PITTSBURG -- The Pittsburg Unified School District and the agency that replaced the city's disbanded redevelopment agency are facing off in court over money.

At issue is whether the district is legally entitled to a $1.2 million pass-through payment or if the money should go to pay off redevelopment debt. Pass-through payments are intended to make up for property tax revenues that school districts and other local agencies would have received if Pittsburg's redevelopment area had not been established.

A state law required redevelopment agencies to shut down in February 2012. In their place, successor agencies were formed to distribute tax-increment revenues. Such revenues are derived from increased property taxes resulting from redevelopment projects and are used to pay down redevelopment debt and to make annual pass-through payments.

The Pittsburg school district was first informed in a November letter it would not be getting a pass-through payment in January 2013 because there were not enough tax-increment revenues to make both debt service payments on redevelopment bonds and pass-through payments. The district was one of 20 local agencies, including the city of Pittsburg, the Ambrose Recreation & Park District, BART, and the Los Medanos Community Healthcare District that learned there would be no pass-through payments in January.

The school district contends previous agreements it signed over the years with the former redevelopment agency only allow pass-through payments to be subordinated to bond debt service payments in limited circumstances that have not been met.


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"The district believes it is entitled to the payment," said Roy Combs, an Oakland attorney representing the district.

The successor agency disagrees.

"It's not an issue where we have any discretion. We have no choice," said Ruthann Ziegler, city attorney for Pittsburg, adding a state law related to ending redevelopment requires debt service payments to take priority over pass-through payments.

The school district filed the breach-of-contract lawsuit in February in Contra Costa County Superior Court against the successor agency, the city of Pittsburg and county Auditor-Controller Robert Campbell, but the parties have since agreed to move the case to Sacramento County. A trial date has not been set.

In addition to seeking the disputed $1.2 million payment, the suit is also asking that future pass-through payments be made to the district, which received a payment last year.

Combs said similar lawsuits have arisen in other school districts in California.

"What school districts are entitled to as a result of the disbanding of redevelopment is a statewide issue (of) how much school districts are owed and how much they will get paid as a result. A lot of districts are grappling with that," he said.

No other school districts in Contra Costa County have filed a similar suit, according to Peggy Marshburn, spokeswoman for the county Office of Education. That's because other successor agencies have not withheld pass-through payments, she said.

The November letter that informed the district and 19 other local agencies that there would be no pass-through payments said: "The Successor Agency anticipated January 2013 tax increment allocations are less than its 2013 debt service obligation. Therefore, all tax increment received by the Successor Agency will be used to pay debt service."

In an email, Pittsburg City Manager Joe Sbranti wrote: "We are disappointed that we will not be receiving our annual pass-through payment this year, but we understand that pass-through payments are subordinate to the payment of debt service as per the agreement we and all other pass-through agencies signed."

The letter went on to say that the successor agency will keep a record of unpaid pass-through payments and is actively pursuing ways to increase revenues so it can resume making pass-through payments in addition to debt service payments.

To that end, the agency has prepared a list of properties such as vacant lots, empty buildings and commercial properties it owns and plans to sell. But before that can happen, it has to get approval from the state Department of Finance. Public use facilities, such as the recently restored California Theatre, parks and roadways, are retained by Pittsburg and not on the list.

Contact Eve Mitchell at 925-779-7189. Follow her on Twitter.com/EastCounty_Girl.