Stanislaus County returns millions of dollars to state

STANISLAUS COUNTY -- Stanislaus County officials said they had to return $10 million in former redevelopment funds, after the California Department of Finance decided the money was not restricted or obligated to projects.

The state made the determination despite an October review by an independent accountant that had concluded the $10 million was restricted for housing efforts outlined in a 1991 agreement with California Rural Legal Assistance.

In that agreement, the county's redevelopment agency guaranteed that 25 percent of tax revenue generated by RDA projects would be earmarked for low- and moderate-income housing.

State officials disagreed with the independent review, which had been prepared for the successor agency of the county's defunct redevelopment agency. After a final determination Dec. 15, the successor agency was required by law to transfer the $10 million to the county auditor-controller by Dec. 21, county staff said.

The auditor-controller had to distribute the funds to fire districts, school districts and other agencies by Jan. 2, staff said.

Before redevelopment agencies were abolished by legislation last year, the county RDA used the funds for housing renovations, home-buyer down payment assistance and matching dollars for obtaining state and federal grants, said Angela Freitas, the county's director of planning and community development.

Freitas said the loss of the funds eventually will make it difficult to obtain federal and state grants for housing. Some funds are still available for local matches, but those funds will be depleted.

"Over time, we are going to feel the impact," Freitas said.

The CRLA, a legal group that represents farmworkers and low-income families, did not forget the 21-year-old agreement. Phoebe Seaton of the CRLA blasted the state decision in a letter last month to the Department of Finance, the county and the oversight board of the successor agency.

Seaton demanded that the Department of Finance rescind its decision. Her letter said the CRLA and its clients may have "no choice but to seek judicial relief against all responsible parties."

Following the demise of redevelopment in California, successor agencies were created to continue making debt payments on redevelopment projects and to dispose of unrestricted funds. Stanislaus County's successor agency was required to have an independent accountant identify unobligated funds that could be shifted to local taxing districts.

The successor agency board held a "meet and confer" with state officials to ask them to reconsider the Nov. 9 decision that the $10 million was not restricted. But state officials confirmed the decision Dec. 15.

Failure to return the funds by the deadline could have resulted in penalties such as withholding sales and property tax revenue from the county.

The 1991 agreement with the CRLA required the county redevelopment agency to prepare plans for affordable housing in Modesto's airport neighborhood, the South Seventh Street corridor, the Shackelford neighborhood and what was called the Butte-Glenn-

Imperial area.

The agreement grew out of an ambitious plan to redevelop 4,000 blighted acres in south Modesto and a number of unincorporated communities over 30 to 40 years.

On Tuesday, county supervisors will consider a budget cleanup item on its consent agenda to account for the $10 million transfer of funds.

Bee staff writer Ken Carlson can be reached at kcarlson@modbee.com or (209) 578-2321.

The Stanislaus County Board of Supervisors will meet at 6:30 p.m. Tuesday in the basement chamber of Tenth Street Place, 1010 10th St., Modesto. The following items will be considered:

• A $50,000 increased appropriation in the public works budget for purchase of a modular building for construction engineering staff at the Morgan Road yard.

• An agreement with California Forensic Medical Group to provide health care services for jail inmates.

• A sheriff's request to spend $585,000 to replace laptop computers in law enforcement vehicles.

• A request for proposals for providing employment services to the county's refugee population.