Selling two downtown parcels includes tax implications

There has been much discussion lately about the three-acre “white picket fence” property on Clayton Road and the five-acre parcel on Galindo Street.

These two properties were held by former Redevelopment Agencies and have certain associated tax obligations. California established RDAs in the 1940s to address urban blight and stimulate development in economically distressed areas where conventional investments would not necessarily be realized.

RDAs received a certain amount of property tax increment when property values increased in the designated Redevelopment Project Area. Those property increment funds were used to issue debt and create funding sources to invest within the Redevelopment Project Area.

By law, 20 percent of those property increment funds were set aside for affordable housing. About 400 California cities, including Concord, formed RDAs to help fund projects such as office developments, affordable housing units and infrastructure improvements. Examples of RDA investment in Concord include the issuance of numerous First Time Home Buyer and Rehabilitation loans, the Plaza Tower, Eden Housing Virginia Lane Apartments, Swift Plaza/the former Bank of America Technology Center, Salvio Pacheco Square, Brenden Theatres, Metroplex Office Center and Concord Auto Row/Market Street.

In 2011, in the heart of the Great Recession, California dissolved all Redevelopment Agencies per Assembly Bill X1 26, as amended by Assembly Bill 1484 and Senate Bill 107 “Dissolution Law.” This ended any RDA’s ability to fund economic development and affordable housing assistance for the community.

The RDA elimination bill had two goals: to get the properties back on the market producing sales tax and to split the value of the properties with all taxing entities, which must be done through a sale. The Dissolution Law created “successor agencies” to act as the bodies to help wind down RDA activities and obligations.

As part of the dissolution, properties held by former RDAs needed to be addressed through a processes called the Long Range Property Management Plan (LRPMP). The LRPMP, which is approved by the state, allowed cities with former Redevelopment Agencies to take title of former RDA properties or to sell these properties outright.

When those properties are sold, cities are required to share net sales proceeds (net of cost for selling the property such as legal fees, studies and closing costs) with affected taxing entities at the entities’ taxing rates based on fair market appraised values.

In Contra Costa County, there are 20 such taxing entities, including the county, the city of Concord, the county library system, county fire protection, the county Flood Control District, Flood Control Zone 3B, Contra Costa Resource Conservation District, county Mosquito Abatement District 1, Central Contra Costa Sanitary District, Concord/Pleasant Hill Healthcare District, the county water district, BART, Bay Area Air Pollution Control District, East Bay Regional Parks District, county schools/K-12 Educational Revenue Augmentation Fund (ERAF), Mt. Diablo Unified School District and Contra Costa Community College District/Community College ERAF.

This means that when projects are someday developed on both the “white picket fence” and Galindo Street sites, the city will owe a specific percentage of the land sales to each of these agencies.

The city of Concord must receive enough of a return for these parcels from their developers to pay the aforementioned taxing entities. In the event the city is not paid enough for the land to pay the other taxing entities, general fund dollars would have to be used to cover the difference.

I share this information with the public to better explain the complexities and obligations associated with developing these prime pieces of downtown Concord real estate.

You can send questions and comments to the mayor by email to Carlyn.Obringer@cityofconcord.org