Yesterday, the California Supreme Court upheld legislation passed earlier this year abolishing redevelopment agencies in California. Hamstrung by a Republican minority that will not touch California’s current tax scheme and facing reduction of funding for schools and social welfare programs, the Democratically controlled legislature decided to rob the cities. Redevelopment is a 65-year-old program that allows cities to undertake capital projects and finance them with future taxes from the resulting increase in property values.
Richmond would likely still look like the devastated shell left over from the WWII boom if it weren’t for redevelopment. Probably the best example is Marina Bay, including the Ford Building rehabilitation, all made possible by redevelopment. As Marina Bay matured, its tax increment funds were tapped for projects all over Richmond, such as the recent Macdonald Avenue improvements. Since 20% of redevelopment funds must be used for low-cost housing, much of what has been built in Richmond was paid for or subsidized by redevelopment.
All of those opportunities will now go away, with the money siphoned off to Sacramento to keep the State afloat.
East Bay redevelopment leaders reeling after ruling
By Lisa Vorderbrueggen
Contra Costa Times
Posted: 12/29/2011 01:04:34 PM PST
Updated: 12/30/2011 07:40:16 AM PST
The end of redevelopment agencies affirmed Thursday by the state Supreme Court deeply affects the East Bay.
"This will be devastating to local government," Contra Costa County Assessor Gus Kramer said. The agencies have been a major source of revitalization, jobs and budget support, and most of its cities have redevelopment. Contra Costa itself oversees five districts in unincorporated areas.
Oakland's prognosis is particularly poor. Redevelopment this year paid for 171 positions, including 17 police officers and nearly 100 other employees.
The ruling also could doom a new stadium for the A's near Jack London Square, where redevelopment funds were anticipated for buying land and relocating
"Unless there is a fix at the state level, many employees will be laid off and there will have to be a serious adjustment of many departments' budgets," said Councilwoman Jane Bruner.
Oakland Mayor Jean Quan said she expected state lawmakers to pass legislation preserving many aspects of redevelopment.
Redevelopment agencies spend money gleaned from the extra taxes generated by rising property values within their boundaries. It finances programs and projects ranging from affordable housing to transportation improvements to land purchases and even extra police.
Many agencies have significant debt, the result of borrowing against expected revenues to assemble properties and construct projects.
Contra Costa's Bay Point district, which has seen a dramatic drop in property values, no longer generates enough money to make its loan payments.
Most agencies took steps to protect their redevelopment assets from state seizure, such as transferring land and signing contracts, but it is unclear whether these acts will survive challenges.
Fremont in July became one of the first cities in the state to try and keep its redevelopment agency by agreeing to return millions in agency funds to the state, but the court also ruled against that mechanism.
City Vice Mayor Anu Natarajan saws the court's ruling as a "huge blow for economic development for all cities ... unless the Legislature comes up with another mechanism for affordable housing and redevelopment."
The decision could cripple Emeryville's budget, which relies more than most on redevelopment income. The city plans to join others to work with state legislators, said Assistant City Manager Dolores Turner.
Ironically, some of the same cities and counties that will lose their redevelopment money will see some of those dollars return to their general funds.
After accounting for the debts and obligations, the dollars that once went directly to redevelopment agencies will return to the overall property tax pool and allocated to all eligible public agencies including cities, counties, fire districts and dozens of other agencies.
Nonetheless, redevelopment advocates throughout the East Bay universally expressed dismay and frustration.
The decision is the worst possible news for cities, said Livermore Mayor John Marchand.
"What's really unfortunate is that the redevelopment agencies were really the fuel in the economic engine that was going to turn around this recession.
"Our redevelopment agency has created hundreds of jobs over the last few years, and to gut a proven economic engine is just shortsighted."
Now the city may never build its regional theater, Marchand said.
Pittsburg has Contra Costa's largest redevelopment agency and the fourth largest in Northern California, having bonded about $180 million to revitalize its waterfront and downtown and to finance other projects.
"(State lawmakers) thought it out for their side where they get the cash, the $1.7 billion they need to balance their budget, but they didn't give us a choice," Mayor Ben Johnson said.
An Antioch leader anticipated the city would have to use general fund money to support some redevelopment projects even as it has dramatically reduced services and staff.
"It's going to be a disaster ... especially because of how we use it for low-income housing and other projects," said Antioch Councilman Gary Agopian.
The ruling could throw off plans for new public housing in Richmond, where property tax receipts for redevelopment reached $18 million this year.
All current redevelopment projects such as the BART garage and Marina Bay railroad undercrossing are fully funded, said Steve Duran, Richmond's former economic development director. But the city also had planned housing projects that may have to wait.
Pleasant Hill used redevelopment to transform its downtown from a hodgepodge of shabby shops to a thriving retail and entertainment complex that has become the city's center. Abolishing its agency likely will derail remaking the outdated DVC Plaza shopping center.
Reporters Angela Woodall, Matthew Artz, Robert Dennis, Chris De Benedetti, Eric Kurhi, Sean Maher, Paul Thissen, Jennifer Modenessi, Paula King, Hannah Dreier, Paul Burgarino, Tom Lochner, Lisa White and Chris Treadway contributed to this report.
Calif. wins OK to abolish redevelopment agencies
Marisa Lagos, Chronicle Staff Writer
Friday, December 30, 2011
The California Supreme Court dealt a deathblow to the state's 60-year-old redevelopment program, ruling Thursday that lawmakers had the authority to eliminate the economic development program and striking down a law that would have allowed the agencies to exist in smaller form.
The ruling was the worst-case scenario for cities, which argued they needed the program to spur economic development in blighted areas and create jobs - but it was a win for Gov. Jerry Brown.
Brown argued that the state should no longer fund the program because those public dollars could be better spent on education and law enforcement. He praised the high court's decision.
"Today's ruling by the California Supreme Court validates a key component of the state budget and guarantees more than a billion dollars of ongoing funding for schools and public safety," he said.
The ruling will force redevelopment agencies to put the brakes on proposed projects, such as San Francisco's Mid-Market revitalization, and could cast uncertainty on approved projects, including the city's redevelopment of the Hunters Point Shipyard and Mission Bay area. That's because while state law allows redevelopment agencies to finish approved projects and pay off existing debt, the court ruling could spook bond investors needed to fund those projects.
Bad news for Oakland
It's also bad news for cities such as Oakland, which rely on redevelopment money to pay for police officers and other city services.
The decision takes effect immediately, though the court gave redevelopment agencies four months to meet some legal deadlines tied to shutting down the program.
Supporters of the program, including San Francisco Mayor Ed Lee, immediately called on lawmakers to find a legislative fix that allows cities to preserve redevelopment, and leaders at the California Redevelopment Association said a bill to revive some form of redevelopment could be introduced as soon as next week.
"It's unlikely that the Legislature intended to dissolve redevelopment agencies without an option to maintain true job creation, infrastructure and affordable housing projects," Lee said in a written statement.
Projects under way OK
Lee noted that while "major projects well under way such as the Mission Bay, Bayview Hunters Point Shipyard and Treasure Island can keep going ... continued future progress on developing affordable housing, revitalizing blighted neighborhoods and generating the resources to fund urban infill development and infrastructure" are at risk.
The ruling comes five months after the statewide Redevelopment Association and League of California Cities sued the state over two bills approved by lawmakers and signed by the governor in June as part of a larger package to solve the state's multibillion-dollar budget deficit.
The 2 state laws
Under AB26 and AB27, the state's 390 redevelopment agencies would cease to exist unless they agreed to pay $1.7 billion this year and $400 million in future years toward schools and other public programs such as special fire districts. Redevelopment programs currently receive about $5.7 billion a year.
On Thursday, the high court unanimously ruled that AB26, which eliminated the agencies, was legal because redevelopment agencies "were created by statute and can therefore be dissolved by statute."
But the court said AB27, which would have forced agencies to pay schools and other public programs in order to stay in business, was not allowable.
Chief Justice Tani Cantil-Sakauye dissented on that ruling while the other six members of the court concluded that the law was unconstitutional because it required redevelopment agencies to give a portion of their funding to other programs. The majority said that requirement violated Proposition 22, a measure approved by voters to protect local funding from state raids.
While supporters of the program intend to work with lawmakers in the new year to write new legislation to reinstate some form of redevelopment, it's not clear whether majority Democrats would embrace such a proposal - or if Brown would sign it.
Brown initially proposed eliminating redevelopment entirely, but Democratic leaders in the Legislature created the smaller, alternative program under AB27 as a compromise to get some of their members on board.
In a statement, Assembly Speaker John Pérez called the court ruling a "mixed result."
Not ready to give up
"Despite the court's action blocking our creation of the smaller (redevelopment agencies) that protected affordable housing funding, we remain committed to finding affordable housing solutions and making smart economic development investments in our local communities," he said.
Jim Kennedy, interim director of the California Redevelopment Association, was optimistic that a bill would be written. He said redevelopment supporters are already talking to lawmakers and that legislation could be introduced as early as next week.
"We think it's abundantly clear that the Legislature did not intend to abolish redevelopment ... and we do still believe there is a willingness on the part of the Legislature ... to work with us and find a viable alternative to keep redevelopment intact," he said.
Redevelopment was created in 1945 as a postwar blight-removal effort paid for primarily by federal grants. Within a few years, it morphed into its current form: a financing structure that allows redevelopment agencies to fund capital improvements by borrowing against future increases in property tax revenues in a redevelopment area.
Critics say the economic development program has moved away from its initial intent and become a slush fund for developers and other private interests.
'Victory' for taxpayers
"For far too long, California taxpayers have financed obscure government agencies that use taxpayer dollars and their power of eminent domain to benefit politically connected developers. During these tough economic times, developers should not be on the public dole while police officers and teachers are getting pink slips," said Marko Mlikotin, president of the California Alliance to Protect Private Property Rights - a coalition that includes family farmers and taxpayer advocates that praised the ruling as "a victory for California taxpayers."
But supporters such as the Non-Profit Housing Association of Northern California say the decision will be "devastating to millions of low-income Californians who have been hardest hit by the largest economic recession the state has seen in years."
"Redevelopment funds are the largest local funding source for affordable homes and rental housing," the association stated. "Over the coming years the loss of this funding will mean thousands more Californians living on the streets and tens of thousands more living in overcrowded and substandard conditions."
Reactions to the redevelopment agency ruling
"Today's decision validated important powers of the Legislature to conduct the people's business."
Senate President Pro Tem Darrell Steinberg, D-Sacramento
"Unfortunately, this decision could eliminate a powerful tool for creating local jobs."
State Board of Equalization member Betty Yee
"Redevelopment is indispensable to cities to spur economic development, create jobs and improve communities."
Chris McKenzie, executive director of the League of California Cities
"This decision comes at the worst time when millions of Californians continue to lose their jobs to a struggling economy and their homes to foreclosure."
Peggy Lee, acting executive director of the Non-Profit Housing Association of Northern California
"I am ready to meet with legislators right away to figure out a way to restore redevelopment."
State Building and Construction Trades Council President Bob Balgenorth
"Today's ruling is a victory for California taxpayers and private property rights."
Marko Mlikotin, president of the California Alliance to Protect Private Property Rights
"Without immediate legislative action to fix this adverse decision, this ruling is a tremendous blow to local job creation and economic advancement."
Julio Fuentes, president of the California Redevelopment Association's board of directors
"We are extremely disappointed with the court's ruling. ...What's at risk for us in San Francisco is our long-term ability to build affordable housing."
Tiffany Bohee, interim head of the San Francisco Redevelopment Agency
E-mail Marisa Lagos at email@example.com.