Clearing the Air on redevelopment debt

There’s this on-going attempt to muddy the waters of the city’s use of redevelopment funding by making claims that are just plain old incorrect.

The first of these, and the biggest, is that somehow redevelopment has added to Alameda’s debt leading to some public claims that the city has hundreds of millions in outstanding bond debt.

It’s easy to understand why this belief might be taking hold, the state’s Comprehensive Annual Financial Report (CAFR) standards require city’s to include redevelopment debt in their budgets as “city” debt.

A quick email to the city’s finance and development services department confirmed that since redevelopment areas are governed by redevelopment agencies and not the city, they are therefore creatures of the state. The debt created for redevelopment is not actually a part of the city’s debt, and were the bonds defaulted on (something that has never happened in the state of California), the default would not affect city tax payers, or the city’s debt rating.

As such, calculations of “costs to Alameda Taxpayers” are not correct, because Alameda taxpayers are not on the hook for the debt. (For example, the $30,000,000 in redevelopment bonds for the Alameda Theatre/Parking Garage do not come out to $10,000 per Alameda household. This is no more true than saying that San Leandro residents are on the hook for $10,000 per household (S.L. has a similar number of housholds as Alameda).

So while the city’s reevelopment agencies have issued (or planned to issue) bonds in the last 10 years, that debt is separate the city’s budget (and used to be calculated separately until CAFR changed the standard).

In the end, the city’s outstanding debt is about $56,000,000.

From the city’s budget:

Long-term Debt

At the end of 2006/07, the City had $124 million in outstanding debt.  Outstanding debt includes $68 million in tax increment notes issued for redevelopment purposes, $18.8 million in certificates of participation and $10.1 million in general obligation bonds. 

2007 Outstanding Debt (XX0s)

Certificates of Participation $18,835
Revenue Bonds $14,995
Tax Allocation Bonds $68,010
General Obligation Bonds $10,135
HUD Section 108 Loan $4,000
Installment Purchase Obligations $1,905
State Loans $5,797
Total $123,677

Summary of Long-Term Debt.  The City of Alameda’s total debt increased 1% during the current fiscal year.  The major addition to debt in 2006/07 was a $4 million loan from the Department of Housing and Urban Development for construction of the Civic Center Garage Project, to be repaid from grant and parking garage revenues through 2027.  Retirement of other issues of $2.9 million partially offset additions resulting in a net increase of $1.3 million.