San Diego Stuck State With Schools’ Big Bill

San Diego Stuck State With Schools’ Big Bill

Photo by Sam Hodgson

Nathan Fletcher helped craft a deal that funneled a big share of an estimated $6 billion in tax money to downtown redevelopment. An alternate version of the bill would have directed more money to the state for local schools.

 

San Diego officials faced a choice the night they pushed a billion-dollar bill they’d been secretly working on for months through California’s legislature.

Should San Diego grab all the money it could for downtown, with dreams of thousands of new jobs, an expanded Convention Center and a new professional football stadium? Or should San Diego use some of its coming spoils to help the state keep city schools in one piece?

San Diego chose downtown. That decision provided an extra windfall for downtown redevelopment. But it stuck the state with a big tab — by one estimate, hundreds of millions of dollars a year.

The choice, made in the hours before the state passed its budget in October, epitomizes the conflict central to new Gov. Jerry Brown’s proposal to eliminate redevelopment agencies statewide. Those agencies divert tax dollars that otherwise would go to schools and local governments. California, Brown argues, cannot afford to subsidize development when schools need the money. Cities, redevelopment backers argue, need all the money they can get to stimulate growth in their communities.

The bill that ultimately became law will funnel a significant share of an estimated $6 billion in future property taxes to downtown redevelopment. But San Diego leaders discussed multiple versions in the hours before the bill passed, documents obtained by voiceofsandiego.org show, and millions hung in the balance.

One bill, which mistakenly saw the Assembly floor, put the schools’ financial burden on downtown redevelopment. The other, which was eventually introduced and approved, made school funding the state’s problem.

A day before the legislation became public, city officials, including advisors for Mayor Jerry Sanders, addressed another conundrum: the possibility that their bill would force schools to take less money. A city lobbyist wondered in an email if “schools getting screwed” could help the law’s chances by lessening the financial hit to the state.

These examples show that in the chaotic moments before the law passed, San Diego leaders at least twice contemplated hurting other governments for the benefit of downtown. In sticking the state with the schools’ bill, that’s exactly what happened.

One lead opponent of the law said the discussions fit with the deal’s overall theme: trying to hoard tax dollars for big projects at the expense of daily budgets.

“It’s not surprising that the city would want its agency to get as much money as possible for this NFL deal,” said Assemblyman Chris Norby, an Orange County Republican and the legislature’s most outspoken redevelopment opponent.

Local Republican Assemblyman Nathan Fletcher, who brokered the deal, defended it as a big win for San Diego and emphasized that the bill guaranteed all school funding. He didn’t apologize for taking a major chunk of that school money from the state’s coffers.

“The other way would have defeated the purpose of what we were trying to do, which was secure funding for San Diego,” Fletcher said. “What we did, and I’ve said this from day one, is we went and fought for San Diego. We fought for our region somewhat to the expense of other regions of California.”

The results of that fight likely will be an expensive one for California’s other regions. The official analysis from the state Department of Finance said the bill “could result in significant, albeit currently undefinable, loss” of state revenue. A Republican caucus analysis said the hit to the state “could easily be tens of millions to hundreds of millions of dollars per year.”

♦♦♦

In the beginning of October, the state budget was more than three months overdue. Fletcher’s vote was needed to pass it, and he wanted something — more money for downtown San Diego redevelopment.

A public process with a similar goal was already underway in San Diego, where the City Council had undertaken a $500,000 study to determine if it was merited. Fletcher was working to eliminate a key limit on downtown redevelopment and circumvent that process with legislation.

Redevelopment seeks to improve rundown communities by siphoning away property tax dollars from counties, schools and cities’ day-to-day operating budgets to subsidize development in those neighborhoods. The theory is that all governments benefit from increased development and property tax revenues in the long run.

But in the meantime, the California constitution requires the state to pay the money redevelopment takes away from schools. The Legislative Analyst’s Office estimates that hit to the state budget is more than $2 billion a year.

Under the plan Fletcher was pushing, downtown redevelopment — and the state subsidies that supported it — would continue for 20 years longer than it would have otherwise. Fletcher and the San Diego officials working with him had to get that bill through the legislature.

On Oct. 6, the day before the legislation was publicly revealed, city lobbyist Moira Topp received an email from a state Senate staffer.

The staffer had caught wind of the city’s plans and added a wrinkle to them.

He suggested that under existing state law, the downtown redevelopment agency would have to pay more of its property tax revenues to schools and others if the agency wanted to eliminate its dollar limit.

This news presented a problem. If special San Diego redevelopment legislation took money from schools, it might be a harder sell to education-sensitive lawmakers.

But Topp spun it another way: If their law called for schools to get less money, she wondered, then wouldn’t the state have to pay less to fund them? Maybe budget-sensitive lawmakers would buy that.

“I know it’s a double edged sword since we don’t want to brag about schools getting screwed, but wondering if that is true or not,” Topp wrote in an email to a Sanders policy advisor.

City leaders later learned it wasn’t true — the existing law didn’t require higher payments. Topp, who works for Sacramento lobbying firm Sloat Higgins Jensen and Associates, couldn’t be reached for comment. But Phil Rath, then a Sanders advisor who was included in the email exchange, said Topp was addressing “a perception battle” between schools or the state potentially coming out losers in the deal.

“Neither of which is a very good thing,” Rath said.

The next afternoon, the city faced that problem head on.

♦♦♦

In less than six hours on the day before the downtown redevelopment bill passed the state Assembly, the responsibility for potentially hundreds of millions of tax dollars switched hands without any public discussion.

At 5 p.m., Fletcher personally passed along a draft version of the bill to Sanders’ then-chief of staff. In the email, an Assembly budget committee consultant had written: “Does this work for san diego…”

It didn’t.

That draft would have forced school funding to come from downtown redevelopment instead of the state, a massive hit to the agency’s bottom line that city leaders weren’t willing to take. They didn’t believe that version of the bill would have given downtown redevelopment enough money.

Instead, they determined it was better to go through the public process the council already had started, two former Sanders policy advisors who were involved in the deal said. If that public process was successful, the state would have been stuck with the schools’ tab.

One of the former advisors, Job Nelson, said some in the city believed the bill’s language even would have hurt the downtown redevelopment agency’s current funding.

“We just looked at it and we said … ‘Wait a second, this is even worse than the deal we have now,’” Nelson said in an interview. “Nathan went back to whoever and said ‘no’ to the deal. And they blinked.”

With the cutting of four lines, the downtown San Diego redevelopment
bill switched the burden of funding city schools from the downtown
redevelopment agency to the state. Click on the image above
to see what language was removed to make the switch.

Four hours after Fletcher had emailed a draft of the bill to the city, it was ready for its public unveiling on the Assembly floor.

There was a problem.

It was the version that forced downtown redevelopment to pay the school funding, the same one the city had rejected. Between the time the assembly clerk read the bill and discussion was to begin someone recognized the mistake. The bill was pulled back quickly.

A little more than an hour later, the bill returned with four key lines removed. Language that forced downtown redevelopment to pay the schools’ share was gone. The state officially was on the hook.

Norby and other opponents of the bill rose to speak. They focused on one project planned for downtown redevelopment dollars: a new football stadium. They argued the state shouldn’t allow downtown San Diego to siphon away dollars needed for schools to help finance one.

Fletcher spoke in favor, talking about the bill’s job creation and affordable housing potential. Local Democratic Assemblyman Marty Block joined in, mentioning that both Sanders and a local organized labor leader supported the deal.

The debate lasted about 20 minutes. It was the only public discussion on the bill once it included the language Fletcher wanted.

Norby said he thought he had mustered enough opposition to defeat it. As budget talks continued through the night, Norby took a nap. He awoke to find it had passed at 3 a.m. The state Senate approved the bill soon afterward without debate.

In the morning, the bill awaited the governor’s signature along with the state budget.

Please contact Liam Dillon directly at liam.dillon@voiceofsandiego.org or 619.550.5663 and follow him on Twitter: twitter.com/dillonliam.

Voice of San Diego is a nonprofit that depends on you, our readers. Please donate to keep the service strong. Click here to find out more about our supporters and how we operate independently.


Liam Dillon

Liam Dillon

Liam Dillon is senior reporter and assistant editor for Voice of San Diego. He leads VOSD’s investigations and writes about how regular people interact with local government. What should he write about next? Please contact him directly at liam.dillon@voiceofsandiego.org or 619.550.5663.

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44 comments
David Crossley
David Crossley subscriber

Oops, left out a word from my previous post--Fletcher (allegedly) wants to be mayor.

aardvark6
aardvark6

Oops, left out a word from my previous post--Fletcher (allegedly) wants to be mayor.

David Crossley
David Crossley subscriber

And Fletcher (allegedly) wants to mayor of San Diego? If so, it looks like he fits the mold.

aardvark6
aardvark6

And Fletcher (allegedly) wants to mayor of San Diego? If so, it looks like he fits the mold.

Kay McElrath
Kay McElrath subscribermember

Once upon a time, our state had some of the best and most well-funded schools in the country and some of the most god forsaken urban cores. Twenty years later, the tables have been turned. Downtown LA and San Diego have been transformed thanks in part to the reinvestment of increased property taxes into bigger and bigger redevelopment budgets. Meanwhile, our schools are implementing cuts year after year and borrowing more and more to cover cash deferrals. Our kids are getting short-changed. The Governor is right. It's time to reexamine our priorities.

OnceRemoved
OnceRemoved

Once upon a time, our state had some of the best and most well-funded schools in the country and some of the most god forsaken urban cores. Twenty years later, the tables have been turned. Downtown LA and San Diego have been transformed thanks in part to the reinvestment of increased property taxes into bigger and bigger redevelopment budgets. Meanwhile, our schools are implementing cuts year after year and borrowing more and more to cover cash deferrals. Our kids are getting short-changed. The Governor is right. It's time to reexamine our priorities.

Philip Ellsworth
Philip Ellsworth subscriber

Underfunding of the city's pension system, forcing the state to pay 6 billion for funding of the city school system. All of these special projects to benefit downtown, with no infrastructure to support this development. The city cries fowl and expects the city employees, the citizens of San Diego city to pick up the tab, what we need to do is to curtail spending. Vote out everyone -- The Carl DeMaio's, Kevin Faulconer, Jerry Sanders, etc....they all will drive our beautiful city into the ground if this doesnt stop now!

pcell61
pcell61

Underfunding of the city's pension system, forcing the state to pay 6 billion for funding of the city school system. All of these special projects to benefit downtown, with no infrastructure to support this development. The city cries fowl and expects the city employees, the citizens of San Diego city to pick up the tab, what we need to do is to curtail spending. Vote out everyone -- The Carl DeMaio's, Kevin Faulconer, Jerry Sanders, etc....they all will drive our beautiful city into the ground if this doesnt stop now!

Liam Dillon
Liam Dillon memberadministrator

Hope this helps.

Jamie Curtis
Jamie Curtis subscriber

Building a new football stadium does not justify taking money away from public education at a time when we need it most.

activemom
activemom

Building a new football stadium does not justify taking money away from public education at a time when we need it most.

Sue Moore
Sue Moore subscriber

t agencies - but behind the smoke and mirrors the gold plated carriage has left the station. At the heart of democracy lies open and transparent government - how do we get it? We get it by holding our elected representatives accountable for their last minute, end-run dealings. Instead there is suppression of information, redaction of vital information, and journalists have to resort to weeks of PR requests to obtain documents.

suemoo
suemoo

t agencies - but behind the smoke and mirrors the gold plated carriage has left the station. At the heart of democracy lies open and transparent government - how do we get it? We get it by holding our elected representatives accountable for their last minute, end-run dealings. Instead there is suppression of information, redaction of vital information, and journalists have to resort to weeks of PR requests to obtain documents.

Joe LaCava
Joe LaCava subscribermember

Say what you will about the chances of that scenario but for you believers the fight is far from over.

jlacava
jlacava

Say what you will about the chances of that scenario but for you believers the fight is far from over.

Scott Mullin
Scott Mullin subscriber

Thank you Mr. Dillon! Mr. Fletcher is clearly a friend of the current 'reform' movement in education (Don't be surprised when Mr. Fletcher comes out as a supporter of the SD$GS movement [ooops, did you notice that the 4 on the keyboard switches to $ when the shift key is hit]). This is how they operate. It is true that Mr. Fletcher is representing his constituency and following the law. Unfortunately, Mr. Fletcher's constituency is money and the laws were put in place by money. It's time that people elect representatives who have people in mind and not money. Hopefully, that time is near. The real reformers in public education – teachers – are empowered when democracy is strengthened for humanity.

Scott Mullin
Scott Mullin

Thank you Mr. Dillon! Mr. Fletcher is clearly a friend of the current 'reform' movement in education (Don't be surprised when Mr. Fletcher comes out as a supporter of the SD$GS movement [ooops, did you notice that the 4 on the keyboard switches to $ when the shift key is hit]). This is how they operate. It is true that Mr. Fletcher is representing his constituency and following the law. Unfortunately, Mr. Fletcher's constituency is money and the laws were put in place by money. It's time that people elect representatives who have people in mind and not money. Hopefully, that time is near. The real reformers in public education – teachers – are empowered when democracy is strengthened for humanity.

Don Wood
Don Wood subscriber

Good alternative headline. "How Nathan Fletcher stuck it to the state and San Diego's schools." Where to guys like this come from in the first place and how to they get elected? Voters need to do their homework better than this.

Don Wood
Don Wood

Good alternative headline. "How Nathan Fletcher stuck it to the state and San Diego's schools." Where to guys like this come from in the first place and how to they get elected? Voters need to do their homework better than this.

Vlad Kogan
Vlad Kogan subscriber

I worry that everyone outraged about this deal will miss the forest for the trees: If you think this was a bad deal, the solution is not to elect different officials, but to change the law to eliminate these perverse incentives. The governor's redevelopment proposal does exactly that.

vkogan
vkogan

I worry that everyone outraged about this deal will miss the forest for the trees: If you think this was a bad deal, the solution is not to elect different officials, but to change the law to eliminate these perverse incentives. The governor's redevelopment proposal does exactly that.

Sue Moore
Sue Moore subscriber

Apologies: 'Part Two' and 'one's neighbors' - I was upset!

suemoo
suemoo

Apologies: 'Part Two' and 'one's neighbors' - I was upset!

Bruce McGirr
Bruce McGirr subscriber

This is yet another example of government/politicians exceeding their enumerated powers. I read the California Constitution. I easily found the part about funding public education. I must have missed the Article about building football stadiums.

Bruce McGirr
Bruce McGirr

This is yet another example of government/politicians exceeding their enumerated powers. I read the California Constitution. I easily found the part about funding public education. I must have missed the Article about building football stadiums.

Jamie Curtis
Jamie Curtis subscriber

Does Mr. Fletcher have children in the public school district? Wow I cannot believe this deal! Our schools are being cut to the bone there will be significant cuts directly to the classroom directly effecting our children here in SDUSD. How dare you bargain with childrens education. What gave you the right to make that kind of a decision?

activemom
activemom

Does Mr. Fletcher have children in the public school district? Wow I cannot believe this deal! Our schools are being cut to the bone there will be significant cuts directly to the classroom directly effecting our children here in SDUSD. How dare you bargain with childrens education. What gave you the right to make that kind of a decision?

Glenn Boogren
Glenn Boogren subscriber

This is the same Mayor who is so concerned with the state of SDUSD that he is a listed supporter of sandiegans 4 better schools???

Glenn B
Glenn B

This is the same Mayor who is so concerned with the state of SDUSD that he is a listed supporter of sandiegans 4 better schools???

Vlad Kogan
Vlad Kogan subscriber

The problem with Fletcher's logic is that every legislator fights for their region "somewhat to the expense of other regions of California," all of Californians -- including San Diegans -- are made worse off. It's a classic Tragedy of the Commons.

vkogan
vkogan

The problem with Fletcher's logic is that every legislator fights for their region "somewhat to the expense of other regions of California," all of Californians -- including San Diegans -- are made worse off. It's a classic Tragedy of the Commons.

John Eberst
John Eberst subscriber

Of course we could have spent our money on educating our kids so they could better compete in the world but then we wouldn't have the money for fancy condos and clubs with overpriced drinks downtown. And lets not forget that we need that money to build sports stadiums so out of shape couch potatoes can have local teams to cheer for while fooling themselves into thinking they share the glory when "their team" wins a game.

ObviousMan
ObviousMan

Of course we could have spent our money on educating our kids so they could better compete in the world but then we wouldn't have the money for fancy condos and clubs with overpriced drinks downtown. And lets not forget that we need that money to build sports stadiums so out of shape couch potatoes can have local teams to cheer for while fooling themselves into thinking they share the glory when "their team" wins a game.

mlaiuppa
mlaiuppa subscriber

Bread and Circuses.

La Playa Heritage
La Playa Heritage subscribermember

What kind of leaders steal from the poor and homeless to give to their rich friends?

La Playa Heritage
La Playa Heritage

What kind of leaders steal from the poor and homeless to give to their rich friends?

Dennis
Dennis subscriber

Mayor Sanders and his crony politicians....you are beyond reprehensible in my eyes.

Dennis Michael
Dennis Michael

Mayor Sanders and his crony politicians....you are beyond reprehensible in my eyes.