City to serve as Newman RDA ‘successor agency’

NEWMAN – The city of Newman will oversee the dissolution of its redevelopment agency (RDA) as a successor agency rather than handing those duties over to an outside entity.

Council members agreed at their meeting of Jan. 10 to have the city handle the affairs of the Newman Redevelopment Agency, which like all other redevelopment agencies in California is effectively dissolved at the end of January.

“Successor agencies” will wind down the business of each RDA, which includes paying the debt obligations, liquidating assets and forwarding any remaining funds into the county’s general property tax pool.

City Manager Michael Holland said the Newman RDA holds three wholly-owned assets – the former McBride dental practice building, Howard B. Hill Park and a remaining parcel in the city’s industrial park.

“It is our contention that at least two of the three (the park and McBride building) have been developed for governmental use and therefore should be turned over to the city,” Holland pointed out.

He said the city was negotiating with a local business to sell the industrial parcel when RDA activities were frozen pending the outcome of the legal battle over the state’s plan to do away with redevelopment agencies. A state Supreme Court ruling in December affirmed Sacramento’s authority to do so. The city had also considered use of the property as a corporation yard, but had never reached any determination to do so.

Exactly how the properties will be liquidated remains uncertain, Holland said.

Officials aren’t even sure how the assets can be transferred from the RDA to the successor agency.

Holland said that RDAs are prohibited from taking any action until formally being dissolved at the end of January, and in any case would have nobody to transfer property to because the successor agencies aren’t officially formed until Feb. 1.

“The two don’t exist at the same time, and RDA cannot transfer assets, so nobody really knows how they are going to be transferred. It is very convoluted,” he commented.

Holland said his understanding is that a local board will be formed to oversee the operations of the successor agency, with city employees serving as staff – although like many aspects of the pending transition unanswered questions surround many details.

The city will be paid for its administrative expenses incurred in serving as the successor agency.

Holland said he and legal counsel read the legislation involved to include an annual floor – or minimum – of $250,000 in administrative costs for successor agencies.

Finance Director Lewis Humphries said that amount can be applied to expenses ranging from payroll for staff handling successor agency business to property maintenance to legal expenses.

“We have spent more time on redevelopment than ever before because there have been so many legal questions,” Humphries noted.

The agency must account for those administrative costs, Humphries said, and return any unencumbered funds to the tax pool.

Unlike some well-publicized cases in which RDAs found themselves with annual debt obligations which exceeded revenues, Newman’s redevelopment agency has a positive annual cash flow.

Its primary obligation is $2.37 million in debt remaining from a 1997 bond.

Holland said the city has not yet reached a decision on whether it will also administer the revenues which RDAs were required to set aside for housing programs, but anticipates that local government will also assume that responsibility.

“We think we’ve done a pretty good job with housing,” said Holland, noting that RDA funds were involved in helping build or renovate several projects that will provide long-term affordable housing in the community.

Redevelopment was a successful economic development and community improvement tool in Newman, local leaders say. Redevelopment did not create or raise taxes, but captured property tax increases as they occurred through improvements or transfer of property and put those dollars into local projects.

Redevelopment played a part in construction of the downtown plaza, Hill Park, the downtown streetscape, business/industrial park development and improvements to the West Side Theatre, among other projects.