Local Housing NGOs Lose Funds as Dispute Over Redevelopment Agencies Continues

Petaluma organizations that provide housing for low-income residents and the homeless are scrambling after losing about $700,000 in revenue because of the ongoing impasse over redevelopment agencies.

This June, the state legislature passed two laws: one ending redevelopment agencies, which Gov. Jerry Brown has criticized as ineffective and wasteful, and another allowing cities to pay to keep them, something known as “pay-to-play.”

Soon after, the California Redevelopment Association (CRA) filed a lawsuit questioning the constitutionality of the bills, putting a stay on the legislation. Meanwhile, Petaluma has delayed passing a budget for fiscal year 2011-12, meaning that contracts that nonprofits were waiting to sign were never approved, making them ineligible for redevelopment monies.  

“We didn’t anticipate that this would happen,” said Mary Stompe, executive director of , which builds housing for low-income seniors. “It’s a really challenging time for affordable housing and we’re doing everything we can to keep going.”

Redevelopment funds are used to improve economically blighted neighborhoods, but 20 percent are set up aside specifically for building affordable housing. The city has 31 affordable housing communities totaling 1200 units.

PEP Housing was counting on $500,000 in redevelopment fees to help build the new Kellgren Apartments, a 50-unit senior housing on Wood Sorrel Drive off North McDowell Boulevard was slated to open in December 2013.

If money is not made available, the organization will have to take out a line of credit to cover expenses, then repay with interest, increasing costs, Stompe said.

“Designs are 90 percent complete and we still have to pay architects, attorneys, financial consultants,” she said. “We have to keep the project moving.”

Other local agencies affected by the frozen redevelopment funds include Committee on the Shelterless, , and .

COTS, for example, will lose out on $166,00, a third of what is needed to run transitional housing at the Mary Isaak Center, while Rebuilding Together will lose $250,000 between now and January 2012, two thirds of its budget.

“It’s a cash flow problem for us and for the other agencies,” said John Records, executive director of COTS. “If they just kill the whole system for redevelopment funding for housing projects, that’s going to have statewide massive consequences, including locally.”

Petaluma People Services Center stands to lose $100,000 for its homeless prevention and fair housing programs, which have seen an influx of new clients because of the recession, according to Elece Hempel, executive director.

“We’re patching together the program with outside fundraising, money from Petaluma Chapters of Realtors and if push comes to shove, we’ll go out and get a low interest loan or dip into our endowment, if we have to,” Hempel said. “Unusual times call for unusual action.”

City housing staff and the housing nonprofits have been meeting on a regular basis and are looking at other sources of funding, including using fees that developers pay a city in exchange for building the required affordable housing units and linkage fees which are used to develop housing for people who work in Petaluma. They will then present their solution before the council.

“We are hoping to take some from one place, take some from another and at least provide funding for a portion of that loss,” said Bonne Gaebler, housing administrator for the city of Petaluma. “It’s not like we can’t dip into our general fund or reserves because we have none.”

Despite the stress of losing vital revenue, housing leaders are optimistic that the city can come up with a short-term funding solution to prevent a disruption of services.

“There is an enormous amount of goodwill in the city and I believe we can find a solution,” said COTS’ Records.

Certainty over long-term funding is a whole other story, with the redevelopment landscape shifting daily, say Gaebler and others, depending on the Supreme Court’s decision over the legislation and what kind of successor agencies spring up to take over affordable housing contracts.

“If one of the bills passes and the second doesn’t, who know what will happen?” Gaebler said. “Redevelopment is our biggest source of funding and it will have a devastating effect on affordable housing units in Petaluma.”