Thursday, June 30, 2011

City Says It Can Go Forward with Kaiser Sale

by Robert Gammon
Thu, Jun 30, 2011 at 2:31 PM

Oakland Mayor Jean Quan and the City Attorney’s Office said today that the city can legally go ahead with the planned sale of the Henry J. Kaiser Convention Center, despite Governor Jerry Brown’s decision to sign legislation that effectively eliminates redevelopment in the state. Oakland plans to sell the shuttered Kaiser Center to its redevelopment agency for $28.3 million to help balance the city’s finances.

The city wants to sell the Kaiser Center (in background).
  • The city wants to sell the Kaiser Center (in background).
Under the law signed by the governor yesterday, redevelopment agencies are immediately prohibited from buying any new property. But at a City Hall press conference, Quan and Deputy City Attorney Dan Rossi pointed to an exemption in the new law that allows redevelopment agencies to fulfill existing contractual “obligations.” Quan and Rossi said that in March the city began the process of selling the Kaiser Center to the redevelopment agency, although they acknowledged that the sale will not be final until the city council approves it. The council may approve the deal at a council meeting tonight.

However, John Shirey, executive director of the California Redevelopment Association, which opposes the bill that Brown signed and plans to sue to overturn it, said in an interview that the law is not clear cut as to whether the Kaiser sale is now legal. “It’s ambiguous,” he said, adding that he would expect the state to attempt to block the Kaiser sale if the council gives final approval of it. But he said the state may allow the Kaiser sale to go through if the council agrees to pay the state the funds it wants under the new law that Brown signed — which Quan said amounted to about $40 million next year.

The mayor and councilmembers originally had planned to use a significant portion of the Kaiser sale to help balance the city’s general fund budget. But after the city’s public employee unions agreed to significant concessions, the Kaiser sale may no longer be that integral to the budget dealings.

Councilwoman Libby Schaaf said that she and three other councilmembers have altered their budget proposal as result of the union concessions, and now only plan to use a small amount of the Kaiser sale proceeds to balance the budget — about $2 million for each of the next two years. Their new proposal would use the rest of the money from the Kaiser sale to pay down the city’s negative fund balances.

In her budget scenario B, which assumed union concessions, Quan proposed doing the essentially same thing. At her press conference today, Quan said she prefers to use less of the Kaiser proceeds for budget balancing and more for debt reduction.

Regardless, Quan made it clear today that she strongly opposes the new redevelopment legislation. And she said the League of California Cities, of which she is a member, plans to join in the lawsuit against the state. The suit will request that the California Supreme Court issue a stay and block implementation of the new law while the case is being heard.

Oakland and other cities contend that the new law violates Prop. 22, a statewide measure that prohibits the state government from raiding local funds. Brown and the legislature apparently will argue that the new law does not run afoul of Prop. 22 because it says that cities only have to “voluntarily” use redevelopment money to pay the state a total of $1.7 billion. However, Rossi contended that it’s “voluntary’ in name only, because the legislation says that if redevelopment agencies don’t pay the money, they must go out of business. “Basically, they’re putting a gun to our heads,” Rossi said after the press conference.

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