The Huntington Beach City Council approved payment of about $11 million to the state Monday in response to the dissolution of the city's redevelopment agency.
Council members said they unanimously submitted to the California Department of Finance's demands after months of negotiations because they felt they had no choice.
"This isn't something that we're freely doing with the state of California, but this is something that we're being compelled to do," Mayor Pro Tem Matthew Harper said. "And should we have the opportunity to be able to take back this money, we certainly will."
In February 2012, the state dissolved all redevelopment agencies, as called for under the 2011 Budget Act. Gov. Jerry Brown signed AB 1484 in June 2012, which required Orange County cities that received the redevelopment agency money from the state to send unused funds to the county auditor-controller.
The money would then be redistributed to a variety of government-funded entities, such as school districts, Huntington Beach finance director Lori Ann Farrell said.
About $6.4 million will come from the former redevelopment agency's fund, while the balance of nearly $4.6 million will be taken from the city's general reserves, Farrell said.
The city initially transferred a portion of the money from the redevelopment agency fund to its own coffers, but county-approved accountants hired by the city identified $4.6 million of it as a disallowed transfer, according to a staff report.
So to come up with the $4.6 million owed, the city took $3.1 million from its budget stabilization fund and will also pull $1.5 million from general fund revenues at the end of the 2012-13 fiscal year.
The Department of Finance initially asked Huntington Beach in August for about $13.2 million but agreed to reduce the amount to about $11 million after city staff and Councilman Joe Shaw disputed the figure last month, Farrell said.
She added that the state balanced its budget "with the assumption that they would receive about $1.9 billion statewide from all successor agencies throughout the state."
Mayor Connie Boardman and other council members lauded the work by city staff that helped reduce the amount Huntington Beach owed the state.
"This has been a tremendous amount of extra work," she said to Farrell and Deputy Director of Economic Development Kellee Fritzal. "It was completely unanticipated during a time when our staffing levels were very, very low."
Council members said the requested amount from the state was a blow to the general fund after the city had successfully balanced the upcoming budget without any cuts, but according to Shaw, the damage could have been much worse.
"We could be up against cutting services again and doing all these other things, but we have this money to pay," he said. "I'm happy that we're in that financial situation, but we are doing this under protest."
[For the record, 11:24 a.m. Oct. 10: An earlier version of this story incorrectly reported the $11 million would be paid to the county. In fact, it will be paid to the state.]