Ojai Nearing Cap On Taxes

$23.2 million cap on Redevelopment Agency might strand several projects

By Daryl Kelley
Faced with a daunting array of planned projects, Ojai’s Redevelopment Agency must instead focus next year on how it can continue to refurbish the city’s core as the agency approaches a cap on how much it can collect in property taxes.
Since its founding in 1972, the Redevelopment Agency has captured about $18 million in property tax that would otherwise have gone to other government entities. But, with soaring property values during the last decade, the agency is now approaching a $23.2-million cap on how much it can collect.
That means that by 2012, the agency could be effectively out of the redevelopment business, and city would be hard-pressed to find another source for the $1 million a year the agency collects.
In a recent report to the City Council, Redevelopment manager Kathy McCann raised concerns about the cap:
“Because this is an important issue for the Redevelopment Agency and its future,” McCann wrote, “staff would like to come back soon after the beginning of the year to outline the ‘challenge’ in more detail and provide options to the Agency Board (City Council).
“At that time, staff may recommend curtailing future capital projects that have been outlined in the Five-Year Implementation Plan in order to ensure that agency debt repayment occurs.”
City manager Jere Kersnar met recently with a top redevelopment lawyer to begin a search for a way to get around the cap, if the City Council decides that is what it wants to do.
Kersnar said his meeting with attorney Murray Kane of Los Angeles resulted in a possible way to extend Redevelopment Agency collections for a few more years.
Kane, whose firm represents dozens of cities around the state, said he thinks Ojai’s collections cap may apply only to its original redevelopment zone — its aging core, which stretches several blocks in all directions from the city’s centerpiece Arcade.
Two newer, smaller redevelopment zones for east and west Ojai Avenue and Bryant Street may not have been included under the cap, Kane told Kersnar.
That would mean that enhanced property taxes resulting from new projects in those two areas could still be funneled to the Redevelopment Agency instead of going to local, state and educational organizations that would otherwise get that bump in taxes when properties are improved and values increased.
These two smaller redevelopment zones cover a half-mile stretch of Ojai Avenue east of Fox Street, including frontage of the Golden West Tract and the Bryant Street business and industrial area. They also include a strip along west Ojai Avenue from Country Club Drive almost to the “Y” intersection.
These two newer zones comprise about 76 acres, compared with the original downtown zone of 159 acres.
The Redevelopment Agency has already planned to place power lines along those strips underground. But there is no money for such projects now. Another key project for Ojai Avenue would be renovation of the old bowling alley site at Golden West Avenue.
Kersnar said he has seen placing utility lines underground lead to explosive development in other cities, and that could be the key to new projects along east and west Ojai Avenue. Indeed, one of the early redevelopment projects in downtown Ojai was to bury utility lines.
“I’ve seen it work,” Kersnar said. “Spending money on under-grounding utilities can serve to attract private investment and change the way owners view their own property.”
To clarify that the two newer redevelopment zones are not under the $23.2-million cap would require a change in wording in the city’s redevelopment plan. But that could be done for a relatively small cost and without inviting a legal challenge by Ventura County, the state or other local school, water and sewer districts that get a piece of each property tax dollar, Kersnar said.
On the other hand, if Ojai were to change the overall $23-million cap, those agencies would likely sue to get their share, he said.
“Ventura County has pledged to challenge every plan amendment,” Kersnar said.
Just why the Ojai City Council, which functions as the Redevelopment Agency board, decided not to raise its $23-million cap when it last amended its redevelopment plan in 1997 is not clear, Kersnar said.
But the city manager said he suspects that no one foresaw the tripling of property values as occurred between 1997 and 2005. So the council probably thought the cap would never be reached.
“Many cities set absurdly high numbers so they wouldn’t run into cap problems,” he said. “My guess is that the council thought $23.2 million was an absurdly high number. But now we’re approaching it.”
Councilmember Steve Olsen, who was also on the council in 1997, said he didn’t recall why the board set the cap at its current level.
“I don’t recall at all,” he said. “Maybe it was a staff recommendation.”
Joe DeVito, also a councilman then and now, said he had no idea why the council set the current cap.
"Who would have imagined that we would ever get to the place where property values would triple?” he said. “But now I'm concerned that we're going to reach a place where we won't be able to do any more redevelopment.”
That money has been especially important, he said, to the city's ability to partially underwrite housing projects for low-income residents, he said. “We've been able to give a half million dollars to some of them,” he said.