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Tuesday, March 8, 2011

Beefing Up The General Fund

SAN LEANDRO'S APPROVAL OF REDEVELOPMENT ASSETS TO CITY NETS $2.1 MILLION
By Steven Tavares

San Leandro’s general fund either became solvent Monday night or the city saved millions after approving a transfer of its real estate assets from redevelopment to the city coffers in advance of another takeaway from Sacramento this spring.

The transfer comes at no cost to the city and theoretically secures funding for a host of over 21 properties mostly located on Davis and East 14th Street. The impetus for the conveyance of properties was spurred by pending legislation that calls for an oversight agency to, in essence, brokers the sale of properties across the state before redistributing the gain within the governor’s plan for tax realignment, said Luke Sims, community development director for the city.

“If it were to remain in the hands of the agency it may be taken by this oversight agency,” said Sims, who added Monday’s proposal is viewed as an “extra precaution” against any future revenue grab by the Legislature. The redevelopment agency and city approved a previous agreement in January securing over $9 million in funding for future projects.

“Hopefully it will not be necessary,” said Sims, “but we feel it is prudent to move forward with this proposal.” Sims also noted the plan could be reversed in the unlikely event Gov. Jerry Brown’s plan for dissolution of local redevelopment agencies by July 1 fizzles before its state goal.

The council unanimously approved the transfer of assets, but faced criticism from Councilmembers Joyce Starosciak and Diana Souza, who said they feared the proceeds would be lumped together with other revenues in the general fund, which currently runs an estimated $2.2 million deficit. “Are we going to put it towards our deficit?” Souza rhetorically asked. The transfer approved Monday adds over $2.1 million to the general fund. City Manager Stephen Hollister said the amount is viewed as repayment to the city for previous loans given to the redevelopment agency.

“I support it, but this a big,” said Starosciak. “My concern is it moves into the general fund and we’re cash rich. It’s a risky decision.” Starosciak also questioned how the city is able to legally transfer funds at no cost and alluded to a similar gambit utilized recently in Hercules which has led to a recall of some members of their city council. According to the state health and safety code, said Assistant City Attorney Richard Pio Roda, it is legal for conveyance of properties within the city without renumeration. Pio Roda said Starosciak’s reading of the situation in Hercules was only partly correct. While the city transferred assets to the city, he said, the potential illegality involves separate issues occurring afterwards.

Hollister’s suggestion to place the real estate assets in separate ledger of the general fund appeared to assuage some of Souza and Starosciak’s concerns leading to the unanimous vote. Similar to the $3.1 million given to the city by Kaiser Permanente for road improvements around their new complex on Merced Avenue, $2.1 million in transfer funds will not be commingled.

Still, there remains the concern funding for remaining redevelopment projects could be abandoned or pushed to the wayside in an effort to repair a hemorrhaging budget in San Leandro. Some councilmembers, including Councilman Jim Prola, have used the $3.1 million windfall from Kaiser to illustrate a local economy that is stronger than the state continuing deficit portrays.

The city expects to begin budget deliberation in the next few months with a new budget approved by late June.

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