Sebastopol stands to lose $5 million in funding over the life of its redevelopment agency under the state's new budget, city officials said Tuesday night.

That will severely delay park and downtown improvements and low-income housing, they said.

The question that the City Council now must grapple with, City Manager Jack Griffin said, is whether to keep the redevelopment agency in business even though it will now take years longer to complete the projects the city wants.

"Does it make sense to have a redevelopment agency with the reductions, or does it make sense to have the money for the general fund?" Griffin asked.

The City Council, which doesn't have to make a decision until September, asked Tuesday night for more analysis as it becomes available.

Vice Mayor Michael Kyes said, however, that the analysis should include the impact of increasing the city's sales tax to make up for the loss of funding.

"We now charge a quarter cent sales tax and people think that is a lot of money, but it is only a latte a month," Kyes said. "Raising it to three lattes a month, our residents might be comfortable with to get better streets."

Thee new state budget abolishes local redevelopment agencies, although it gives the cities and counties the option of retaining then if they agree to collectively send $1.7 billion to the state this ear, and lesser amounts in succeeding years.

For Sebastopol, officials said, that means the city would lose its total redevelopment revenue of $1.3 million this budget year, but get $373,000 in the following years.

Through 2023, when the agency is set to expire, its redevelopment funding would be $7 million instead of the $12 million it would have gotten.

Griffin said that if the city decides to abolish the agency, it will receive $400,000 a a year for its general fund, for a net of about $5 million.

In anticipation of the take-away, the city has suspended any redevelopment spending this year. That includes $625,520 for expansion of Skategarden Park, $100,000 for downtown streetscape improvements, $100,000 for an Ives Park master plan, $15,000 for facade grants and $5,000 for technology grants.