The Feb. 27 Santa Clara Redevelopment Agency (RDA) Successor Agency Oversight Board meeting could be described as the same as its previous meeting on Feb. 19. The subject was financial obligations for continued operation of the Santa Clara Convention Center under the court ruling that the property belongs to the RDA Successor Agency and must be turned over in mid-April.
The Board still hadn’t made any apparent effort to understand Convention Center financials, and was still complaining the information wasn’t sufficiently easy-to-understand. The Chair, Gilroy Mayor Don Gage, continued insisting that the court order ruling didn’t have anything to do with them, and was still playing a game of chicken, daring the City to stop funding the Convention Center. He apparently didn’t believe City Manager Julio Fuentes when he said, “The day we transfer title, it’s game over.”
The law shuttering RDAs transferred all their assets, income, contractual obligations and debts (Required Obligation Payments Schedule, ROPS) to new legal entities, Successor Agencies (SAs), to pay debts and liquidate assets, supervised by Oversight Boards appointed by local taxing entities. Boards recommend what goes on the ROPS, with the State Deptartment of Finance making the final decision.
SAs are separate legal entities from the cities and counties that created the RDAs. It doesn’t matter if a city is also the SA, as in Santa Clara’s case. It’s still legally a different entity. So the City isn’t liable for Successor agency debts, just as the City doesn’t receive any SA revenues or own SA assets.
Since 2011, Santa Clara spent $7 million to subsidize the Convention Center, while all the lease revenue went to the County taxing agencies. The Convention Center has only been in the black twice in the last 10 years, and the 2014-15 deficit is $2.1 million. In addition to repayment of its $7 million, the City is also asking that roughly $7 million for continued Convention Center operations be put into the ROPS for 2015-16.
The City has been trying to buy back the Convention Center, without success. “We made offers, including a very substantial written offer,” said Fuentes, “and we got no counter offer … My Council is ready to engage. My Council is willing to make an offer.”
Well over an hour into the meeting, the Board’s attorney, Hilda Montoy, explained a key piece of the puzzle. “The city has the direct authority to work with each taxing agency to come up with a payment agreement. It’s not something this Board controls or can prohibit.”
“[Past] RDA decisions were made by the law,” said former Santa Clara City Council Member Dave DeLozier. “The Convention Center is a loss leader. We did it because it’s a regional center. It brings in jobs, sales tax, and that all benefits every member of this community. That’s why I’m saying you need to negotiate. You people are playing craps with people’s jobs. You’re playing … to see ‘what’s the best deal we can get.’ You’re the ones who make the recommendations to the Department of Finance. Without you giving that negotiation a thumbs up, it isn’t going to happen.”
Although Board Member and retired County Finance Director John Guthrie said several times that the Convention Center wouldn’t shut down, there was no explanation of how this would happen. The parade of speakers and withering criticism of the Board’s conduct demonstrated considerable doubt about Guthrie’s assurances.
A Foregone Conclusion: Kick the Can Down the Road
It’s not unusual for governing boards to continue discussions to future meetings. But at this meeting, the main subject of the meeting was continued to an as-yet unscheduled future meeting before there was any discussion.
Why? The Board didn’t get the proposed ROPS until 5 p.m. the previous evening, said Gage, and didn’t have time to study it. “It’s not like I’m sitting at home all day with nothing to do,” he said. “Now we get down to the wire and we don’t have the data.”
The Convention Center budget and the relevant contracts are public information — the County received copies a year ago and Board Members received individual copies on Feb. 19.
Montoy, suggested that continuing an item before it was discussed was precipitous. “I would recommend that you proceed to the substantive item … and reconsider your vote for continuance … until after you’ve heard the presentation.”
The Board then agreed to hear the City’s presentation. Gage wasn’t going to change his mind “if the presentation was like the two the City has already given,” he said. “I’m not about to make a $20 million decision on a 10-minute presentation.”
There was, however, some significant mind changing when Guthrie moved to simply put the City’s requests on the ROPS and approve it – after he argued earlier to defer action. This necessitated a motion by someone else to rescind the earlier decision — no one made that motion.
“I Don’t Know” Covers All the Bases
The meeting was characterized by heated discussion at times resembling Abbott & Costello’s “Who’s on First” routine, accompanied by the same level of audience raucousness. One example was an exchange between Convention Center General Manager Lisa Moreno and Gage.
“How do you see this transition going?” she asked. “How are we going to move forward and operate? “We don’t operate the Convention Center,” replied Gage. “And when they turn the keys over?” she asked.
“The city operates the Convention Center,” Gage said. The Board’s responsibility was deciding if “all the expenses … on the ROPS, based on very specific law, are valid. It’s up to the city to decide whether they close down.”
“They have to turn the property over by court law,” said Moreno. “So who is going to run the convention center?”
“We have an obligation to put things on the ROPS that the law says we can,” replied Gage. “The city could go right now and sell the property to someone else. What they’ve been telling us is they’re going to stop spending money and they’re not going to support it anymore.”
“Then who is?” said Moreno. “Do we close the doors because no one’s taken responsibility to operate the Convention Center?”
“I have no idea,” answered Gage.
“Then who can answer my questions?” she retorted. “The Deptartment of Finance I guess,” said Gage. “The Department of Finance is going to run us?” she responded. “They’re not going to run you,” Gage answered. “Then who is?” she repeated. “When the doors close what I suspect will happen is that all the people who have a contract are going to sue the Successor Agency,” said Gage.
The back and forth continued, with Moreno saying Gage wasn’t answering her question and Gage saying, he has “no idea how to answer your question. We’re not there yet.”
“As of mid-April the City has to turn over the keys. Then what?” she asked again. “It could be taken care of by then,” Gage answered. “When the ROPS goes in maybe the problem’s solved. I don’t know.”
“We still don’t know who’s going to run the Convention Center,” she said again.
To that Gage responded, “Nor do I.”
“So the Successor Agency is going to run it?” she said. The Board, replied Gage, has no say in it. Moreno brought up the fact that the SA has no money to fund operations, “I don’t know what money they have,” replied Gage. “Somebody else said they’re a very ‘in the black’ city … I don’t know. I can’t answer a question that’s not my responsibility.”
Moreno then asked what the Board was responsible for. Gage repeated it was looking at the law, determining the validity of items on the ROPS, and passing that on to the State. “That’s the way it works,” he said. “I don’t have your answer.”
The Oversight Board meets again on Thursday, March 5 at 12 p.m. in the Santa Clara City Council Chambers.