Do you remember the childhood story about a Troll under a bridge who threatens to block passage and eat the three Billy Goats Gruff? Well, this is similar to the county of Santa Clara and the city of San Jose.
The county government as a whole, was never a fan of the Redevelopment Agency, as RDA had the long-term potential of minimizing future property tax revenues to the county. The county was always unsure what it would have actually collected in property taxes had it not been for RDA. Without RDA, North San Jose would have been the mecca for mobile home parks and downtown San Jose would have remained a collection of surface parking lots. There was simply not much property tax to collect from undeveloped property in these RDA zones.
The county, like the troll, had an option of eating or stopping the Billy Goat/RDA by blocking the RDA from raising its debt limit. Instead, the county entered into an agreement to let the RDA borrow even more. In return, the county had the most generous payout by a RDA in the state of California.
The county, again like a troll on a bridge, has the ability to block passage. In the case of the county, it is the official body that collects property taxes and then divides and distributes revenue out to school districts, cities and special districts. The county would have nothing to lose by withholding property taxes, hoping that San Jose would capitulate and make a deal. A deal could put the Successor Agency to the Redevelopment Agency (SARA) at possible default of bond payments.
The nothing to lose posture of the county caused all RDA bonds to be downgraded in the state of California, because the rating agencies saw potential risk by trolls on other bridges in the state. This increased cost of financing, as a result of the downgrade, puts the County further behind in getting paid, as the county is last in line to get paid behind the bondholders and lines of credit.
State Controller John Chiang played mediator between the county and city, and he found that the county is wrong and should give San Jose the property tax money it is due.
The County has withheld some of the funds to pay for the PERS (Public Employee Retirement System) tax. As a result, the city of San Jose has filed a motion against the county in a Sacramento court. The letter from the state controller specifically called out the PERS levy, noting that the county was not eligible in retaining those funds. Again, the county has nothing to lose by posturing in this manner.
Going back to the Troll and Billy Goat story, the last of the three Billy Goats lowered his horns, galloped along the bridge and butted the Troll into the air. After this, the troll no longer blocked passage on the bridge.