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Taxpayer-supported redevelopment appears set to live on downtown for another generation.

The City Council voted 8-0 Tuesday to fund a $500,000 study that will examine whether downtown is still sufficiently blighted to justify allowing the Centre City Development Corp. to hang onto — and spend — even more tax money to spur development.

The current cap limits the amount it’s allowed to raise at roughly $3 billion, but city redevelopment officials say the agency will reach that number in 2024, almost 10 years before its deadline for ceasing to collect money. Lifting the cap will allow the agency to raise potentially billions more to continue funding downtown projects.

CCDC collects tax money that would otherwise go into the city’s day-to-day budget, which pays for services like parks and libraries across the city. It uses that money to provide subsidies and other incentives to downtown developers and finance beautification and infrastructure projects.

Councilman Kevin Faulconer, who represents downtown, said redevelopment downtown has been a success and its extension would be a boon to the entire city.

“Downtown is where we want to encourage growth, development and density that helps relieve pressure on some of our other neighborhoods that are already developed,” he said.

Opponents of the plan have said raising the cap deprives other neighborhoods around the city, as it would keep much-needed tax revenue within downtown’s boundaries. Those very concerns drove the City Council to postpone the first vote on the study in April.

And concerns remained among council members — that despite the huge amount being sequestered downtown, the city’s day-to-day budget will continue having to pay for services downtown because redevelopment dollars come with strings attached and cannot be used for those services.

Before the council approved the study Tuesday, Councilman Carl DeMaio asked CCDC to complete a report determining what redevelopment dollars the city could use to pay for services downtown.

“Unless we can make this happen on its own merits … I’m not sure it would be a good thing for city taxpayers citywide,” DeMaio said.

An April report by Andrea Tevlin, the city’s budget analyst, said the city’s day-to-day budget would lose $300 million in property taxes if the cap was lifted.

But last week, a second report said sales and hotel tax revenue generated by new development downtown would more than offset that loss.

On Tuesday, a number of council members asked that the new study analyze how lifting the cap could affect their own pet issues.

Councilman Todd Gloria asked that funding for affordable housing be considered. Councilwoman Donna Frye asked that the study analyze impacts that lifting the cap would have on job creation and hotel tax revenue. Councilwoman Sherri Lightner asked that the study determine whether lifting the cap would result in a net increase to the city’s day-to-day budget.

“We’ve loaded it up pretty good,” Faulconer said.

“We may need more money for the blight study,” joked Phil Rath, the mayor’s deputy director of policy.

But the scramble by council members to amend the motion portends just how contentious future decisions to lift CCDC’s cap may be, as various interests jostle to get their share of the revenue that new downtown development generates.

Before the city can lift the cap, it will have to negotiate with other entities, like the county and the school district, that could oppose it because they would stand to lose their own shares of downtown property taxes.

Appeasement strategies are in the works. Among the downtown projects made possible by collecting more money there would be a new Chargers stadium.

The council’s vote on the study does not make an explicit decision on a stadium. But had it not approved the study, the council would have ended the possibility of collecting enough money to fund the most current stadium plan in the future.

Most of the $3 billion CCDC expects to collect through 2024 has already been planned for use on other projects. Even so, officials say, under the current cap, the agency will fall more than $1 billion short of funding all the projects it hopes to complete.

Estimates put the additional revenue that could be generated by lifting the cap at as much as $6 billion.

The study approved Tuesday is expected to last six months. If it finds sufficient blight to justify lifting the cap, the City Council could make that decision in the fall of 2011. Governments must be able to prove that an area is blighted in order to create a redevelopment area.

Please contact Adrian Florido directly at adrian.florido@voiceofsandiego.org and follow him on Twitter: twitter.com/adrianflorido.

Dagny Salas

Dagny Salas was web editor at Voice of San Diego from 2010 to 2013. She was an investigative fellow at VOSD from 2009 to 2010.

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