City of Oakland to take over affordable housing programs, debt obligations after redevelopment agency is eliminated

The City of Oakland will take over the Oakland Redevelopment Agency’s affordable and low income housing programs, assume responsibility for the agency’s enforceable obligations and oversee the dissolution of the agency this spring.

In a tense city council meeting that unexpectedly went into closed session Tuesday night, Oakland city councilmembers unanimously elected the City of Oakland to serve as the successor agency, and successor housing agency, to the Oakland Redevelopment Agency. The agency will close its doors February 1, s following the state Supreme Court’s decision to uphold a controversial state law eliminating all redevelopment agencies in California.

City officials will be responsible for terminating the agency, meeting all of its enforceable financial obligations—which total about $160 million—and overseeing its various housing programs.

For two hours, councilmembers debated the risks and merits of assuming responsibility for the redevelopment agency’s debts, ongoing projects and housing programs. Their chief concern was if—and how—doing so might affect the city’s finances. Currently, the redevelopment agency funds more than 170 city jobs, many of which are not purely related to redevelopment.

“There are a lot of unknowns … because of a lack of clarity on how the dust will settle on this,” cautioned City Administrator Deanna Santana, who has been working with staff to determine the city’s next steps once the redevelopment agency is eliminated. Santana explained that the general fund could be affected if the city were to become the successor agency, although the amount needed to shut down the redevelopment agency is still unclear.

The new law mandates that, once the redevelopment agency is shuttered, any funds left over after meeting its enforceable obligations must be remitted to the county auditor, as if they were property taxes. Unencumbered monies in the housing fund would also be remitted to the county.

While the court ruling allows successor agencies to charge up to 5 percent of the redevelopment agency’s tax increment funds for “wind down” costs—approximately $5.4 million in Oakland’s case—any costs incurred over that amount would be subsidized by the general fund, Santana explained. City staff remained uncertain about how the decision might affect the city’s overall budget.

Councilmember Libby Schaaf (District 4) cautioned her fellow councilmembers against hastily assuming responsibility for redevelopment. “We could end up voluntarily spending general fund money for the purposes of winding down redevelopment when we didn’t have to, and we could have spent money providing core services to the citizens of Oakland,” she said. “We need to be mindful that we may be making that decision tonight.”

Other councilmembers expressed concern about the alternative—ceding power over redevelopment projects and housing programs to other government agencies (such as the Housing Authority) which may not be equipped to handle them.

“As painful and horrible as this situation already is, the idea of giving these powers to a group that knows nothing about redevelopment would be a complete disaster,” said Councilmember-At-Large Rebecca Kaplan. “The risk of what could go wrong if some other random group gets assigned this authority could be quite a problem.”

Councilmember Nancy Nadel (District 3) said she was particularly worried about what would become of the agency’s housing programs. “I have worked for God knows how many years to make sure that we don’t have affordable housing concentrated in just one area,” she said. “And the history of the Housing Authority … is to concentrate affordable housing and concentrate very low-income housing, which I think has been very detrimental to my district, so I would not support having the housing authority take over that function.”

But councilmembers Jane Brunner (District 1), Desley Brooks (District 6) and Ignacio De La Fuente (District 5) all said they needed more information before reaching a decision.

“I am very disappointed at the lack of information presented here tonight,” Brunner said, after chastising city staff for failing to present the council with a list of redevelopment projects approved for continuance, as well as a thorough financial analysis of how the housing program could affect the general fund.  “I do not feel that I have enough information to make a decision here,” she said.

After two hours, the councilmembers decided to go into closed session to discuss the issue privately with city staff. But after an hour and half in closed session, the council returned to chambers and swiftly passed both resolutions, electing the City of Oakland to serve as the successor, and housing successor, to the Oakland Redevelopment Agency.

As the successor agency, they will report to an oversight board to be formed by Governor Jerry Brown by May.