By Jennifer Bestor
Three weeks ago the California Supreme Court abruptly stopped the redevelopment merry-go-round. While Menlo Park city officials bid unhappy adieu to a subterranean revenue stream that allowed them to address challenges in east Menlo Park, I personally am relieved that one of the tight random twists in the Gordian knot of California public finance has been cut.
For 30 years Menlo Park's redevelopment agency has consumed the lion's share of property tax revenue from Belle Haven and Willow Road -- now over $10 million a year.
Borrowing against that tax stream further leveraged the agency's ability to fund yesterday's blight-reduction initiatives out of tomorrow's tax dollars. Currently, over $63 million of Menlo redevelopment debt is outstanding, with debt-service commitments that will consume over $5 million annually for another 20 years.
Among the expenditures was $2 million for the city's gang and drug-related programs, along with other blight-fighting activities. And $3 million of the tax stream made it through to local agencies -- overwhelmingly to the county and the Menlo Park Fire Protection District, which wisely gave up only half their allotted revenues to redevelopment.
Fewer dollars flowed to our schools -- nominally the largest beneficiaries of local property taxes. Schools had blithely assumed back in 1981 that the state would generously top up any shortfall to their coffers. Needless to say, that backfill quickly emptied the state's purse.
So, while local city governments loudly rue the dissolution of their redevelopment agencies, the county's school districts see a glimmer of hope. For 20 more years, education will not get anything near what it's given up, but, from dissolving the Menlo Park agency alone, Sequoia Union High School District may see another $240,000 a year and Menlo Park City School District another $70,000.
Dissolving South San Francisco's redevelopment agency -- with its $40 million a year in property tax revenue -- should release more than $10 million a year directly into that economically disadvantaged district. And everything that strengthens education elsewhere now directly benefits Menlo Park -- a child who doesn't have to move into our crowded school system for a good education is one fewer to fund out of our fixed pot -- and comes with a parent who does not have to add a long commute to the region's congestion and pollution.
While some local districts like Ravenswood and Redwood City won't benefit as directly (their increased property tax revenue will simply decrease the state's obligation), anything that stabilizes the state's financial situation helps them avoid further cuts and disruptions. Additionally, more local funding coming straight to them, rather than through the weak reed of Sacramento, means less borrowing to deal with the now-annual state payment deferrals.
A significant one-time cash transfer to all underlying local services should also result from distribution of the remaining assets of the agency. In Menlo Park, $17.7 million in cash remains from the last round of borrowing. The new law divides it up based on the underlying tax allocations for district properties.
Unless redevelopment lobbyists claw this back via threatened legislative action, the city of Menlo Park will receive around $1.5 million; Sequoia High School District, $2.2 million; Menlo Park City School District, $750,000; the county, $2 million to $3 million; the fire district, $1.5 million; and so forth.
Are there clouds on the horizon? Of course. One-time windfalls are an invitation to every special interest. I would hope that local school districts fund one or two meaningful initiatives with lasting impact.
Also, the former rob-Peter-to-pay-Paul nature of redevelopment funding for east Menlo Park's special needs shouldn't obscure the importance of addressing them. Our city, acting as our redevelopment agency, has tried hard to do good things for the "blighted" area. This change offers the opportunity to engage all Menlo residents openly in understanding and paying for these local high-impact programs.
Jennifer Bestor writes occasionally about city and school district finances.