Conflicting, vague or late explanations and misunderstood advice swirl around recent sudden changes to the makeup of the Morgan Hill Redevelopment Oversight Board, and the potential impact on the distribution of local tax dollars could be significant, according to authorities.
The Oversight Board is tasked with closing out the affairs of the RDA, which was closed after 30 years by the state in February 2012. Each city in California that had an RDA now has a similar oversight board.
Two new appointees to the seven-member Oversight Board attended their first meeting at Council chambers Wednesday, and no one in the room – including the board members – offered to explain the new faces when asked by a resident for some input.
Observers including Mayor Steve Tate say it’s already evident that at least one of the parties with a stake in more than $22 million annually of former Redevelopment Agency revenue is pushing to make an aggressive claim under false pretenses. Specifically, Tate and former County Executive Pete Kutras, who was unexpectedly removed from the board last month, think Santa Clara County is trying to solidify a consistent voting block on the board.
Santa Clara County Supervisor Mike Wasserman, who represents the supervisorial district that includes Morgan Hill, points out that in the long run local schools, public safety services and even the City itself will see long-term benefits from the closure of the RDA, but the cities themselves say the County’s elected governing board continues to thumb its nose at their concerns.
Morgan Hill’s RDA and more of the 400 or so agencies – which were funded by incremental property tax revenues – had projects, contracts and outstanding debts in progress. After the oversight boards wind down those affairs under the guidance of the state, the former redevelopment revenues go back to cities, counties, school districts and community colleges.
Complicating things is the fact that, while the 2012 state RDA law doesn’t allow much flexibility on what to do with the agencies’ former assets, it is poorly written and therefore subject to conflicting interpretations at the local level – and the short-term consequences could be significant, according to numerous staff people and officials involved in the process.
The Santa Clara County Board of Supervisors recently appointed county Asset Development Manager Glen Williams to replace Kutras, a Morgan Hill resident who retired in 2008 after about six years as the County Executive.
And Feb. 6, the Santa Clara County Board of Education appointed Jason Vann, the County Education Office’s Advisor for District Business and Advisory Services as its representative on the Morgan Hill board. Vann replaced Morgan Hill Unified School District Superintendent Wes Smith.
“I’m a member of this community, and Wes (Smith) is our K-through-12 superintendent, and to have both of us unceremoniously removed and replaced with people who aren’t (members of the community) – it’s clear to me they’re going to be directed as to how to vote,” Kutras said. “And that’s troubling because it’s supposed to be a straight-up process.”
Each taxing agency in the former RDA’s boundaries appoints at least one representative to the Oversight Board. The County and the City each appoint two members, and the County Office of Education, State Chancellor of Community Colleges, and the Santa Clara Valley Water District each appoint one.
When the water district’s appointee, Gilroy Mayor Don Gage, was prompted by a member of the public to ask the Oversight Board and its staff Wednesday if anyone could shed some light on why there were two new board members at the dais, he was met with silence. “I guess not,” Gage said.
Tate, who serves along with Morgan Hill Accounting Assistant Angela Rivera as the City’s representative to the board, was perplexed at the County’s removal of Kutras, citing his institutional knowledge and a full year of background in the highly nuanced and complicated RDA dissolution process. He said Wednesday’s meeting was “very frustrating,” as Williams asked numerous questions already posed at previous meetings or answered in staff reports, regarding a long list of former RDA obligations remaining to be paid.
These include expenses related to the ongoing Butterfield Boulevard extension project, and future downtown improvements the RDA long planned to fund with bond proceeds it acquired in 2008.
If other ongoing RDA expenses proposed to be funded by the $22 million formerly collected each year by the Morgan Hill agency are reduced or rejected by the Oversight Board or the state (which has ultimate veto power over the board), then more money could pass more quickly to general funds of the City, county, MHUSD and other agencies.
Tate thinks the County replaced Kutras in order to ensure both its appointees vote along the same lines, as some of the expenses have been continually disputed since the Oversight Board went into action last year. Kutras did not always vote the same way as the County’s other appointee, Tax Collector George Putris.
“The only reason I can come up with (for replacing Kutras) is they want as much money as quick as they can get it, and they want people (on the board) who will be yes-men,” Tate said.
From the outset, Tate and elected officials from other cities in Santa Clara County wanted their elected supervisors to serve on the Oversight Board because they are directly accountable to the public.
A letter from the Santa Clara County Cities Association to the Board of Supervisors Jan. 28 expresses the cities’ continued desire for a more active role by the elected supervisors. The letter cites instances in which County appointees to oversight boards have “undermined” the cities’ efforts to limit the impact of the loss of redevelopment and relied on “overly narrow” interpretations of the state law dissolving RDAs.
In Morgan Hill, for example, while the state law requires a specific review process for determining the former RDAs’ outstanding assets and liabilities, the County appointees to the Oversight Board pushed for a previous audit that was “unprofessional, inaccurate and inconsistent with state laws,” the letter said.
Plus, County staff and appointees have repeatedly argued that the City has overstated some of the staff costs associated with former RDA projects – such as Butterfield Boulevard – while the County has outspent the City on its own share of similar staff costs related to the oversight process.
Despite the cities’ intended message, Wasserman cited the Cities Association’s letter as the County’s reasoning for replacing Kutras. At the Feb. 12 Board of Supervisors meeting, the board replaced one of its appointees – as well as alternates – to each of the Morgan Hill, Mountain View, Milpitas and Campbell oversight boards.
Wasserman said, citing insight from the cities’ letter, the focus on the dissolution process has shifted from auditing and financial tasks to mostly property and real estate development tasks. Most of the former RDAs, including Morgan Hill’s, owned properties they intended to develop that now sit in limbo.
The Oversight Boards and state now have to determine what to do with those properties.
For the county, Williams has been extensively involved in property transactions, redevelopment and valuation.
Plus, Williams’ parents lived in Morgan Hill for decades, and were residents of one of the Morgan Hill RDA’s first affordable housing developments, he said.
The County never had an RDA, and in the supervisors’ response to the Cities Association, Supervisor Ken Yeager pointed out that RDAs diverted public revenues that would otherwise have gone to education, public safety and other basic services.
In the “bigger picture,” Wasserman noted, most of the former RDA revenues will remain in Morgan Hill, with 45 percent of the property taxes going to MHUSD, and 10 percent going to the City’s general fund.
“For 33 years the schools gave up their share that went to the (RDAs),” Wasserman said. “It’s a good chunk of dollars, and you know how (financially) challenged the schools are.”
Tate said Wasserman’s explanation for replacing Kutras is “exactly the opposite of what we were asking for.”
Cities Association Executive Director Raania Mohsen clarified the purpose of the Jan. 28 letter was to “request the county supervisors to get directly involved” and appoint oversight representatives who are accountable to the public – such as the supervisors themselves.
Kutras candidly pointed out that during Oversight Board meetings, he often questioned County staff’s conclusions and recommendations, and “consistently supported the City’s position” – rather than the County’s – on the complicated question of whether certain staff costs associated with projects should be paid with bond proceeds or property tax revenues.
Wasserman countered the claim that the County is trying to solidify its Oversight Board voting block by noting that the two appointees will always form a minority on the board.
Plus, all the board’s actions are subject to state review and approval, Wasserman added. And both Wasserman and Williams said they are required to follow the state law.
“This is not the County versus the City,” Wasserman said.
The explanation for Smith’s replacement on the Oversight Board remains murkier.
A staff report from the Feb. 6 County Board of Education meeting said replacing Smith was recommended “per discussions with Morgan Hill Unified.”
But Smith said he was notified he was off the board via a letter he suddenly received in the mail one day from the Office of Education.
A statement from the Office of Education, which also replaced its appointee to the City of Santa Clara Oversight Board, noted that the former appointees had served for a year, and “we’re trying to provide some relief to them by making this change,” according to the office’s Chief Business Officer Micaela Ochoa said.
However, Smith said he never indicated to anyone that he was tired of serving on the board. In fact, he started out with a long-term commitment to see the entire RDA dissolution process through to the end, which could be years away.
Santa Clara County: $1.3 million
City of Morgan Hill: $$926,000
Morgan Hill Unified School District: $4.1 million
Gavilan Community College: $519,000
Santa Clara County Library: $239,000
County school service: $313,000
Santa Clara Valley Water District: $254,000
Bay Area Air Quality Management District: $17,319
Loma Prieta Resource Conservation District: $3,197
Education Revenue Augmentation Fund (K-12 and College): $1.5 million
Total: $9.2 million
Source: Santa Clara County
