The new oversight board that will be tasked with implementing an orderly liquidation of redevelopment in Santa Clara County hasn’t even been created, and there’s already a disagreement about who should serve.
In Morgan Hill, local officials want representatives with knowledge of the city itself as well as the financial complexities of the redevelopment agency. And they prefer the oversight board members to be elected and “accountable.”
Santa Clara County officials, on the other hand, think that since the new board will have little freedom to make political decisions which are not mandated by the state, staff members with knowledge and experience in the property tax distribution process will suffice.
And the representatives of other agencies that have a stake in the oncoming redistribution of about $20 million a year in the Morgan Hill redevelopment agency’s property tax increment revenues – such as local school boards – are hoping to have a seat on the new board.
As of Feb. 1, the RDA will no longer exist. The five entities that will receive the funds that normally go to the Morgan Hill RDA but will be redirected their way when the agency’s debts and contracts are paid off, get to appoint the seven board members.
Those are the county board of supervisors (two appointees), the county board of education, mayor of Morgan Hill (two appointees), chancellor of California community colleges and either the county library district or the Santa Clara Valley Water District. They have to appoint their representatives by May 1, and each of the nine former RDAs in the county will have a new oversight board.
The oversight board’s first and predominant task, probably for several years into the future, will be to ensure the Morgan Hill agency’s annual “enforceable obligations” including debt and contract payments are made.
The board was created by a state law approved last year that dissolved RDAs statewide. That law was intended to direct about $1.7 billion in property taxes from the agencies to education, social services and public safety.
As of Wednesday, the city is now acting as the “successor agency” to the RDA. As such, it will make claims to the county auditor-controller, who will soon have control over the RDA’s revenues, to pay an estimated $48 million in annual outstanding agency commitments – including 2007 bond proceeds and the Butterfield Boulevard construction contract.
An updated list of obligations will be submitted to the county in the coming weeks, and the auditor and oversight board will determine which claims are valid under state law.
The supervisors’ potential appointees to the oversight board are already a point of contention.
Mayor Steve Tate said the city wants “people that are accountable for their actions,” such as elected officials should serve on the oversight board. He thinks County Supervisor Mike Wasserman, who serves the district that includes Morgan Hill, would be an ideal candidate.
A county staff report released last week recommended the board appoint finance director Vinod Sharma to one of the county’s seats, and former CEO and longtime Morgan Hill resident Pete Kutras to fill the other one. Furthermore, the staff recommended that county tax collector Jay Singh be appointed to represent the library district, though there is even a disagreement about whether or not that body is entitled to a seat.
While Tate supports the appointment of Kutras, he doesn’t think that Sharma or Singh – as county number-crunchers – will be as accountable as Wasserman or another member of the Morgan Hill community.
“We want people who are trying to do the best job for the community, and are accountable for doing that,” Tate said.
City manager Ed Tewes added that city officials have expected the county to ask for suggested appointees to the oversight board, as it will be making decisions that affect Morgan Hill.
Wasserman noted that the oversight board is “not political, and not policy-making,” and therefore the “background and knowledge” of Sharma, Kutras and Singh qualify them to serve.
“There’s very little, if any, discretion the oversight board members will have,” said Wasserman. “The only thing the oversight board must do is implement the rules the state has mandated.”
The board has already appointed supervisor Dave Cortese to sit on the San Jose oversight board. County staff provided a list of recommended county employees and community members to serve on the county-appointed seats on the other boards, in the event that the supervisors themselves do not want to be appointed.
City staff even disagree that the library district is entitled to a seat on the board. Under the state law, the largest special taxing district in the former RDA area gets a seat. The county says that’s the library district, but the city’s independent financial advisor thinks it’s the Santa Clara Valley Water District, Tewes said.
If that’s so, then the city would like to see one of the SCVWD board of directors appoint one of its elected members, Tewes said.
Kutras agrees with the city, and sent Wasserman a letter telling him why. “While they are very qualified professionals, they will not have any independence,” he wrote of the county staff people recommended to be on the oversight board.
Approving the recommendations “will give the message and signal that Santa Clara County has no intention of doing any “due diligence” type of work with the oversight boards, but merely window dressing to steamroll a predetermined outcome.”
He added over the phone Monday that since the RDAs were served by elected officials – typically and in Morgan Hill’s case the city council – then it rightly follows that the oversight boards should be as well.
“That creates accountability and transparency,” Kutras said.
The mayor will appoint himself to the oversight board. By state law, Tate’s second appointment has to be a former RDA employee who is also a representative of the largest labor union represented in the former agency. In Morgan Hill that’s the AFSCME union, and Tate said the union members and other city staff are in the process of suggesting an appointee.
While no one knows how much more revenue the local school district, Gavilan College, city, county, fire districts and other agencies will receive from the breakup of the RDA, they are eager to see that revenue start trickling in.
Steve Kinsella, president of Gavilan College, has submitted his name to the state chancellor of community colleges to be considered as a Morgan Hill oversight board member. As such, he can help ensure that tax increment revenues that Gavilan College has been missing out on due to redevelopment for 30 years will come back.
“We’re interested in how the (former) assets of the redevelopment agency are expended,” Kinsella said.
And while MHUSD Superintendent Wes Smith was unfamiliar with the technicalities of the new state redevelopment law at press time, he has informed city and county officials he is willing to serve on the oversight board.
The RDA has always made “pass-through” payments to the county, libraries, SCVWD, MHUSD, the Bay Area Air Quality Management district, and other taxing agencies. Those were funded by tax increment revenues collected in the RDA zone. In the current fiscal year, for example, Gavilan received about $102,000 in those payments, and the county received about $444,000.
Those numbers will go up now that the RDA is dissolved, but only slightly at first. According to the county staff report, once all nine agencies’ obligations are paid off – at a currently unknown date – the county will receive about $80 million more per year in property taxes, and school districts and community colleges will receive about $150 million annually.
Partial list of debts, contracts and other obligations, to bepaid by successor agency:
– 2008 tax allocation bonds: $159 million
– RGW Construction, Butterfield Boulevard: $11.6 million
– State of California: $3.7 million
– Granite Construction, West Dunne Avenue construction: $1.6million
– SCVWD, for Llagas Creek flood control design: $2.8 million
