Dissolving Redevelopment Agency Will Cost City $5.3 Million

Some loans the city made to get the San Juan Capistrano Redevelopment Agency started almost 30 years ago will not get repaid.

Dismantling San Juan Capistrano’s Redevelopment Agency will ultimately cost the city’s general fund $5.3 million.

The that the state can snuff out redevelopment agencies across the state as a way of redirecting $1 billion-plus to cash-strapped state coffers. The agencies are designed to rejuvenate blighted areas and encourage the development of low- and moderate-income housing.

Although the agencies may finish projects they started, they may not start any new ones, according to the high court ruling. In addition, any undeveloped property must be sold, with the proceeds going to schools and various county agencies.

“The city is going to be left holding the bag,” said City Attorney Omar Sandoval.

That’s because San Juan Capistrano, like other cities with redevelopment agencies, loaned money from its general fund to kick-start the redevelopment agency when it formed in 1983, Sandoval said.

Any money loaned during the first two years of the agency’s life will be repaid, Sandoval said.

“Any debts after the first two years of creation of the agency are wiped out,” he said.

For San Juan Capistrano, that comes to $5.3 million, said Cindy Russell, the city’s finance director.

The city is going to be left holding the bag.

         – City Attorney Omar Sandoval


Russell later told Patch that when the agency first started, the city loaned it $3.4 million to help the builders of Capistrano Pointe apartments off of Las Ramblas to include low-income housing. That money will be repaid.

But the city loaned money for other projects after the Redevelopment Agency’s two-year anniversary that will not be paid, Russell said. These include moving a storage facility Solag Disposal Co. (now CC&R) owned out of the , the administrative costs associated with the loans and some “leftover" downtown development.

The discussion was part of the postmortem held by City Council members – wearing their hats as directors of the city’s Redevelopment Agency – during Tuesday’s meeting in light of the court decision.

According to the ruling, the city’s only choice is to dissolve the Redevelopment Agency, Sandoval said. The next step is deciding whether the City Council wants to become the “successor agency” responsible for liquidating assets and seeing the current projects through to completion, he said.

However, the real power will go to an oversight board comprised of representatives of the city, the county, the South Orange County Community College District and the , Sandoval said.

“Most decisions made by the City Council will have to go to the oversight board for approval,” he said.

The city has until Jan. 13 to decide whether it wants to be the successor agency, Sandoval said. If it does, the city will receive some funding to pay for the administrative costs for the new agency.

By choosing to act as the successor agency, the City Council would “have a say how those properties are sold,” Sandoval said. “You get to align the values and priorities of the cities with the uses; however [the sales proceeds] will not go to the city.”

Council members decided to hold a special meeting before the Jan. 13 deadline to decide whether to take on the role of successor agency. If they decline, another taxing agency that has property in the redevelopment area can play that role.

Resident Jim Reardon urged the City Council to get creative. For example, the city could hold onto the , a 16-acre parcel north of Stonehill Drive, if it built a water reclamation plant there.

“When you get lemons, you make lemonade,” he said.

But sometimes, you just get a lemon.  

The agency is also sitting on $11 million that was supposed to go to new low-income and moderate-income housing projects, Russell said.

Now, too, “that’s gone,” she said.

Alberto Barrera January 05, 2012 at 05:16 AM
I agree with Jim Reardon on this one, but I'd take it a step further and attempt to build on all properties. The city must not be led like sheep to the slaughter house, it should try to make this process as painful to the state as possible.
desimal January 07, 2012 at 12:14 AM
I agree, but we just shouldn't attack this with the hubris the council and city hall has approached other matters which resulted in millions of dollars lost in lawsuits.


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