Governor, Cities Locked in Fight Over Redevelopment Funds

Jerry Brown is meeting with the mayors of nine California cities today, including four from our neck of the woods: Ed Lee of San Francisco, Jean Quan of Oakland, Chuck Reed of San Jose, and Kevin Johnson of Sacramento.

On the agenda? Brown's proposal to eliminate hundreds of redevelopment agencies around the state. This article from the San Diego Union-Tribune describes the plan in capsule:

Gov. Jerry Brown issued his budget for 2011-12 this week and one of the many proposals was eliminating local redevelopment agencies and redistributing the money back to counties, schools, cities and other special districts – after sending the surplus for one year to the state.

Redevelopment bond payments and other obligations would continue, but future economic development projects could be funded by bonds with 55 percent of voter approval, down from the current 66.7 percent requirement. Currently, redevelopment is funded from rising property taxes generated within redevelopment project boundaries.

So how do the mayors like the proposal?

Not so much, turns out.

Mayor Quan has suggested using redevelopment funds to build a new A's stadium. Kevin Johnson's been quoted as saying "Those dollars are catalytic, they create jobs, they do some amazing things." Chuck Reed's stated, "Given the difficult times California is in, I am shocked that Sacramento is looking to eliminate the only tools we have to spur job creation, increase tax revenues, and induce economic growth."

And KQED's John Myers is now tweeting various other expressions of consternation from different mayors at the confab...

As for the governor, the LA Times has this report about a press conference Brown gave today:

Striking a strident tone in an afternoon press conference, Brown called the redevelopment agencies a “piggy bank” that the state needs to crack open to fund education and local services as California grapples with a $25-billion deficit. He said shutting down the state’s nearly 400 municipal redevelopment agencies is a crucial part of his budget proposal and will save $1.7 billion.

Cities across the state have angrily denounced the idea as they rush to squirrel away redevelopment dollars in ways that would shield the funds from any state raids.

Brown challenged the mayors to find alternative spending cuts if they want to keep redevelopment alive. “My message is: If not you, who?” Brown said.

So what are these redevelopment funds anyway? Here's a primer from the California Redevelopment Association. While keeping in mind that the group is a trade association fighting Brown's proposal tooth and nail, you can still get a decent overview of the redevelopment process.

What is redevelopment?
Redevelopment is a process authorized under California law that enables local government entities to revitalize deteriorated and blighted areas in their jurisdictions. Redevelopment agencies develop a plan and provide the initial funding to launch revitalization of identified areas. In doing so, redevelopment encourages and attracts private sector investment that otherwise wouldn’t occur...

What is a redevelopment agency?
State law gives a local government (city or county) the authority to form a redevelopment agency with the specific goal of revitalizing deteriorated areas. There are 397 active redevelopment agencies throughout California, all of which are overseen by the local city council, county board of supervisors or a separate appointed board -- all accountable to the public. Because they are locally governed and their boards are comprised of local elected or appointed officials, redevelopment agencies are in the best position to work with local citizens and businesses to identify community needs and to work with private investors on local projects to meet those needs....

How are redevelopment agencies funded?
Redevelopment agencies do not levy taxes and do not have the ability to raise taxes. They receive a portion of the property tax revenues generated when property values rise as a result of new investment. When redevelopment agencies improve deteriorated areas, property values within those areas rise, thus increasing property tax revenues. The increased property taxes resulting from redevelopment activity are referred to as “tax increment.” State law allows redevelopment agencies to pledge tax increment so that they can repay bonds and other types of debt incurred to make investments in project areas. In essence, redevelopment agencies fund themselves when they make improvements to their communities. They stimulate increases in property values that otherwise would not have occurred.

Here are different views of Brown's proposal, pro and con, of some academics, officials, and economists, published in the San Diego Union Tribune. Two below:

(I)n practice the benefits of public redevelopment subsidies are often captured by private developers, while the costs are borne by local residents. And if the taxes needed to pay for the programs end up forcing businesses and jobs to leave the state, it is hard to argue that this is a net benefit for the local economy. --James Hamilton, University of California San Diego

Redevelopment agencies are an important tool for public officials to promote local economic development, so eliminating them would reduce the options to boost local economies. Sending the surplus for one year to the state would also take money out of local economies, which would hurt in this economic environment. This shows though how desperate the state budget situation is.
--Alan Gin, University of San Diego

Get it? Well, a lot more entertaining than all of this is Brown's Jan 19 address to the League of California Cities, which -- guess what -- doesn't much like his plan either. As Brown said at the beginning of his speech, "Everybody eaten already? Because you look a little hungry to me."

He then goes on, speaking about the desperate financial straits of government in general these days: "It's very difficult at the city, the county, the state, or the federal government to look truth in the eye and say okay, there it is, let's deal with it honestly...I'm willing to walk down that road hopefully with as many of you as possible, or walk there myself."

Looks like the latter. Cities have been maneuvering to protect the funds and expedite projects before the well runs dry. Meanwhile, state Controller John Chiang has announced plans to audit 18 redevelopment agencies, including San Jose, Fremont, Hercules, and Sacramento County.

Looks like the fight has just begun...