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State hits up city for $5M

By: Megan Wood The Press Tribune
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Many Roseville building projects could be put on hold or potentially eliminated as the state budget promises to take more than $5 million from Roseville’s funds. At Wednesday night’s city council meeting, Roseville Treasurer Russ Branson presented council with a budget update and according to his presentation, the state budget will call upon Roseville to part with $3.4 million under Prop 1A borrowing as well as an additional $2.3 million from the city’s redevelopment funds for the fiscal year 2010. “At this time there is no plan of taking Highway User Tax the gas tax, which may or may not be legal” Branson said. “It is also still questionable whether taking redevelopment funds is legal.” Branson said if it is found to be legal, the state will take an additional $478,000 from the city coffers in 2011 and the combination of the takes over the next two fiscal years will have a huge impact on the redevelopment agency. Branson said the state tried to take redevelopment funds from cities last year but was challenged, and defeated, by the California Redevelopment Agency who plans to sue again this year. “The state has changed their reasoning and the laws in attempt to address the issues under which they lost the last lawsuit,” Branson said. “At this point we’re not making changes in the budget to see how this all plays out.” Branson told council members he is positioning the city to act, possibly capitalizing on bond interest if the lawsuit against the state does not succeed. The plan includes taking bond proceeds set aside for projects, like low and moderate income housing projects and turning a portion into interest payments to free up money from the city’s tax increment to absorb part of the state’s taking. “It’s legal, and we’re able to do it under IRS rules,” Branson said. “It’s just not what we had originally wanted to do.” This would put projects like the Downtown Specific Plan further in Roseville’s future, and impact the city’s ability to go after new, upcoming projects. Overall, Branson assured that council members that despite putting the ability to sell project bonds in the future at jeopardy and modifying or eliminating some city projects, Roseville’s redevelopment agency would remain intact. “It’s tragic that we can’t move forward on this,” said Mayor Gina Garbolino. “Of all things, this is hardest to hear.” Under Prop 1A borrowing, the state may borrow up to 8 percent of city’s property taxes, of which Roseville’s share is $3.4 million, twice within a 10-year period. However, the state may not borrow property taxes again within the 10-year period until it has paid the loan back plus interest within three years of the initial borrowing. “Aren’t we taking a giant leap of faith that the state will pay us back?” said Councilman Jim Gray. Branson said Roseville’s strategy is to borrow from the city’s operational reserves, currently at $9.8 million, and has no plans to further reduce city services. “I have to hold on to my belief in the system. It’s in our constitution that they have to do it,” Branson said. “I don’t think they won’t figure out some other way to get at us, but I have to keep my faith.”