Redevelopment or no redevelopment?

That is the question facing the Santa Clarita City Council on Tuesday when it’s scheduled to decide if it wants to extend the life of its redevelopment agency past Oct. 1 – and pay ransom to the state for the privilege of doing so.

Gov. Jerry Brown’s June budget package killed redevelopment agencies, whose purpose is to restore economic vitality to blighted areas. The city uses redevelopment financing to make improvements in Newhall, where vacancies, property values and land use met the state’s legal definition of “blight” in the 1990s before redevelopment began.

The June budget package left a costly window for cities wanting to continue redevelopment: They could adopt a “pay to play” measure known in bureaucratic jargon as a “Voluntary Alternative Redevelopment Program” and pay Sacramento its share of the money the state thinks it is losing to redevelopment agencies.

Redevelopment is financed through a share of new property taxes that are generated when properties in a redevelopment zone are reassessed. If redevelopment is working, values go up and are reassessed at higher rates when they make improvements or change hands. The redevelopment agency then takes a share of the increase in  tax revenue and uses it to do more redevelopment. If redevelopment isn’t working, properties don’t gain value, property taxes don’t increase and no money goes to the redevelopment agency.

Although questioned by redevelopment experts at the time, Brown said the state would lose $1.7 billion to redevelopment agencies in the current fiscal year, decreasing to $400 million in future years.

If Santa Clarita wants to continue with redevelopment, the agency would have to pay a share of the presumed $1.7 billion. The city’s first-year payment is currently calculated as $714,756, although the city has challenged the figure. The payment would come entirely out of the city’s redevelopment fund and would have no impact on other city services.

A budget trailer bill set Oct. 1 as the end date for redevelopment agencies in California that passed on the pay-to-play or “opt-in” option. The California Redevelopment Association sued to block the new law and won an injunction. The State Supreme Court is expected to rule in January.

According to a city staff report, the timing of what needs to happen when is nebulous. The city’s law firm is recommending that the council exercise an abundance of caution and adopt the necessary ordinance prior to Oct. 1.

“Prudence dictates that the city adopt its … opt-in ordinance now rather than waiting for a final determination in the litigation,” the staff report says.