Return of Redevelopment Agency Funds Sought From City of Santa Clara

Santa Clara County has filed suit demanding the city of Santa Clara turn over nearly $320 million in property, cash and other assets the city withdrew from its former redevelopment agency in 2011, county officials said.

The assets include city-owned property beneath the Great America Theme Park, the Santa Clara City Convention Center, Techmart Center and the Marriott, Hyatt and Hilton hotels in Santa Clara, according to the county auditor-controller's office.

Santa Clara County Auditor-Controller Vinod K. Sharma and the county's Office of Education filed the suit on Feb. 8 in Sacramento County Superior Court against Santa Clara and several city agencies including its housing and stadium authorities.

Sharma, in a Dec. 17 county staff report included in the lawsuit, stated that the city of Santa Clara is holding on to $319.8 million in real property and cash from leases that it must turn over to its local successor agency to comply with state law.

The suit's objective is to enforce a 2011 statute that abolished local redevelopment agencies and compel Santa Clara to give up its RDA-related assets, said James R. Williams, special assistant to County Executive Jeffrey Smith.

"The city is holding onto those assets," Williams said. "This is a mechanism to get those assets returned."

Santa Clara has been transferring into its coffers about $13.4 million in payments from annual RDA property leases, including from Great America—property itself worth $76 million—the convention center, Techmart, the Marriott, Hyatt and Hilton, Williams said.

But that's not consistent with a law known as ABX1 26 signed by Gov. Brown in June 2011 abolishing local redevelopment agencies to provide new revenue streams for public education and other government offices, Williams said.

Under the law, former RDA property must be governed by a local successor agency and its seven-member oversight board, in this case the city of Santa Clara's Successor Agency, Williams said.

The property is placed under the control of the locally controlled successor agency and the revenues such as rents and leases are shared with local public schools and other programs, Williams said.

For the city of Santa Clara, its successor agency would send about 40 percent of the revenue from its former RDA property to the Santa Clara Unified School District, which governs the public schools within Santa
Clara's city borders, Williams said.

About 26 percent of the proceeds would go to other local public education offices such as the West Valley-Mission College Community College District and the county Office of Education, Williams said.

Then about 10 percent would be sent back to the city itself, 18 percent to Santa Clara County and the rest to other local boards such as the Santa Clara Valley Water District, Williams said.

Santa Clara City Attorney Ren Nosky said that the city would reserve its opinion on the case until it receives a summons to appear in court.

"We have looked at the lawsuit but I don't think it's appropriate to comment because we have not been served," Nosky said.

"We obviously have significant differences with the county with those issues," Nosky said. "We have quite a ways to go conclude that process."

Jacob Roper, a spokesman for the state controller's office, said the agency is conducting its own audit of Santa Clara's former redevelopment assets and he was unsure when it would be completed.

The controller's office is not involved in the county's suit but the department has the ability to order the city's assets transferred to Santa Clara's successor agency once the audit is finalized, Roper said.

Santa Clara tops the list of nine cities in the county that withheld RDA funds and assets to avoid having to distribute proceeds to local agencies under the 2011 law, Williams said.

Many cities all over California also have held onto former RDA assets to get out of turning them over to successor agencies, Williams said.

State auditors, for instance, have found that Milpitas kept $50 million and Morgan Hill held onto $13 million in former RDA assets, Williams said

But Santa Clara's case is different in that the city has continued to spend money that should have been sent to its successor agency and the value of the city's property and other holdings is much higher, Williams said.

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