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Budget Update
State Actions Could Devastate City Budget
Posted Date: 12/10/2012 6:00 PM

Throughout Santa Clara’s history with its Redevelopment Agency (RDA), the City of Santa Clara has always followed the spirit and the letter of the law as it relates to RDAs, working to support economic development and job creation, add affordable housing and revitalize specific areas of the community. With the recent dissolution of RDAs by the State of California, however, the possibility that the State could demand as much as $300 million in assets and real property from the City of Santa Clara - twice the amount of the City’s annual General Fund – remains a real and serious threat as this publication goes to print.

In a letter sent to all residents in November, the Mayor and City Council described the devastating impact that would occur if the State should take this action as part of the dissolution of the City’s RDA. While Santa Clara continues to follow the law regarding the State abolishment of RDAs, City officials strongly believe the State’s potential actions would be “unfounded and improper.” The City assured residents that every step is being taken to protect local city taxpayer assets from these State-wide forced transfers of local taxpayer assets. For Santa Clara, at risk are cash and bond proceeds, real estate and other property acquired over the past decades as part of the City’s redevelopment strategy to support its RDA goals. 

The State is now trying to retroactively claim property and assets that were transferred to the City months before the State law to abolish RDAs was even passed. We believe the State has no rightful claim to force us to give up City assets. The State has given indications that it may soon demand that the City transfer these assets – such as the land under Great America Theme Park – putting into jeopardy millions of dollars in rent and lease payments that each year contribute about $13 million to the City’s General Fund. That amount is about equal to the entire annual budget of the Parks & Recreation Department or the combined funds for library operations and street and road repair. It is about half the cost of the City’s firefighters and about half what is spent annually by the City on police patrol and investigators. These examples are only to put the potential impacts in perspective; until the State Controller’s Office letter or other audits are received no specific budget impacts can be considered. Santa Clara’s concerns stem from similar letters received by other cities in the State regarding their former RDAs.

The City remains very concerned. “We believe the State has no rightful claim to force us to give up City assets,” the letter noted. “We have an obligation to our residents and taxpayers to protect your local tax dollars and your local services.” 

City staff members continue to travel to Sacramento to speak with State staff and their auditors, to review Santa Clara’s former RDA operations, and to explain the potential severe consequences to our community. Updates on the situation will be posted on the City’s website. 

City Budget 101: Flip Book | PDF

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