Redevelopment Agency phase-out link roundup

Hey folks. I’m hoping to get a blog up later this afternoon about the Governor’s proposal to eliminate redevelopment agencies. I have mixed feelings about it, some of which I hope to explore in the post. While I was writing, I noticed that my “links for further reading” list that I was going to tack onto the end was getting ridiculously long. So I figured I might as well post it separately.

Here you go:

  • Governor’s Proposed 2011-2012 Budget, detail version

  • Governor’s Proposed 2011-2012 Budget Summary: The whole summary is 226 pages, so it should probably be more than enough for most people. It is also written in refreshingly clear language.

  • Video of the Governor’s budget briefing

  • Transcript of Governor Jerry Brown’s remarks at yesterday’s budget proposal press conference: With respect to the redevelopment changes, he offers:

    Finally, the last slide: ending subsidies. Redevelopment has done some important things and we don’t — I don’t — want to interfere with any redevelopment bond of commitment that has been contractually entered into. But going forward, the redevelopment takes money from schools, cities, and counties, and we want that money to be available, because all that’s happened in the redevelopment is that the state has to backfill and pay to make up for the property taxes that are taken by redevelopment. So, in effect, what we’re doing here is spending money at the local level that the state doesn’t have. So we want to take that money and leave it at the local level for the purposes that it was historically intended. That’s police or fire or local activities, county, or schools.

  • “We’re Finally Facing the Music”: Initial analysis on the Capital Notes blog from KQED Sacramento Bureau Chief John Myers. Myers, on the blog, on his podcast, and on the radio, is always excellent, and I highly recommend his rundown of the budget. Regarding the redevelopment issue specifically, he offers:

    The Redevelopment Slugfest: The governor’s proposal to begin phasing out the existence of California’s 397 redevelopment agencies (RDAs) is going to be one of the real battles to watch in 2011. RDAs exist in both cities and counties around the state, and are given a share of property taxes that are often leverage against private sector dollars for economic development projects. RDAs don’t, on the whole, have money sitting in the bank; most of their money is tied up in projects with long-range commitments. And so Brown proposes to stop funding RDAs sometimes after July 1, with future property tax dollars redirected to local programs and schools. A long story can (and, later, will) be written on the pros and cons of the RDA process in California. But the governor’s plan is already igniting a battle royale by RDA supporters, who blanketed my email today with stats about jobs created by redevelopment projects and thus equating the Brown plan with an economic poison pill.

  • California Budget Project on proposed budget (PDF)

  • California State Association of Counties Budget Action Bulletin on the Governor’s Budget Release (PDF): Summary of proposed realignment of services starts on page 5, summary of redevelopment proposal on page 12

  • California Redevelopment Association press release on the budget proposal (PDF): It’s about what you’d expect — naturally, they don’t like the idea of phasing out redevelopment agencies at all. The all-caps bold headline reads “Governor’s proposal eliminating redevelopment is budget smoke and mirrors that will bring little financial benefit to state but will cause significant harm to California’s economy.”

  • California Redevelopment Association talking points on proposal (PDF): “It is an gimmick that will likely result in extensive litigation.” Well, the litigation part is definitely true.

  • California Redevelopment Association sample letter to the Governor (PDF):

    However, even in difficult times, the Governor’s proposal to eliminate or curtail redevelopment is short-sighted public policy that will damage our economy and bring little budget relief to the State. The proposal to eliminate redevelopment:

    • Will not provide expected budget relief to the State or local governments after bond issues and contractual obligations are repaid;
    • Will destroy billions of dollars in local economic activity and hundreds of thousands of jobs;
    • Will kill the state’s leading program to provide affordable housing; and
    • Will harm our efforts to grow responsibly by focusing on urban and infill development.

    The proposal will not provide budget savings to the State or local governments.

  • California League of Cities initial analysis of Governor’s budget proposal: They don’t like the idea of phasing out redevelopment agencies at all either:

    From a policy standpoint, such a radical proposal makes no sense in a state with unemployment rate of more than 12 percent, a monstrous infrastructure deficit and recently passes policies championing more infill development. Redevelopment, which has been around since the 1950s, is a tool for building things. It builds and improves communities, spurs job growth and taxes and is the most significant provider of infrastructure, urban development and affordable housing in the state. Enterprise zones are one of the few economic development rools that cities and counties have to bring jobs to depressed areas.

    This proposal will hurt our underserved and distressed cities and communities. It will cost California thousands of jobs. The reality is that the plan to eliminate redevelopment agencies will bring very little financial benefit to the state and will actually move the state backward in terms of land use and infill development. In addition, the League is reviewing the constitutionality of the realignment proposal under Proposition 22, and other constitutional provisions.

  • California Planning & Development Report on proposed elimination of redevelopment agencies: “The proposal has set off what will likely be an ongoing debate over the value of redevelopment as it has been implemented in the 59 years since California voters approved a constitutional amendment allowing the use of tax increment financing to combat blight.”

  • Sacramento Bee’s Capitol Alert blog roundup of reactions to Governor’s budget proposal

  • Press release summarize Public Policy Institute of California 1998 study on success of redevelopment agencies

  • “Subsidizing Redevelopment in California”: A 1998 report from the Public Policy Institute of California that offers a fairly negative assessment of the benefit of redevelopment agencies.

24 thoughts on “Redevelopment Agency phase-out link roundup

  1. len raphael

    Link to ORA’s financials
    http://www.oaklandnet.com/government/fwawebsite/accounting/CAFR.htm

    i gave these complex statements a superficial 5 minute review. Surprising to see a large overall city deficit in the “unrestricted funds balance”.

    Anyone understand these and/or read the footnotes?

    Does that deficit backup the response an acquaintance got when he asked if there were RDA funds avail in a particular district for a modest community project and he was told the RDA was tapped out, (at least that RDA was.)

    Going back to the ballpark situation, where unlike SJ, our ORA would have to issue more bonds because it doesn’t have the bucks.

    -len

  2. Chris Kidd

    Len, I think part of the deficit comes from when the state raided CEDA’s reserve funds over the last two budget cycles to plug state budget holes. The reason SJRDA is in a comparatively better position is because they land-banked instead of building a reserve fund. They can, and do, resell property to raise RDA funds at a later date.

  3. Allan

    The point is that total money available is limited. Of course we would rather have redevelopment than nothing, but we have to decide among desireables. What we have been hearing for years is “sure this project may not be the wisest use of money, but it is just redevelopment money, we cannot use it for police or libraries or schools.” If we get rid of redevelopment set asides, we need to make decisions. Maybe the ball park is a better use of funds than schools – the proponents have to make the case.

  4. len raphael

    CK, 45 minutes more of reading the 08/09 financials and i need help from CX so i don’t jump to the wrong conclusion based on apply gaap ideas to these.

    The only thing that’s clear is that that deficit was unrelated to the (attempted) state grab because that would have occurred in the fiscal year 09/10 and i couldn’t find those financials.

    comment in the documents “The Agency’s
    deficit in unrestricted net assets of $331.9 million is attributed to the issuance of bonds and other indebtedness to fund urban development and housing projects that are not capitalized.”

    I’m thinking the picture of the head of RDA, Walter Cohen shows him smiling so broadly is that he knows normal humans will never be able to follow the RDA money.

    -len

  5. Naomi Schiff

    The never being able to follow has been the case for a long time. When I was on the local advisory board, many years ago, it was our chronic greatest complaint. We kept asking where the tax increment money had gone. I have mixed feelings about redevelopment. Hope that this doesn’t mean we have to gut the city services that are paid through redevelopment (not that I think they should have gone down that road, originally), such as the planning dept.

  6. len raphael

    wouldn’t be so funny if JB gives us full discretion over the RDA purse, but we’ve already emptied it with cost chargebacks and asset sales.

    Suppose that if we laid off the substantial number of city employees whose wages are charged back to RDA, but kept the revenue less debt repayments, there wb a bunch of money avail to go toward the structural (= we never could afford it) and the cyclical (recession revenue drop) shortfalls.

    What if a good chunk of those employees were actually mostly doing general fund type work eg. policing the coloseum area.

    Can’t imagine JB would let us expand the RDA districts or even extend the expiration dates on the tax increments.

    -len raphael, temescal

  7. John Garrett

    Ooh. This is one of my pet peeves.

    I think ending new RDA activity is one of the best features of the budget proposal.

    Some of the faults and criticisms of RDAs are understood:

    - RDAs divert a significant amount (10%?) of property taxes from other services
    - RDAs capture incremental tax revenue which was not created by redevelopment, but rather by inflation, by too-large redevelopment area designations, and by designating areas for redevelopment which are not really “blighted” but up and coming due to market forces (Old Town Sacramento, Downtown San Diego)
    - Enforcement or audit mechanisms to ensure compliance with state law do not exist: Among other things this means RDAs don’t always spend 20% of funds on politically unpopular affordable housing
    - Some of the “other things” exempt from audit are beautification grants, overpayment to developers to keep units affordable, theme parks (proposed in Garden Grove)
    - Favoritism for the politically connected
    - RDAs often focus on sales tax generators – car dealerships, malls/big box retail, stadiums – instead of small businesses or neighborhood amenities or even manufacturing/industry
    - RDAs employ eminent domain
    - RDAs are undemocratic; officials are appointees, albeit often they are elected to some other government role such as city council

    Fundamentally the RDA structure doesn’t achieve the goal of improving the economic life of folks in designated redevelopment areas. They have provided some benefits: affordable housing, infrastructure improvements, and amenities ranging from groceries to sports stadiums and theaters. But the cost is too high and the process easily coopted.

    Redevelopment can still happen under the Governor’s proposal. However projects would require approval and funding by the local authority – city council or county – instead of an RDA.

  8. John Garrett

    Another interesting point here is that California just passed Prop. 22 which prevented state raids on entities such as transit districts and RDAs. Proponents thought this would prevent a repeat of the 2009 state raid in which RDAs transferred more than $1 billion in property tax revenue to the state’s General Fund. But if the RDAs are shut down the Prop. 22 requirement becomes less important.

  9. Naomi Schiff

    Yes, and in all the attention paid to the general budget I think very insufficient attention gets paid to the redevel. budget, which is a major part of the city’s funds, taken all together. Also, even without using eminent domain, cities jump into the real estate market, which is not always wise. Seems like the tax inc. structure must have been very hard on the county budget, at the same time that state wanted counties to take on more. Not a problem for SF, but every other county in the state suffers from this strain between city and county priorities.

  10. Chris Kidd

    I think the discussion so far raises a very telling reason why RDA’s are on the chopping block. Regardless of how they are run, how effective they are, or what kind of real impact they have in spurring economic development, RDAs have a much smaller constituency of vociferous defenders than other state services/agencies that control comparable amounts of funding. It worries me that the #1 reason RDAs are on the chopping block is not because it will be a positive step forward or makes good policy sense, but because they are an (relatively) easy target.

  11. Livegreen

    The challenge for Redevelopment if the RDA’s r eliminated is making sure the extra money actually goes to that purpose. Everyone’s going to make a grab for any extra money in the general fund. After all, wasn’t there a purpose to creating the RDA’s in the first place?

    I agree with Len’s criticism about the City backfilling the General Fund with RDA moneys, & Chris’ political concerns about why RDA’s r up for grabs.

  12. John Garrett

    Chris Kidd, I disagree with most of your premise:

    “the #1 reason RDAs are on the chopping block is not because it will be a positive step forward or makes good policy sense, but because they are an (relatively) easy target”

    The part I agree with is that RDAs are easy targets. Many people in a time of large budget cuts and government service cutbacks prefer to direct finite property tax revenue to fund police, fire, libraries, schools, streets and parks before funding publicly subsidized real estate developments.

    I disagree that abolishing future RDA activity is not a positive step forward or good policy.

    While RDAs produce some some benefits to the public, notably affordable housing, the way they do so is strikingly inefficient, is prone to corruption, is operated by appointees, has no audit mechanism, and diverts more than its share of property taxes. And it is arguable they provide no net economic benefit to members of targeted neighborhoods.

    I’m for urban planning, especially in pursuit of social goods like affordability and environmental goals. But I am against RDAs and the current tax increment financing structure.

  13. Naomi Schiff

    To me, the hallmark of the largest portion of redevel. funds has been high ambition to do huge projects, which take decades to complete if they are ever successful at all, and sometimes damage the areas in which they are located. It is hard for redevel. agencies to take on the smaller incremental kinds of development, because they don’t make city councils feel they have accomplished something memorable enough, and don’t suddenly inject loads of sales tax revenue. Things like business retention and small business development are minor expenditures and could be handled under general fund, don’t really need a redevelopment structure. Central City East is a case in point. Tax increment monies being generated there at present must result from everyday general tax increases, since the redevelopment projects haven’t gotten anywhere yet.

  14. Chris Kidd

    @ John Garrett – I never said that abolishing RDAs wasn’t a good step forward or not good policy. I was speculating that those aren’t the *determining factors* driving the current debate over the continued existence of RDAs.

  15. len raphael

    Just a couple of weeks we couldn’t even have a discussion of the merits of the RDA mechanism because “it’s the law and it’s never gonna change”.

    Just a list of our RDA’s achievements and disasters would be useful regardless of whether and in what form the RDA survives here.

    How would you go about evaluating the results? Compare land acquistion costs to similar private ones? Return on investment?

    And maybe it was a net positive for the early years a drag on revitalization in the later years.

    Part of me says that the RDA tax financiing distorted city policy much the way welfare distorted distorts the decisions of it’s beneficiaries. Seems like we should have outgrown the need for an RDA by growing a city that attracted much more of the world wide capital that flooded the USA over the past thirty years.

    To some extent the RDA financing enabled us to bumble along with inferior basic public services.

    different topic: JB also eliminated the Enterprise Zones which would have provided major income tax incentives to employers in Oakland if we had ever geared up effectively to promote them. We never got off the starting line on that. RIP

  16. oakie

    “Redevelopment” smells like a rat to me. A lot of money and most people not paying attention. The result is inevitably not a good thing, or good value for the money spent.

    If you look around to what makes the Bay Area the place we chose to live in, besides the good weather, it’s the infrastructure. Housing stock like Rockridge and Crocker Highlands and Glenview, commercial districts like Rockridge, all of it was built in the 1910 to 1935 era.

    Was this the result of ‘redevelopment’ agencies? I doubt that very much. I presume RAs are the product of the 1960′s and beyond. And look at what infrastructure that has produced? Bubkos.

    Jerry is a real Yoda. And I’m glad to see him put a cleaver to them. I’m hoping for a lot more of that as the pension fiasco plays out–finally.

  17. len raphael

    My impression so far is that JB goals are to protect the public uninons’ vested pensions and probably their unfunded medical retirement benefits promised by the local govts (does the State promise those too??) while protecting very basic state and local services by sacrificing social services for lower income residents and the higher ed system which he’s always had a hard on against.

    Like Obamba he’s not going to go for big tax increases on higher income people until the economy gets better. That’s more surprising than it was for BO, but then JB doesn’t want to encourage CA entrepreneurs to look elsewhere.

    Its a solution. Not optimal but better than gridlock.

  18. David

    Well, the higher ed system has a ton of waste (no net professor has been hired the past 10 years, but the number of administrators has tripled, along with tuition. hmm). As for additional services beyond “basic,” well, that’s all we can afford, although I agree if we cut the pension BS etc, we could “afford” more (although I’d prefer to see lowering of taxes than blowing the money on welfare–where California has 32% of the nation’s welfare cases).

    Anyway, “redevelopment” is a fancy name for sending tax dollars to developers. It’s a farce and needs killing.

  19. RdwithCypress

    I think it is a great idea to do away with all of them.

    The Oakland agency is full of people pretending to know what they are doing but the reality is they are simply hacks. The public redevelopment money always ends up in the hands of corporations and the developers who lobby our greedy city employees. Also, the city has a way of snatching dollars from these restricted funds using central services overhead allocation journal entries, i.e. they make the redevelopment fund pay expenses that should be charged elsewhere. This money could be better spent on cops, outreach, fire etc.

    Unfortunately, I don’t think Jerry’s threat was serious. He is just trying to use this as a bargaining chip for something else he wants. After all, when he was in Oakland, he loved redevelopment.

    It definitely is the redistribution of wealth and as David says above, it needs killing!

  20. RdwithCypress

    Mayor Quan,

    Who cares about the Fox Theater?! If you want to increase property taxes in Oakland all you need do is

    1)Fix the School System – campaign promise

    2)Make Oakland Safe – campaign promise

    This will make property values increase and thus increase property taxes.

    Please consider Jerry Browns idea of scrapping redevelopment money and putting to better use by increasing funding of schools and cops. No one gives a crap about the Fox Theater or other redevelopement projects.

    IF OAKLAND HAD GOOD SCHOOLS AND WAS SAFE DEVELOPERS WOULD BUILD WITHOUT REDEVELOPMENT DOLLARS….

  21. RdwithCypress

    SEE BROWN’S PLAN AT THE WEBSITE BELOW…. The Money comes back going to Police, fire, schools everywhere it should go. The only losers are the LLC developers and big corporations sucking the city’s tit…. I am all for doing away with dollars being stolen. Trust me I know for a fact there is conflict of interest and corruption all over the place with redevelopment funds.. Put the money were it belongs. If you want to increase the tax base, fix the schools and make the place safe. Then the property values increase, property taxes increase and developers don’t need incentives to build. Redevelopment is a complete failure and it need to be killed.

    http://www.auditoaklandceda.com/index.php?news&nid=54

  22. RdwithCypress

    In my opinion…
    February 19, 2011
    Building Services generates $24 Million annually by fining property owners and bolsters the city’s budget with the dollars that should be applied towards due process. Further, the $24 Million represents, in a significant percentage of cases, consumer debt the city has forced property owners to incur.
    Think of it as $24 Million is removed from Oakland’s economy by Building Services to pay for wages, tamales, Oakland Unified, Redevelopment Agency land purchases, etc. It’s all spelled out in the Fund 2415 ledger.
    (The staff that generates $24M is fewer than 100 people!)
    Think of that $24 Million as indiginous investment dollars that are being constantly squeezed from the constituents. How do 2,000 property owners come up with $24 Million every year? They dip into their children’s college savings, home improvement savings, business investment dollars, tax refunds, credit cards, equity lines, or the property itself may be sold at a tax auction for 4 years of non-payment of property taxes.
    Oaklanders continue to try to start up and run businesses and are driven out of business or to the brink of financial ruin by Building Services staff, who interfere. Oakland’s homegrown investors are undermined by extortionate practices of Building Services.
    Bolstered by Building Services practices, CEDA Redevelopment competes with constituents for investment opportunities. Of course, CEDA wins. CEDA competes with constituents for Federal and State funds.
    Redevelopment staff act like entrepreneurs interfering with the market economy for the sake of personal benefit, be that benefit prestige or position. 400,000 Oaklanders; so little opportunity for the many because the apperture for opportunity is controlled by CEDA.
    Of course, CEDA Redevelopment has the advantage! The constituent entrepreneurs must ask CEDA for permission to operate! And staff have been known to take their time, charge too much money, or outright deny what should be allowed to organically start and grow. Meanwhile, don’t get anything underway without permission lest the enforcement arm of CEDA, Building Services, deems your enterprise a blight, forcing you to terminate any money-making activities while you figure out how to finance the penalties you have just incurred. Shame on you for even trying.

    Oakland doesn’t need Redevelopment staff because our constituent numbers and composition are so varied as to provide the ideal environment for a free market economy in this city. We have numbers and brains on our side.

    Redevelopment is robbing Oakland’s citizens of the entrepreneurial opportunities every constituency deserves by right. CEDA Redevelopment does this by competing and defeating. A reduction in CEDA staff across the board will save constituents millions directly by reducing Code Enforcement revenues, which are actually revenue targets, referred to as “allocations” in Antoinette Renwick’s deposition. Building Services doesn’t just happen to make $24 Million a year. That’s what they achieve by aiming for it! (Did you know that quotas/targets are illegal in California?) Building Services revenue targets represent our tax savings accounts, home equity lines, 401ks, college savings, business profits, business start-up funds, and new shoes (certainly in my case).

    Elimination of the Redevelopment Agencies will save constituents millions by eliminating dozens of useless positions that serve to benefit the individuals who hold the positions, who live primarily outside of Oakland, and the investors, who are also from outside of Oakland. Would you like the money in your neighbors’ pockets or in CEDA’s? I’d rather my neighbors get to spend their own money. Their salaries come from our hard work.

    Haven’t you all had about enough?

    It will benefit every constituent and cause constituents to have more money as we are allowed the very same investment opportunities here in Oakland that CEDA staff and outside investors have been enjoying for years.

    Redevelopment destroyed Oakland in the first place.

    http://www.auditoaklandceda.com/index.php?news&nid=55