LAFAYETTE -- City leaders have agreed, at least preliminarily, to loan Lafayette's redevelopment agency $1 million to keep the agency in the black as bond payments and the final bill for the new library come due.

But council members also asked staff not to pull the trigger on the loan until absolutely necessary, as the city continues to wade its way through a sea of uncertainty regarding the future of redevelopment agencies.

The redevelopment agency must make a final $1 million payment to its library contractor in August. Payments on the bonds that funded the library and veterans memorial building come due around the same time. That could leave the agency as much as $965,885 in the red.

The agency has a "revolving line of credit" up to $2 million from the city reserve fund to resolve cash flow issues. But council members in February, worried that the state's plan for redevelopment could put the repayment of any loan in doubt, said the money should only be transferred with council approval.

The city has about $9.8 million in reserve -- 95 percent of its operating budget.

"This is one more reason why it's great to have $9 million in your general fund reserve," said City Manager Steven Falk. "People talk about having an emergency reserve, a rainy-day reserve, for the days when it's raining. Well, it's been pouring around here for two or three years now, and we're weathering it very well."


Advertisement

With the state of redevelopment still in flux, the council may discuss other options during an upcoming closed session, said Administrative Services Director Tracy Robinson.

"We're just all kind of sitting and waiting to find out what's going to happen," she said.

On Thursday, Gov. Jerry Brown signed a pair of bills that would allow the state's 400 redevelopment agencies to continue to exist only if they hand over $1.7 billion in revenue this year and a smaller amount annually beginning in 2012-13.

Lawmakers are now working on additional legislation that would define how redevelopment agencies would operate going forward, said Assemblywoman Nancy Skinner.

The League of California Cities and the California Redevelopment Association plan to sue the state, saying the move violates Proposition 22, which passed in November and prohibits the state from raiding redevelopment and other local money. They will also seek an injunction allowing agencies to continue operating until the case is decided.

Under the new laws, payments to bondholders and other "enforceable obligations" would still be made even if a redevelopment agency shuts down. The central question for Lafayette is whether loans from the city to its own agency fall into that category.

Language in one bill suggests loans made before the end of last year, such as the nearly $6 million the city has already loaned the agency, may be repayable. Whether that would be the case for an additional $1 million loan is unclear, the city says.

"The council may decide that if that's in question or if in fact the debt is not repayable; they may want to reconsider using city funds," Robinson said.

If Lafayette wanted to keep its redevelopment agency in business, it would owe the state about $400,000 this fiscal year and roughly $100,000 each following year, according to California Redevelopment Association estimates. One council member said those payments may be worth it.

"We forecast that the agency was going to bring in $15 million for projects and $30-some million to support affordable housing," said Councilman Don Tatzin.

"So $3 million of that is unpleasant, but unless we think that forecast is no longer valid because of the recession, it's still an acceptable deal."

Contact Jonathan Morales at 925-943-8048. Follow him at Twitter.com/sosaysjonathan.