City Continues Redevelopment Cost-Benefit Analysis

The Hercules City Council Tuesday will receive a report and consider a plan to either keep or disband the .

New California laws require cities to make payments to the state to keep their redevelopment agencies active. Hercules would have to pay about $1.5 million by the end of fiscal year 2011-12 and $348,000 the following year. It is unknown what the fees will be beyond 2012-13.

Cities can opt out, not pay the fee and discontinue their RDAs. They would then be required to set up a successor agency to deal with their agencies’ debt.

Hercules has not determined whether it will keep its RDA or if keeping the agency is even possible.

The original legislation required cities to make a decision on the future of their RDA by October, but a challenging the constitutionality of the laws has allowed California RDAs to hold off until the state Supreme Court makes a ruling.

“While the court will most likely not make their decision until January, our attorneys have recommended that we continue our plan to discuss and decide our opt in/out position, but to do so in September, 2011 so that any remittance payments can be scheduled…” said interim City Manager Liz Warmerdam in a written report submitted to the council.

The report points to a number of potential benefits to keeping the RDA, including safeguarding some of the city’s properties and the repayment of city funds spent on the agency. But ultimately, the report states, keeping the RDA would “not be the preferred or even viable alternative.”

One of the main drawbacks to preserving the RDA is that the general fund would have to subsidize the agency by nearly $10 million over the next five years, and cash flow to the agency would not be positive at least until 2026, the report shows. Also, if the city chooses to keep its RDA now and then dissolve it at a future date, it would face steeper penalties than if it chose to abolish the agency up-front. 

Hercules' redevelopment attorney, Lynn Hutchins, is scheduled to present on the city's RDA possibilities at the Tuesday, Sept. 13, council meeting.