Category Archives: News

03.24.11
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News for 3/24/11

Quick housekeeping note: If you were not aware, this blog is a self-hosted WordPress site. Ever since I moved to this platform in November 2009 after years with Blogger, I have been astonished at the rapid pace of third party development for WordPress. One feature came out today in the form of a server-side plugin called Onswipe, which can automatically reformat any WordPress site into an iPad/touch-friendly format. If you’ve used iPad apps such as Flipboard, Pulse, and Zite, you’ll feel right at home. Here’s a screenshot:

If you have an iPad, your browser (Safari) will show this version of the site automatically. I’m going to leave it up for now, but if any iPad users would prefer to go back to the original version of the site with the sidebars, I’ll heed your words. No other browsers or platforms should be affected. If you are, let me know in the comments. I’ve experimented with a mobile version of the site, but I’ve chosen not to launch it because nobody’s asked for it, so I didn’t want to penalize readers who are happy with the full site on their smartphones, etc.

Now the news:

Evan Weiner has a good overview of how the landmark Tax Reform Act of 1986 impacted the ways stadiums and arenas could be financed.

Jorge Leon was interviewed by Oakland North, a three minute clip in which he manages to dismiss economic viability concerns in Oakland as easily as he does train safety.

Press Democrat columnist Robert Rubino bashes the Giants in consecutive weeks – first the fans, then the team over T-rights.

Bleacher Report’s Brandon McClintock seems to buying into a Wolff conspiracy theory – nevermind the millions spent in Fremont, the lack of interest or cooperation during the Brown administration, or the Coliseum Authority’s lack of willingness to explore a ballpark plus development at the Malibu/HomeBase site.

As for the fate of redevelopment? The legislature is steeling themselves for the fight over tax extensions. Redevelopment will have to wait.

Added 2:27 PM – Speaking of trains, the Harbor Drive Bridge, a pedestrian/bike span that goes over heavily used heavy and light rail tracks near PETCO Park in San Diego, has finally opened. It’s lovely and it only cost $12.8 million $26.8 million to construct. A Victory Court-to-Jack London Square bridge shouldn’t cost as much. It will probably cost many millions of dollars to build, and yes, it absolutely is necessary.

Picture from San Diego Union Tribune / CCDC

03.23.11
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2011 Forbes valuations out, A’s up 4%

It’s late March, and you know what that means: the new Forbes MLB franchise valuations are out. With a few notable exceptions due to debt problems (Mets, Dodgers), things in baseball are going quite swimmingly. The A’s are back above the $300 million mark with a $307 million valuation, up 4% from 2010. The team remains second-to-last among all MLB franchises, eclipsing only the Pirates. Forbes also listed at $23.2 million, which is probably due entirely to revenue sharing.

To understand where the A’s may be headed, I took five teams and looked a little deeper at how their valuations were constituted. The teams are the A’s, Giants (natch), Red Sox (Giants’ aspirations), Rockies and Padres (aspirational western mid-markets for the A’s). The numbers are quite interesting.

First off, it’s important to note Forbes’ explanations for some of the components of each valuation. “Sport” is described as attributable to revenue shared among all teams. You’ll see there’s an inverse relationship between the bigger revenue teams and this number. If a team is highly dependent on revenue sharing, this number will be higher. “Market” seems self-explanatory, though for the two Bay Area teams it’s interesting that according to Forbes they share the same market, which based on its size (4,274,000) is probably defined as the SF-Oakland-Fremont MSA. That leaves out both the South Bay and all of the North Bay save for Marin County. Not clear on what impact this has, so I’ve reached out to Forbes editor Kurt Badenhausen for a clarification. Here’s his response:

We publish the population and revenue per fan numbers based on the San Francisco-Oakland-Fremont MSA. We use the official MSA designations for all those numbers. Market size plays a role in the value of teams in terms of how they drive revenues, but a bad stadium situation in a big market is still not going to help a team out.

“Stadium” is fairly straightforward, though it should be pointed out that just because you build a $500 million dollar stadium you’re not going to see a similar appreciation in your franchise valuation. That makes “Stadium” more a function of gate revenue and attendance, areas where the A’s and Padres fall behind while the Giants and Red Sox excel. “Brand Management” must be related to marketing efforts – or in the case of the A’s, a lack thereof.

Debt/value is a tricky beast, both in how it’s defined and how MLB’s debt rules get enforced. It always includes stadium debt, and should the A’s get their new ballpark in the next few years that number will jump up significantly from its 29% position, which has hovered there for several years. Since it’s possible that some of that debt may come in the form of a loan from MLB, it will be extremely important for Wolff/Fisher to ensure that revenue streams are locked in to service that debt (and then some) for the foreseeable future.

Surely, this annual release by Forbes will be followed up by a denial of the veracity of the figures by Commissioner Bud Selig. Despite this, it’s telling that franchise sales tend to use the Forbes figures as a baseline at the very least, leading me to believe that they’re far more accurate than Selig, who is loathe to provide any real financial data from MLB, is willing to let on.

03.21.11
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Redevelopment survives the weekend

Late Thursday I tweeted that after a number of budget-related bills were passed, the Assembly didn’t get around to dealing with SB 77. Stuck at a 53-23 vote with only one Republican holdout needed, the bill would have to wait until Monday.

Redevelopment got a three day reprieve because the California Republican Party was holding its annual convention in Sacramento, just blocks from the Capitol building. Though I choose not to pay much attention to party politics, it was clear from the various updates coming out of the CRP bash that the whole affair seemed a bit too Lord of the Flies to get anything substantive out of it. Republicans aren’t just worried about unity, they’re wondering if they’re relevant in the state.

The fate of redevelopment may be a hot-button issue, but it pales in comparison to Governor Brown’s interest in extending tax hikes. Brown’s budget proposal is predicated on half cuts, half taxes, which on the surface looks fair. It’s the details of it that have gotten people upset, which is not surprising. The Republicans, who have rallied hard for more cuts and an end to that tax extension, simply don’t have the numbers to do anything other than be a spoiler in Brown’s plans. That’s where redevelopment comes in. Should SB 77 not pass, it would throw a monkey wrench into the budget proposal, inevitably delaying the final budget while the Democrats look for other places to bridge the gap.

Redevelopment as a tool is broadly supported and reviled by people in both parties, so it’s not as though there were some ideological divide there. The delay in getting the budget framework passed (it was supposed to happen 10 days ago) has allowed cities to come up with an alternative proposal that may make its way through the legislature in short order. The proposal, which has not yet been introduced in bill form, allows for redevelopment agencies throughout the stake to remain intact while pledging more tax increment as passthroughs to local schools. The League of California Cities has the outline:

  • Local redevelopment agencies can voluntarily suspend their housing set-aside for FY 2011-12. An equivalent amount of funds must then be contributed to local school districts in project areas.

    • In exchange for this contribution of funds for FY 2011-12 to local schools, the agency will be allowed to extend the project area’s life by TWO YEARS.

  • In addition, or alternatively, redevelopment agencies could voluntarily contribute up to 10 percent of their non-housing tax increment revenue stream to local school districts each year for 10 years, beginning in FY 2011-12.

    • The tax increment revenue stream they could contribute would be calculated as a percentage of the gross tax increment minus the existing pass-through payments to local taxing entities.
    • For each percentage of tax increment paid to schools, an additional year could be added to the project area life, up to a maximum of 10 years. For example, if five percent of tax increment was dedicated to schools, the project area life could be extended for five years.

    The gist of this is that cities would be trading affordable housing funds for school funds. This is driven by several people in some of the largest cities in the state who believe that, at least in their jurisdictions, there is enough affordable housing already and that more would only harm local and state governments more from a revenue-and-cost standpoint. What I don’t get is the use of the word “voluntarily.” How exactly would the budget shortfall be bridged by some shaky pledges from the cities? The League positions this proposal as the “lawsuit free” solution, as it would hold up Prop 22 and keep cities from having bondholders pull the trigger on lawsuits against the state.

    It’s unclear who would write and sponsor this redevelopment bill, since Brown has been using his muscle to get the Democrats in line and moving forward. It all may be moot anyway, since SB 77 will get called for a vote again sometime in the near future. We’ll find out soon enough.

    03.17.11
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    April 3rd A’s – Japanese Relief Effort

    Press release from the A’s today:

    OAKLAND, CALIF. — In their ongoing efforts to support victims of last week’s Japanese earthquake disaster, the Oakland A’s announced today that the team will donate $1 for every ticket sold to their Sunday, April 3 game against the Seattle Mariners at the Oakland-Alameda Coliseum to the Red Cross for their relief efforts in Japan. In addition, the A’s have established a new web site, www.oaklandathletics.com/japan, which will allow fans to make tax-deductible donations to the A’s Community Fund, with 100 percent of those proceeds-along with money raised from the April 3 game — given to the Red Cross.

    The benefit game, which will showcase Japan’s two greatest modern-day players in Oakland’s Hideki Matsui and Seattle’s Ichiro Suzuki, is also Japanese Heritage Day at the Coliseum, featuring pre-game ceremonies and entertainment. Yet most importantly, the game will feature many fund-raising components to support the Japanese relief efforts.

    Beyond the $1 per ticket commitment by the A’s organization, corporate sponsors for Japanese Heritage Day, including title sponsor Capcom and presenting sponsors NetSuite and Futjisu, will also contribute thousands of dollars to the cause. Besides purchasing a game ticket, fans will be encouraged to donate in the following ways:

    • CONTRIBUTE ON-LINE-Make a personal donation on line to the A’s Community Fund by going to www.oaklandathletics.com/japan. All proceeds will go to the Red Cross.

    • A SILENT AUCTION – Before and during the April 3 game, the A’s will conduct a silent auction of signed and game-used baseball equipment by Oakland players, with 100 percent of the proceeds raised going to the relief efforts.

    • MATSUI AUTOGRAPHED PHOTOS – A limited supply of personally-signed 8×10 color photos of Matsui will also be sold for $50 each.

    • FRAMED AUTOGRAPHED GAME JERSEYS – Personally-signed game jerseys worn by Japanese baseball icons Hideki Matsui and Ichiro Suzuki on 2011 Opening Night will be added to the Silent Auction on April 3.

    As part of Japanese Heritage Day, 10,000 fans will be given complimentary Hideki Matsui t-shirts, presented by Super Street Fighter IV 3D Edition. Pre-game festivities will include an on-field ceremony and relief-effort check presentation featuring Matsui, the San Francisco Japanese Consul-General Hiroshi Inomata, and Japanese Heritage Day sponsors.

    In addition, Taiko drummers will entertain fans before first pitch. For more information regarding Japanese Heritage Day and the Japanese relief efforts, go to the A’s newly-created web site, www.oaklandathletics.com/japan.

    Give by enjoying an A’s game that Sunday. Then give again (if you can) via one of the methods above. A’s games are a great deal, and on April 3 you’ll be there for a great cause.

    03.16.11
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    Deal struck between San Jose and Santa Clara County

    It took until the very last minute, but Santa Clara County pulled back from its lawsuit against San Jose when the two parties struck a payments and land deal. As reported by the Merc’s Karen de Sá and John Woolfork, the key is the City relinquishing its old City Hall north of downtown to the County. A smallish, dated postwar relic, the old City Hall could work fine as additional office space for the County. There are also suggestions that the County could turn the land around to a housing developer, which isn’t exactly promising given the land’s proximity to San Jose’s Main Jail. The property is right next to the Civic Center light rail station, which might make it attractive (It’s not really the Civic Center anymore – shouldn’t the station be renamed?). Talks about the transfer have been happening pretty much since the new City Hall opened. It’s a good deal in one sense for the County, as the corten-steel Government Center is next door so consolidation of the bureaucrats can begin in earnest. Or, if the hint in the document is correct, demolition can begin in earnest.

    Additionally, the City would pay the County $21.5 million by March 30 and $5 million by May 15. Hopefully that money can address county services that would otherwise face cuts. Part of that money will come from 50% of the proceeds from the North San Pedro (Brandenburg) sale. Five payments of $4.756 million each (plus interest) will be due by the end of each of the 2014-18 fiscal years.

    The upshot is that the San Jose Diridon Development Authority will remain intact, depending on the endgame of RDAs. Existing tax increment passthroughs would continue to be applicable at Diridon. Sometimes it takes a crisis to bring about results.

    03.16.11
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    SB 77 (End to redevelopment) in session

    As I type this I am watching the State Assembly stream the debate over SB 77, a bill that would ostensibly end redevelopment as we know going forward. Sponsors and critics are speaking now, including numerous Democrats who are voting for the bill despite having reservations over its effect on the future availability of affordable housing. Republicans seem to be voting no. Will it go party-line or will some of the Republicans cross over? Introductory text of the bill reads as follows:

    (1) The Community Redevelopment Law authorizes the establishment of redevelopment agencies in communities to address the effects ofblight, as defined. Existing law provides that an action may be brought to review the validity of the adoption or amendment of a redevelopment plan by an agency, to review the validity of agency findings or determinations, and other agency actions.
    This bill would revise the provisions of law authorizing an action to be brought against the agency to determine or review the validity of specified agency actions.

    (2) Existing law also requires that if an agency ceases to function, any surplus funds existing after payment of all obligations and indebtedness vest in the community.
    The bill would repeal this provision. The bill would suspend various agency activities and prohibit agencies from incurring
    indebtedness commencing on the effective date of this act. Effective July 1, 2011, the bill would dissolve all redevelopment agencies and community development agencies in existence and designate successor agencies, as defined, as successor entities. The bill would impose various requirements on the successor agencies and subject successor agency actions to the review of oversight boards, which the bill would establish.
    The bill would require county auditor-controllers to conduct an agreed-upon procedures audit of each former redevelopment agency by October 1, 2011. The bill would require the county auditor-controller to determine the amount of property taxes that would have been allocated to each redevelopment agency if the agencies had not been dissolved and deposit this amount in a Redevelopment Property Tax Trust Fund in the county. Revenues in the trust fund would be allocated to various taxing entities in the county and to cover specified expenses of the former agency. The sum of $1,700,000,000 of these moneys would be allocated to the various counties for deposit in a Public Health and Safety Fund, which would be used to reimburse the state for health and trial court services in the county. The bill would authorize the county to elect not to administer this fund, in which case the Director of Finance would be required to designate a different entity to administer this fund. Under the bill, if the county elects not to dminister the fund, it would not receive moneys remaining in the Redevelopment Property Tax Trust Fund, which would otherwise be distributed to taxing entities in the county. The bill would also require, for the 2012-13 fiscal year and each subsequent fiscal year in which funds are available, each county auditor-controller to allocate to various educational entities a specified amount. By imposing additional duties upon local public officials, the bill would create a state-mandated local program.

    (3) Under the California Constitution, the Legislature is prohibited, except by a 2/3 vote, from changing the pro rata shares in which ad valorem property tax revenues are allocated among local agencies in a county.
    Because this measure would provide property tax revenues that would otherwise be received by enterprise special districts from
    former redevelopment tax increment allotments instead be received by the respective county, and may result in property tax moneys in the Redevelopment Property Tax Trust Fund not being allocated to the county if it declines to administer the Public Health and Safety Fund, the bill would constitute a change in the pro rata share of property tax allocations in that county and require the passage of the bill by a 2/3 vote.

    (4) The bill would appropriate $500,000 to the Department of Finance from the General Fund for administrative costs associated
    with the bill.

    (5) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
    This bill would provide that no reimbursement is required by this act for a specified reason.

    (6) This bill would declare that it is to take effect immediately as a bill providing for appropriations related to the Budget Bill.

    More as the vote is taken. Passage requires a two-thirds approval.

    4:10 PM – District 16 (Oakland) Councilman Sandré R. Swanson is speaking in favor of the bill and will apparently vote yes. The Dems are talking about holding Governor Brown to a promise of setting up whatever the proper successor to RDAs is.

    4:14 PM – Closing statements happening now.

    4:18 PM – 50-21 Aye, 8 abstentions. They are four short of the necessary absolute two-thirds thanks to the abstentions, putting the bill on “call” or hold. Bill may come back after the other three budget bills are addressed.

    5:02 PM – Call lifted on SB 77. One additional No vote, 50-22. Can no one else be whipped into voting for this? Apparently not, bill placed on call again.

    5:54 PM – Still don’t have the additional four votes. Republicans are calling for a caucus.

    6:25 PM – The Assembly is now taking up a few Assembly bills. Looks like AB 77 will have to wait until the end of the night, whenever that is.

    6:57 PM – Call lifted. Vote is now 53 AYE, 23 NO. 3 holdouts remain. All four Assembly members who represent ballpark areas (Wieckowski – Fremont, Beall/Campos – San Jose, Swanson – Oakland) have voted to approve.

    7:09 PM – Still can’t get that last vote, bill moved to call yet again. Tally remains 53-23.

    9:25 PM – Last motion to lift call and vote. No 54th vote. Tally remains 53-23. Assembly adjourns for the night, will reconvene tomorrow at 11 AM. (Thanks for interfering with my NCAA tourney quality time, pols.)

    Note: Let’s keep the discussion to redevelopment and the impact of it going away.

    03.14.11
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    News for 3/14/11

    Today’s hearing for Santa Clara County and the City of San Jose may set the stage for a proper settlement between the two parties over $62.9 million in redevelopment funds owed to the county. The Merc’s Karen de Sá has the details, including this bit from County Supervisor Dave Cortese, who has long been a ballpark backer:

    “This is what we call a straight breach of contract, it’s not that much different than if somebody got behind on their car or house payments — you gotta settle up,” said board president Dave Cortese. “The difference is, this isn’t money for a car payment, this is money that needs to go toward all the services the county provides, everything from emergency rooms to a regional park service, libraries and courthouses. There’s no end to the hardship that would result in us being out of pocket $63 million.”

    City Attorney Rick Doyle is among those who believe a deal can be reached by Wednesday, which is when the State Legislature is supposed to hear the new budget proposal.

    Santa Clara is set to wrap up its work to protect RDA funds for the 49ers stadium project tomorrow.

    San Diego is considering a Diridon-like transfer of 135 RDA-owned properties to the City.

    Longtime NY Times baseball writer and anti-blog curmudgeon Murray Chass keeps up the weekly trickle of nationally-sourced articles pushing for the A’s to move south. This one follows a widely used AP piece last week. I sense a strategy in there… Chass’s column comes two years after a similar entry at his site, the difference this time being the appearance of Bill Neukom on the scene.

    Jonah Keri’s new book about the Moneyball-style rise of the Tampa Bay Rays is out. The book is titled The Extra 2%: How Wall Street Strategies Took a Major League Baseball Team from Worst to First.

    Added 3/15 1:00 AM – In Sunday’s edition of the Chronicle, Matier and Ross reported that Denver attorney Paul Jacobs was hired by Oakland to be its lead negotiator for the Victory Court project. The $455 per hour hiring, which wasn’t publicized immediately because it was done in closed session, is a big deal because Jacobs is prominent in the Western US for working on stadium deals. His biggest claims to fame are his role in putting together the resources that eventually created the Colorado Rockies, and the ballpark and land development deal around PETCO Park. As is often the case in the stadium game, Jacobs isn’t batting 1.000. More recently he worked on the aborted Pacific Commons project in Fremont and was retained by the City of Oceanside in its efforts to figure out a football stadium deal for the Chargers. One thing I’m curious about is whether or not the firm Barrett Sports Group was brought in. The last two links include mentions of Barrett Sports Group, the “other half” to Jacobs, with both hired as a package deal of sorts. Jacobs handles the real estate stuff, while BSG takes care of facility planning and financing. BSG counts A’s and Giants ownership as two of its many current or former private sector clients.

    03.11.11
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    Days of Reckoning

    Governor Jerry Brown’s self-imposed budget deadline has come and gone, though Brown has asked for more time to work out details with the legislature. That body is trying to line up a floor vote next week, and they can waive the advance requirement for a public vote if they can get the budget basics outlined. If a compromise can’t be reached in the Capitol, Brown has warned of an “all cuts” budget in which every state agency and employee group will be in an “every man for himself” mode. It’s hard to conceive, but not out of the realm of possibility. It’s too early to know what such an impasse would mean for redevelopment, and for the various stadium projects throughout the state.

    Speaking of redevelopment, Santa Clara County’s lawsuit against the City of San Jose and SJRA will have a hearing on Monday. The immediate issue at hand is the County’s request for an injunction against the transfer of the Diridon land to SJDDA. It’s a move that could have a paralyzing effect on ballpark efforts in San Jose, at least if the state goes through with the elimination of redevelopment agencies. One thing to keep in mind is that unlike many other Bay Area counties, Santa Clara County has no redevelopment agency of its own. That makes the County unique in that advocacy for curtailing or eliminating redevelopment presents no potential conflict of interest. San Jose has tendency to throw its weight around, so you can see why the County might feel it has to resort to a legal action.

    If redevelopment goes away, it wouldn’t only threaten San Jose. Oakland, Santa Clara, and at least two or all three of SoCal football concepts would both see their stadium projects vanish (San Diego, City of Industry for certain, Downtown LA unclear).

    Under Brown’s proposal, redevelopment agency property would be sold and the proceeds divided among the cities, counties, school districts and other local entities, finance spokesman H.D. Palmer said, so moves to protect the assets – transferring parking lots, buildings and other properties to a city, for example – could limit the amount those other local government bodies get if lawmakers eliminate redevelopment agencies.

    Assuming that whatever lawsuits stem from the seizures get resolved, that would leave the various cities to work out deals where agreements and contracts already exist. That would include the Coliseum in Oakland and the Airport West property in San Jose.

    In other news:

    • Chuck Greenberg is resigning from his CEO post with the Texas Rangers today, after only 8 months on the job. A shocker, and the background article is a worthwhile read.
    • The A’s will raise funds for victims of the Sendai earthquake and tsunami on April 3, a game against the Mariners. The day will also be called Japanese Heritage Day.
    • NFLPA appears to be ready to decertify itself, a move that would preempt a lockout. It would also set off a series of lawsuits. The two sides are said to be some $600-700 million apart n terms of sharing revenue, with the league offering 43% of the full pie ($9 Billion) and the players wanting 50%. By going down this path, both sides are setting a highly contentious precedent that could well be followed by the NBA this summer, MLB not so much. Update 1:19 PM – The league has reportedly upped their offer to 46%. Last minute talks are underway. Update 2:16 PM – False hope. Union is decertifying. Begin lockout posthaste.
    • Tim Kawakami continues to carry the torch for Larry Ellison’s NBA team ownership bid.

    I need a drink.

    03.09.11
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    Getting ready just in case

    KCBS radio reported yesterday that an online construction bidding service, bidclerk, has a new or updated listing for an A’s stadium San Jose (paid subscription required). The value of the project is $400 million, less than what we’ve frequently discussed as the cost of the ballpark. Start date is listed as January 2013. The project description goes as follows:

    New construction of an athletic stadium in San Jose. Preliminary plans call for the construction of a 32,000-seat baseball stadium. The stadium will include concession areas, restrooms, ticket boxes, V.I.P. areas, locker rooms, a medical facility and offices.

    This project is contingent upon approval from Major League Baseball and the city. Construction is scheduled to begin no earlier than the first quarter of 2013.

    The listing dates back to 2006, when the A’s were looking in Fremont. Strangely, the included documents are two of the now outdated Pacific Commons renderings alongside one recent San Jose rendering. Listed as project contacts are Lew Wolff and 360 Architecture principal Brad Schrock. There isn’t much information right now other than a heads up to interested contractors. Should the project be approved by MLB and SJ, activity should increase appreciably.

    Wolff’s Maritz-Wolff development company also lists the Earthquakes’ stadium project. Some light-oriented schematics are included, and the project description indicates how much further along the project is compared to the ballpark:

    Site work and new construction of a mixed-use development in San Jose. Schematic plans call for the construction of a 20,000-seat soccer stadium.

    This project is currently in the financing stage, and construction is tentatively expected to begin in spring 2011.

    In both cases, they are accurate reflections of where the two projects stand. That leaves the January 2013 start date for Cisco Field the one truly speculative item. Should it start at that date, construction would have to be completed in 27 months to be done prior to Opening Day.

    03.09.11
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    San Jose’s Two Front War

    If you follow this blog’s Twitter feed, you’d have seen this on Tuesday afternoon:

    SJRA: Item 8.1 – Creation of San Jose Diridon Development Authority – approved unanimously. Objection by Santa Clara County.

    The approval took all of a few minutes and had no speakers for or against. Compared to what was discussed during the rest of the session, it was highly anti-climactic. I left Council Chambers wanting more. After the swearing in of the SJDDA board (mayor + city council), there was a brief stretch used to establish a few ground rules, then an adjournment and a return to regular city agenda items. I didn’t realize what that last bit meant until I got home, when I saw an article in the Merc describing Santa Clara County’s $62.9 million lawsuit against San Jose.

    To settle prior lawsuits over redevelopment tax grabs, the agency since 2001 has paid the county a portion of the tax dollars it collects, but agency chief Harry Mavrogenes stopped those payments as the economy soured.

    By July 1, the agency will owe the county $62.9 million to fund such essential services as mental health, drug rehabilitation and juvenile justice.

    San Jose city officials said they weren’t surprised by the suit.

    “They need to protect their interests against whatever the state is going to do, so I understand their action,” Mayor Chuck Reed said Tuesday night. “But we also have to protect our interests as the state takes action.”

    Reed said the lawsuit would not stop negotiations with the county, which have been going on for more than a year.

    By acting to preempt a raid by the state, San Jose raised the ire of the county. The city and county have often clashed over funding and development priorities. I guess I’m surprised the peace lasted this long. Now we wait for the other shoe to drop in Sacramento, if it happens at all.