center on The Alameda, which I would not support, and split the proceeds with JP Morgan and the Successor Agency.
The other option is that if property values increase, like in North San Jose, for example, those higher values would bring in more tax increment to pay off the bonds sooner. To some degree this is likely to happen because developments have been approved and are under construction in North San Jose. This will cause those parcels to be re-assessed. However, even with this scenario it will still be years before the county gets revenue. The county is last in line.
There is a tax increment shortfall that will impact the general fund for the Fourth Street Garage and Convention Center. The reason is the State of California took $154,714,244 from the San Jose RDA, including interest. This amount is far greater than the annual bond payments to cover the Fourth Street Garage and Convention Center. The city of San Jose could relieve itself of this debt payment by selling these assets, but it may choose to keep them. It is not unheard of for a city to own a downtown parking garage or a convention center. However, if a potential buyer emerges, the City Council should consider the offer.
In 2001, the council could have brought the RDA to a peaceful closure. Instead, the City entered into a new revenue-sharing deal with the county on May 22, 2001, to keep the RDA alive. The deal assumed property valuations would rise at a “bubble” pace. This agreement over the last 10 years paid the county over $344 million. This amount was much larger than the required annual $2 million per AB1290. The 2001 agreement was unrealistic.
As I have written before, the RDA was not meant to last forever. As a result, San Jose could have planned for an end of the RDA but it is hard for elected officials (around the world) to say no to capital projects. Of course, RDA was positive in many ways, which relates to the comment that was shared with me Saturday at a public school event. A 50-year resident of my district shared with me that “for people that have lived in San Jose a long time they know the before and after of San Jose and that RDA investments were good.”