‘Negative bailout’ fix for Stanislaus County is left out of state budget

A bill that would have corrected what’s called the “negative bailout” for Stanislaus County was left out of the primary state budget approved in Sacramento this week.

County officials still were hoping the Legislature would vote on a trailer bill, which includes the negative bailout fix but also is strongly opposed by cities because it mainly contains language regarding defunct redevelopment agencies.

“I don’t know if I’m giving CPR to a dead patient or not,” said county Supervisor Vito Chiesa, who was in Sacramento to talk with state officials Wednesday.

Stanislaus County has lost $70 million over the decades to a funding formula that was supposed to bail out counties for losing property tax revenue after California voters approved Proposition 13 in 1978. Rather than getting assistance from the state, the formula required Stanislaus and five other counties to give up more revenue.

It has cost Stanislaus County $2 million to $3.4 million a year. Over the years, a number of legislative attempts to change the formula failed or were vetoed by previous governors.

Local and state representatives who worked recently on a solution had hoped this time would be different.

Assemblywoman Kristin Olsen, R-Riverbank, joined with a bipartisan group of lawmakers representing the county in seeking the relief, which was included in Gov. Jerry Brown’s revised budget proposal in May. County officials were hopeful when a legislative conference committee retained the relief in the 2015-16 budget Friday.

Unfortunately for Stanislaus County, the $6.9 million in relief for the counties was slipped into a bill that, according to cities, would cause them to lose hundreds of millions of dollars.

The bill would limit the repayment rates on startup loans that cities made to their redevelopment agencies decades ago. With the dissolution of the agencies in 2011, cities still are waiting for repayment of the long-term loans. The battle with the state is whether the loans should be repaid at rates when the agencies were created in the 1980s, which may have been 8 percent to 10 percent, or at current rates of less than 1 percent.

“We have cities that potentially could lose $30 million, $40 million or $70 million,” said Dan Carrigg, legislative affairs director for the League of California Cities. “This is not a trivial issue. Legislators are being put in a very difficult position by this proposal.”

Stephan Christensen, Modesto’s budget manager, said he was trying to estimate the trailer bill’s effect on the city. He said Modesto is owed $21 million on loans made to its redevelopment agency over more than 30 years. “It does not look like we will have too much impact on the total repayment,” he said.

In addition to the interest rates, cities that battled the state in court over redevelopment issues are concerned other components of the trailer bill would sidestep court decisions.

Chiesa, who met with Department of Finance officials, said amendments are being written to bring the two sides closer on interest rates. As president of the California State Association of Counties, Chiesa said he planned to ask key legislators to call for a vote on the bill.

The trailer bill is slated for a Senate budget committee hearing Thursday.

“Redevelopment is a totally different animal; there’s no reason (negative bailout) should be in the same bill,” said Stephen Qualls, a regional public affairs manager for the league of cities. “It is an issue that legislators are aware of because of our efforts to bring it to their attention.”

This story was originally published June 16, 2015 at 6:48 PM with the headline "‘Negative bailout’ fix for Stanislaus County is left out of state budget."