By Khalida Sarwari
San Jose’s redevelopment agency announced it has laid off two dozen employees and placed several projects on hold due to a state fund transfer that will reduce the agency’s budget by $88 million over the next two years.
The layoffs, which constitute nearly a quarter of the agency’s staff, will save about $3 million out of the agency’s $15 million personnel budget. Projects such as the expansion of the San Jose McEnery Convention Center, acquisition of the potential Major League Ballpark site adjacent to the Diridon Station and various neighborhood revitalization efforts have been placed on hold.
Redevelopment Director Harry Mavrogenes said the loss of funds means a significant reduction in capital programs.
“It is the wrong thing to do at a time when you need economic development in the state,” Mavrogenes said. “The state … relies on redevelopment agencies and local government and now you’re cutting that off, potentially eliminating jobs. This is the wrong thing for the state to do.”
In July, the Legislature approved legislation that takes about $2 billion from redevelopment agencies throughout California, according to the city of San Jose. The state will take $62 million from San Jose this year and $13 million next year on top of $13 million that the Legislature approved in 2008.
State Finance Department spokesman H.D. Palmer said the state is transferring the $2 billion to K-12 schools. But in order to ease the burden on redevelopment agencies, Palmer said, legislators will vote before the end of the year on a bill that would allow the agencies to borrow funds from a low- and moderate-income housing reserve with a stipulation that the funds be repaid by June 30, 2015.
“We believe that the transfer that was approved in July was drafted in a manner to make sure that there is a cleaner connection between the transfer from the redevelopment agencies and the schools which serve the redevelopment agencies,” Palmer said.
In 2008, the California Redevelopment Association filed a suit against the state and won, although the state appealed the decision. Mavrogenes said the association is preparing to file another lawsuit on the latest state take, but again the appeal process is likely to delay the matter from being resolved anytime soon.
“We believe that it is an illegal take and that’s why we’re suing,” Mavrogenes said. “The lawsuit is saying that basically the state constitution protects our funding and that they are not able to take it. We have to go to court to prove that.”
In the meantime, Mavrogenes said the agency is obligated to pay the state to avoid the risk of being prohibited from undertaking new redevelopment activity.
Mayor Chuck Reed attributed the layoffs to “Sacramento’s failure to solve its structural budget problems.”
“San Jose closed an $84 million gap in our general fund budget this year and focused our efforts to make strategic investments that grow the economy,” Reed said in a statement. “The Legislature, in contrast, fails to address its structural budget problems in a prudent and responsible manner, instead choosing to raid local resources with dire consequences for communities, businesses, and families throughout our region.”
The agency will hold public study sessions to discuss its budget in November and approve a five-year budget in December.