City Looks at Keeping RDA

Despite a complicated puzzle of money problems including a $1.5 million structural deficit and state-imposed fees in the millions coming due, the Hercules Redevelopment Agency might choose its “pay to play” option and stay in business.

Hercules must pay $1.4 million to the state by Oct. 1 to keep its agency going through the next fiscal year, when it will need to pay an additional $375,000 fee, interim City Manager Liz Warmerdam said at Tuesday’s Finance Subcommittee and Citizens Finance Advisory Ad Hoc Committee meeting.

The fees are a result of the state’s recent effort to balance its budget by shutting down California's 400 redevelopment agencies by Oct. 1. Companion legislation lets agencies continue operations by payng their share of $1.7 billion this year and $400 million each year moving forward. The amount varies from city to city. 

Those funds would be diverted largely to schools and special districts.

The Hercules RDA also owes more than $5 million to a state education fund.

Still, the city might benefit in the long run if it can pay the $1.4 million, Warmerdam said. Most of that money would probably come from the city's affordable housing funds, which have a $1 million surplus this year, Warmerdam said.

Land recently transferred to the city’s general fund and grants for the Intermodal Transit Center are in jeopardy if the city chooses to dissolve its RDA, she said. If the city keeps its RDA, there is also the possibility of increased tax revenue as property values rise and the city continues to develop.

Either way, Warmerdam said, the RDA's mounting bond debt and other debt will not go away. If Hercules dissolves its RDA, it will need to form a successor agency to deal with its debt and assets.

Warmerdam said city staff is looking into hiring consultant to do a cost-benefit analysis and determine if Hercules should keep or kill its RDA.