Monday, Aug. 17, 2009 | SACRAMENTO — The agencies in charge of revitalizing San Diego’s most blighted neighborhoods stand to lose about $55 million for redevelopment to the state’s budget-balancing grabs.

In the scramble to cut costs and find revenue for last month’s budget deal, state legislators agreed to laws that could take $2.05 billion over the next two years from the county and city redevelopment agencies.

Projects already planned and approved are safe, but projects for next year and beyond may face reduction or cancellation. That could impact plans in the coming years for new streets around the city, housing in southeastern San Diego, and a new fire station in downtown.

Redevelopment is how cities get minor makeovers. Redevelopment agencies are supposed to target “blighted areas” — urban areas with poor economic health — and improve them with restored facilities and new features to attract businesses, as well as with affordable housing for low-income families. Street improvements, road-widening, streetlights are all things developers look to redevelopment agencies to do before and during work on site.

The finances of a redevelopment agency are tied to its success. The local agencies corral taxes that would’ve gone on to higher levels of government and reinvest them in development and beautification projects. As an area generates more taxes revenue, it has more money with which to invest in the neighborhood.

The state will be taking those revenues for its budget-balancing.

The new law would reroute $1.7 billion this fiscal year, and $350 million next year, in property tax revenue from cities and counties to the state’s school fund. Under current law, the state is obligated to spend 40 percent of its general fund on education, and the property tax grab allows the state to achieve that. Each redevelopment project area would pay into a state educational fund according to a formula based on its revenues from the 2006-07 fiscal year. Those funds must then be apportioned to K-12 school districts within the redevelopment project area. The districts in turn send out the money to schools and housing supported by redevelopment funds.

In the city of San Diego, redevelopment comes in three flavors.

The Redevelopment Agency of the City of San Diego is made up of three divisions: the City Redevelopment Division, the Centre City Development Corp. and the Southeastern Economic Development Corp. Each focuses on different areas.

The City Redevelopment Division manages 10 project areas including Barrio Logan, North Bay and Naval Training Center. CCDC focuses on downtown, with project areas including the San Diego Central Courthouse and the Navy Broadway Complex. SEDC has four project areas in the area east of downtown.

Each agency would share the payment.

“The cuts are substantial,” said Frank Alessi, CCDC’s vice president. “It’ll cause less public works projects and impact what we would otherwise have as construction jobs.”

Projects planned for this fiscal year are safe, he said, but others — including a program to relocate train tracks on C Street and a new downtown fire station anticipated for 2012 or 2013 — “will obviously have to wait until funding comes.”

“It’s a one-way taking because the money’s coming out of the project areas is not producing — or reproducing — new property taxes, which is how redevelopment areas maintain themselves,” said Alessi. “You put in dollars to generate new dollars.”

The SEDC’s three projects to which it is committed — street improvements on Market Street and Mt. Hope; the second phase of a park in Southcrest; and a streetlight project in Southcrest — have funding approved.

“But in the following years,” said Brian Trotier, interim chief at the SEDC, “things that are in the planning stages may very well end up stuck a while.”

Future infrastructure and business improvements will be harmed, but so will be area residents, he said.

“It’s a sad day when Sacramento decides to shift their problems to the poor,” he said. “We are already in a crisis situation, where every dollar that we could spend as a redevelopment agency to stimulate new construction would go to directly attack and alleviate those problems, so when you take that money away the effect is felt disproportionately in those communities that already have the burden and the brunt of the problems.”

The San Diego county redevelopment agency has two project areas, but neither will be immediately affected by the payment to the state.

“Right now we’re OK, it just reduces our reserves,” said Sunny Barrett, director of the county’s Gillespie Field Project Area, a redevelopment site outside an airport surrounded by industrial property. The project also receives funding from an airport enterprise fund, as well as from tenants in the industrial park areas — so the state’s take is not a significant loss.

The Upper San Diego River Improvement Project Area did not receive funding in the 2006-07 year so it will not have to pay this year, although, according to project director, Kaye Robson, that could change if the law is broadened to include all agencies.

The move to take redevelopment funds came toward the end of a weeks-long struggle to close the state’s multi-billion dollar deficit. Among huge cuts to education and social services and gimmicks like

pushing back employee paydays into the next fiscal year, the taking of local funds was another way in which the state made unpopular moves to balance its budget. Measures to raise tobacco and oil severance taxes were dropped in favor of the redevelopment grab.

“As a longtime advocate of redevelopment, the $1.7 billion shift of redevelopment dollars was a particularly difficult vote to make,” said Sen. Christine Kehoe, D-San Diego. “But to balance the budget we had no other option.” 

Some criticize the lawmakers’ action as more than unpopular. Some in charge of redevelopment argue it is illegal. The California Redevelopment Association plans to sue.

This is not the first time the state has tried to balance its finances with local money. Last year, the state would have taken $350 million from redevelopment but the CRA sued and successfully blocked the taking of the funds. The difference between what the state did last year and this year is the added requirement that the funds taken from the agencies return through to the school district in the area.

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