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Mayor Allevato Steps Into Redevelopment Boxing Ring

The San Juan Capistrano Community Redevelopment Agency has about $50 million in debt and generates about $9 million in revenue annually.

is ardently opposing to sink redevelopment agencies in California.

This week, he floated a message praising San Juan Capistranos's redevelopment agency as an economic boon and fired off a letter to Brown listing 28 significant projects he and other city officials say "demonstrate how vital redevelopment has been for our city."

The mechanism has breathed new life into San Juan, including much of the historically iconic areas in downtown, including the , Franciscan Plaza and the Capistrano Depot. 

But because of the unique, and somewhat complicated funding mechanism used by redevelopment agencies, the projects have diverted coveted property tax revenues away from schools and the county, which provides basic services to San Juan residents, such as public safety and health and welfare programs.

Without the revenues, the state government has been forced to pay the difference, hence Brown's proposal. He says the annihilation could free up $1.7 billion that will be funneled back into schools and local services.

Since its formation in 1983, the San Juan Capistrano Community Redevelopment Agency has helped create about 1,500 jobs and seen the completion of 39 projects, according to city estimates. It did so with what is called "tax increment"—the increase in property taxes within a redevelopment project area, which result from the rise in the project area's assessed value that exceed the base year's value.

Redevelopment agencies are able to subsidize improvements to blighted areas by issuing bonds, then paying back those bonds with the tax increment.

Locally, opponents of taxpayer-funded redevelopment say public money should not be "gifted" to the private sector. They take issue with the $3.3 million awarded to car dealerships (an additional $4 million has been pledged if they keep their doors open for an extended period of time) and the approximately $500,000 in agency money used to pay for the production of a voluminous draft master plan for downtown. That same plan, they say, could be substantially hindered if redevelopment agencies cease to exist.

With the exception of a few housing projects for residents with low incomes, most of the projects were within the San Juan Capistrano Central Redevelopment Project Area. The area encompasses 429 parcels and about 1,097 acres—totaling 12.6 percent of the city’s total acreage.

Here are some of the projects:

  • The construction of the gym at Capistrano Valley High School, the headquarters for and .
  • Purchased the 100-year-old railroad depot, retrofitted it and sold it to a private investor. The space is now occupied by and the.
  • Paid to widen a street, install a traffic signal and add storm drains to make way for the development of the Capistrano Home Furnishings Center and portions of Plaza del Obispo, which also received fincial assistance from the agency. The agency also paid for the cleanup and removal of the Super 7 fueling station.
  • The creation of 198 units of affordable housing for low- and moderate-income households.

In the last 28 years, it has also incurred a number of significant financial obligations, currently including: five promissory notes, five owner participation agreements and four outstanding tax allocation bonds.

Those total $50 million in debt, just over $17.75 million of which is set to be due this year, but on Tuesday, the agency elected to refinance about $8 of the $9 million owed to members of the Kinoshita family for the 1990 purchase of a swath of farmland.

Some of the other obligations include $6.5 million owed to the city of San Juan Capistrano; one of those loans has an interest rate of 9 percent. Additionally, there’s $9.78 million in tax allocation bonds issued to finance a variety of projects.

If Brown succeeds in his quest to dissolve the redevelopment agencies, the tax increment, projected to be about $8 million annually in the years ahead in San Juan Capistrano, will be used to pay off all of the debt. Other sources of revenue currently include about $900,000 in interest and $170,000 in rental income yearly.

"My plan protects current projects and supports all bonded indebtedness of the redevelopment agencies," he said Monday during his State of the State Address.

These are the current projects under way in San Juan Capistrano:

  • Tuttle Click's Capistrano Ford: 169,357 square feet, 100 employees, anticipated to open March 14, 2011.
  • : 28,271 square feet, 38 jobs, anticipated to open May 2011.
  • Vaquero West: 10,026 of square feet of retail and office space in the white and brown building across from on Verdugo Street, anticipated completion is in 2012.
  • Finalization of the : an update to the 1995 version to add 220,000 square feet of retail, 140,000 square feet of commercial/office space, 1,200 square feet of public institutional space, 240 condos or apartments, 214 homes and 214 hotel rooms ( and ).
  • : 26 housing units for residents with low and very low incomes. The project is currently in the design process.

While the debt will be paid off and contractual obligations filled, the city's ability to subsidize future redevelopment projects in the absence of the redevelopment agency (the city and the redevelopment agency are two separate legal entities) is questionable, San Juan's chief financial officer, Cindy Russell, said.

The Historic Town Center master plan approved by the City Council in October calls for the revitalization and expansion of downtown from 20 to 44 acres. In a column he wrote recently for Capistrano Common Sense, resident Jim Reardon wrote that supporters of the plan "need the Redevelopment Agency ... in order to finance their grand downtown scheme."

While it's possible that without redevelopment, some of the public infrastructure, such as water and sewer lines, wouldn't be installed to feed the new development, Russell said it's never been the intention of the redevelopment agency to subsidize the vast array of changes.

"I don't think it's envisioned that we're going to pay for every one of those things," she said.

"We would then be going to find other ways for the private sector to support it," she said of the plan if the agency were eliminated. "It's unknown [how the plan would be affected]. Whether you have redevelopment or not, you now have a plan, a vision, to follow."

Mamie February 04, 2011 at 05:17 PM
Jenna, Another well done article. Keep up the good work. Until now, I knew very little about any of this, or other important issues in town. Your stories have actually inspired me to get more involved and learn more about what is going on in my community. Thank you. Please do not waiver from your unbaised reporting. You are a breathe of fresh air.
Colleen February 04, 2011 at 10:27 PM
Agreed Jenna. We appreciate getting unbiased news. Opinions we can form on our own, if we have unbiased facts from our journalists.
rick lyons February 04, 2011 at 10:47 PM
Cindy Russell, you have go to be kidding. For the past 20 years the City has been paying interest only on the two Kinoshita notes. Not one penny on the principal paid. You recommended to the City Council to renew the notes another 10 years, interest only. 30 years of interest only payments. Does that make good business sense to you?
Jim Reardon February 06, 2011 at 03:03 AM
Mayor Allevato has clearly expressed his preference for continuation of the Redevelopment Law. What he's saying is that he likes the idea of shifting City expenses off on to future property tax payers. But as these future obligations increase, the debt will crowd-out essential public services such as police and fire protection, roads, other basic government services. I'm sure everyone has noticed that government costs us more and delivers less lately. This is because mistakes of the past are catching up. Excessive pension benefits are a form of borrowed payroll -- a gift today to be paid by future taxpayers. Crazy redevelopment ideas are much the same -- awards to insiders today that are to be paid from future tax receipts. It is no different than if the City had simply borrowed the money directly. But of course, it is not possible for them to do that outright without approval of 2/3 of the voters, so they resort to shifting of City costs into the Redevelopment Agency where they have no such restriction. They are quick to tell you, "This costs you nothing. Your taxes won't go up." But the truth is that as a larger share of your future taxes are committed to pay for past activities, future tax increases become inevitable. None of us want to see police, fire and roads deteriorate, and those who are supporting today's crazy schemes are certain we will tax ourselves to protect these services later. Want to pay more for the same services? That day has arrived.
Jim Reardon February 06, 2011 at 03:09 AM
Jeena, This is a great article and an excellent topic. However, please be careful about the facts. Your sub-headline says that the Redevelopement Agency "generates" $9 million. You are parroting the line from City Hall. In truth, the Agency spends $6.2 million each year in excess of its income. The money "generated" does not come back to the Agency. This is a "funny money" number, an estimate of consequential tax receipts that cannot be confirmed. To get to $9 million, the City has to take credit for "generating" all the tax receipts through redevelopment. That is obviously a hoax.

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