Goleta’s $18 Million Problem

Will State Make City Pay (Again) for San Jose Creek Project?

Construction crews work on the San Jose Creek channel along Highway 217.
Paul Wellman (file)

In the annals of hasty government moves with potentially chaotic results that citizens generally fail to grasp, the California Legislature’s June 2011 decision to eliminate redevelopment agencies across the state ranks near the top.

The move may have been appropriate for areas where agencies had already redeveloped plenty, places where taxes from increased property values probably would be better spent on school districts and other tax accruers than put back into the redevelopment agency coffers. But for places just starting to see those benefits ​— ​like Old Town Goleta, whose redevelopment agency (RDA) was formed in 1998, decades after the first RDAs came to California in 1945 ​— ​the one-size-fits-all law immediately dashed dreams of ending blight and improving neighborhoods. (Though created by the County of Santa Barbara, the Old Town RDA came under the City of Goleta’s jurisdiction when the city incorporated in 2002.)

Things got worse in July 2012, when the state decreed that any contracts signed six months prior to the June 2011 decision or any deals hatched with associated cities would also be voided, which was a retroactive move to halt the cash-rich RDAs from spending money superfluously. That six-month window was when the City of Goleta started using RDA funds to pay for the $26 million project to protect Old Town from floods and encourage investment by improving the San Jose Creek channel along Highway 217, which was one of the primary goals for forming the RDA back in 1998. Even though the project was in full swing, the state sent a letter to the city, demanding that it pay back $18.5 million in five days.

<b>MEN AT WORK:</b> Construction crews work on the San Jose Creek channel along Highway 217.
Paul Wellman (file)

Specifically, there are two main chunks of money being challenged. The first is a $3.5 million loan that the RDA paid back to the city, which had ponied up that money to keep the San Jose Creek planning process moving after the economy crashed in 2007 and officials decided to wait for the bond market to rebound before seeking full funding. The second chunk is about $14.5 million, which is the money that the RDA paid the city to deal with the construction contracts after finally floating those bonds in March 2011.

Last week, City of Goleta officials ​— ​like many other city officials before them who’ve been caught in this widely cast net ​— ​traveled to Sacramento to fight for their money. The contingent included City Attorney Tim Giles, who believes that the city is in full compliance with the law because the funds being challenged are directly related to “preexisting obligations” that go back more than one dozen years. “The city not only entered into a contract to pay this money to contractors who are going to build it; they’re out there building it,” said Giles, who is “pretty confident” that their presentation gave enough context and information to make the state rethink its demands. “Once you start ripping up a flood-control channel, you can’t go, ‘Oops. Let’s just leave it as is.’ It won’t function. You have to complete it.”

The city also believes that the intent of the changing redevelopment law remains on its side. “Nobody gets harmed by what we’ve done,” said Giles, explaining that it was not a “last minute” move and that most of the agencies that the new rules hope to help ​— ​school districts and county departments like fire, emergency services, and flood-control ​— ​are better off with San Jose Creek improved. “Our project is not taking money from the other taxing entities,” said Giles. “It’s giving them money. It helps them all across the board.”

All that said, the state could decide either way. “The real challenge is going to be whether or not they’re willing to look at the purpose of the law or if they are merely looking at it from a bookkeeping standpoint,” said Giles, who explained that the city is already examining how it might pay such a steep bill.

The state’s response is expected within the next couple of weeks. In the meantime, construction work on the San Jose Creek project started up again on May 1 after the mandatory winter break, and it is expected to continue until completion in the fall. Said Giles, “Stopping the project is not really an alternative.”


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