State to Orange County Cities: Turn Over $257 Million

Santa Ana city officials are scrambling to address a $56-million demand by the state due by Friday.

It’s the culmination of a month-long quiet negotiation with state Department of Finance officials, who are in the midst of similar negotiations with cities across the state as they wind down nearly 400 redevelopment agencies.

In Santa Ana, council members have yet to inform the public about the coming fiscal storm that could result from having to make the payment.

Orange County government was ordered to pay $50 million last month.

And in recent weeks, state officials have stepped up the pressure for 17 cities in Orange County to immediately redirect more than $200 million to local schools and special districts as part of the winding down of redevelopment agencies statewide.

It’s likely that some cities may resist the takeaway, and the state is bracing for confrontation.

“There will be cities that disagree that the state has the authority to do what it has done,” said Department of Finance spokesman H.D. Palmer.

County officials are themselves embroiled in a lawsuit against the state over $73 million in property tax revenues

Other cities in Orange County targeted by the state:

  • Huntington Beach, $31.1 million,
  • Orange, $19.5 million,
  • Westminster, $15.9 million,
  • Tustin, $14.3 million,
  • Anaheim, $13.8 million,
  • Fountain Valley, $12.5 million,
  • Brea, $7.9 million,
  • Fullerton $7.6 million,
  • Mission Viejo, $5.4 million,
  • San Juan Capistrano, $5.8 million,
  • Buena Park, $4.6 million,
  • Garden Grove, $4.2 million,
  • Lake Forest, $4 million,
  • Costa Mesa, $2.3 million,
  • Stanton, $1.4 million and
  • Seal Beach, $1 million.

The money is to come from what’s called low- and moderate-income housing funds. Redevelopment agencies were required to set aside 20 percent of their property tax increment revenue — funds that cities had diverted from going to other local governments in redevelopment zones — for affordable housing programs.

The housing fund takeaways could have stark consequences for city budgets.

State Department of Finance officials say that if cities have spent the demanded funds on housing projects or staff salaries — seen as illegal spending by the state — then they must find other ways to pay up.

State officials also say that cities’ efforts to resist the payments are futile because of a Supreme Court ruling upholding the elimination of the state’s 400 redevelopment agencies.

In official correspondence, state officials warn any local officials thinking about resisting that sales and property tax revenues could be withheld and that city officials could even face “criminal penalties.”

All of the memos sent to cities by the state Department of Finance are available here.

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