City Might Pay $2 Million to Avoid Redevelopment Shutdown

Worried that a state plan to dissolve redevelopment agencies could limit Lake Forest's ability to complete major projects—including the revitalization of commercial centers on El Toro Road—local officials are contemplating whether to pay a stiff annual fee to keep the agency alive.

As part of California's new state budget, cities must hand over all their redevelopment money to the state--unless they pay an annual "community remittance" fee.

Some cities are suing to block the new provision, arguing that the state shouldn't hijack funds designed to upgrade areas a city deems "blighted."

But in the meantime, local officials are getting ready to pay the fees demanded by the state. In Lake Forest's case, the estimated charge to continue operating the city's redevelopment agency during the 2011-12 fiscal year is a cool $2 million, according to a city staff report.

The fee would drop significantly the following year, to an estimated $500,000, then grow incrementally through 2038. In that year, the payment would hit about $850,000, according to the report.

If the city doesn't pay the piper, the Lake Forest Redevelopment Agency would cease to exist Oct. 1—a move that would cause "significant loss of revenue" to the city and severely crimp planned revitalization and improvement efforts, the report predicts.

The city would forfeit all future taxes generated by the redevelopment project area, as well as an existing account worth $4.4 million. The city would also be forced to sell properties earmarked for affordable housing (worth a collective $1.6 million) and would have to rescind a $3.2-million transfer of redevelopment funds to the city in February for traffic control projects, officials said.

The Lake Forest City Council will vote on whether to pay up at its meeting 7 p.m. Tuesday in .