Two years ago, the Modesto Redevelopment Agency was flush with rising property tax receipts and looking for ways to capitalize on the opening of the Gallo Center for the Arts.
Now it's just trying to keep enough cash on hand to pay its bills.
The agency expects to bring in about $5.8 million in special property taxes over the budget year that starts July 1, about $700,000 less than it anticipated collecting when the economy was going well and investments were coming together to improve downtown.
That revenue goes out the door fast because of the agency's debt payments and its obligation to reserve a fifth of its cash for affordable housing.
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The remainder "dwindles down to not much of anything," said Brent Sinclair, Modesto's Community and Economic Development Director. He oversees most of the redevelopment agency's projects.
Modesto's redevelopment budget faces a couple of serious risks that could jeopardize even those commitments:
The state could attempt for a second time to borrow money from local redevelopment agencies, or a severe downturn in the value of commercial real estate could crimp the property taxes that fund the agency.
Sinclair worries more about a state raid on the agency's funding than a steepening decline in property values. The state tried to grab $414,000 from the Modesto agency this year, but cities blocked the attempt in court.
He wouldn't rule out a crash in commercial property tax values but said the kind of drop that would threaten debt payments is improbable. Property values within the redevelopment area have increased each year since the agency was created in 1983, except for last year. The agency gets its income based on how much more properties are worth today than they were 26 years ago.
"As long as properties are not deteriorating, they're going to retain some pretty good value," he said. "It's just we're not getting the (revenue) we historically have."
The City Council's Finance Committee today is scheduled to review the redevelopment budget.
In 2008, the council elected to soften the blow of a deficit in its general fund by taking $1.3 million from the redevelopment agency in the form of a loan repayment. The city jump-started the agency in the 1980s with more than $20 million in loans that remain outstanding.
Money is so tight in the redevelopment agency this year that the city likely will refrain from taking another loan repayment in the near future.
The agency's budget includes:
• $4.5 million for debt repayments and payments to other agencies, such as Stanislaus County. About $1.9 million is intended to pay down debt tied to the Ninth Street parking garage; $980,000 is linked to Tenth Street Place debt.
• $1.2 million earmarked for affordable housing
• $176,000 in administrative charges
• $218,000 for project planning
The redevelopment agency intends to put work into making sure that it completes a long-awaited sale of a 45-acre property at Kansas Avenue and Graphics Drive. Modesto wants a developer to turn the former FMC factory property into a business park, but it's awaiting environmental studies that must be closed before the property can change hands.
The agency also continues to work with EAH, a San Rafael nonprofit that's building a 150-unit affordable housing project off Ninth Street. EAH is getting $6.7 million in money the redevelopment agency has reserved for affordable housing projects.
The City Council's Finance Committee meets at 5:30 p.m. Monday in Room 2005 of Tenth Street Place, 1010 10th St. The City Council is scheduled to consider the redevelopment budget at its meeting at 5:30 p.m. Tuesday in the basement chamber of Tenth Street Place.
Bee staff writer Adam Ashton can be reached at firstname.lastname@example.org or 578-2366.