Picture the property taxes collected in downtown San Diego as a giant, Scrooge McDuck-ian pile of money.
Every year, all sorts of government agencies — the city of San Diego, San Diego County, San Diego Unified School District — grab a share of the cash to pay for things those governments do. Parks, libraries, social services, education.
But because downtown is what’s known as a “redevelopment area,” another government entity comes into play. It’s the city’s downtown redevelopment agency, Centre City Development Corp., and it snags the largest share of downtown’s giant money pile. CCDC’s job is to subsidize downtown development and eliminate rundown neighborhoods.
Other governments, such as the county and the school district, must take less from the pile. The city’s general day-to-day budget, which serves other city neighborhoods, takes less, too. The theory is that in the long run every government’s bottom line benefits from more development and more property taxes. In other words, downtown’s giant pile of money becomes more giant than if redevelopment didn’t exist.
Friday’s last-minute state deal to eliminate the cap on redevelopment downtown ensures the downtown agency will grab the pile’s biggest share 10 years longer than it would have otherwise — assuming Gov. Schwarzenegger signs the bill. That’s expected to raise enough cash for a new Chargers stadium, and maybe expand the Convention Center and pave downtown’s roads.
In short, it’s great news for downtown. For everyone else, it’s a billion-dollar guessing game.
No one knows what the city’s other neighborhoods, the county, the school district and the state will gain or lose with downtown taking more from the tax money pile.
The city’s Office of the Independent Budget Analyst estimated last spring that a cap increase would mean about $30 billion in greater development downtown, based on CCDC growth estimates.
The state deal will not change how governments share that property tax pile, downtown redevelopment officials said, they’ll just continue sharing the money the same way for 10 years longer. Downtown gets the most and everyone else gets varying percentages. But comparing how any other governments will fare overall remains elusive. It’s the reason City Council members and others have expressed wariness about the effect of more downtown redevelopment on their neighborhoods.
So far the independent budget analyst’s office has made the best effort at understanding what a cap change might do. It has had conflicting answers.
One report projected the city’s day-to-day operating budget, which pays for police, fire and other neighborhood services, would lose $300 million in property tax revenue over 30 years if the cap were lifted. That’s about 1 percent of the city’s annual budget. A second report argued gains in sales and hotel-room taxes would more than offset the property tax loss, but it couldn’t say by how much.
The office has no new answers, said Andrea Tevlin, the city’s independent budget analyst.
Assemblyman Nathan Fletcher, who authored the cap elimination bill, said he didn’t know what would happen to the county’s bottom line. County officials have been analyzing the bill since Friday. They haven’t released numbers because they want to keep negotiating with the city. Last year, if the downtown redevelopment agency hadn’t taken a slice of downtown’s tax revenue, the county would have received $11.8 million more than it did.
Fletcher said the state would make the school district whole if it lost any tax revenue through the deal. Monica Henestroza, who handles government affairs for San Diego Unified, said the same thing. But the money to pay the district back would have to come from somewhere in the state’s coffers.
City Council members have saved their greatest outrage for Mayor Jerry Sanders, state legislators and CCDC blindsiding them by not telling them they were lifting the cap, even though the mayor had promised otherwise. But they also ripped the decision because they didn’t know if the neighborhoods they represent would win or lose. In part for that reason, Councilwomen Donna Frye and Marti Emerald penned a letter urging Schwarzenegger not to sign the bill.
City Attorney Jan Goldsmith’s office didn’t have any answers either. He couldn’t address questions about the decision’s impact in part because the city’s outside redevelopment firm hired away a lead attorney with “higher pay and benefits,” Goldsmith spokeswoman Gina Coburn said in an e-mail.
“When we lose a top lawyer in a unit, we will be unlikely to respond,” Coburn said.
A $500,000 study approved by the council in June was supposed to spell out how everyone would fare if the cap were lifted and downtown grabbed more money. After Friday’s deal, downtown redevelopment head Fred Maas put the study on hold, saying it was unnecessary.
But no one should worry, downtown redevelopment leaders argued. Eliminating the cap will not only make the pile of property tax dollars collected downtown bigger, but also it will make other money piles like sales and hotel room taxes bigger. Everyone, they argue, will benefit in the end from money piles made bigger from more redevelopment.
“In my opinion, the tax money would be greater than if the cap hadn’t been lifted,” said CCDC vice president Frank Alessi.
This opinion relies on a faith that downtown will grow at rates it wouldn’t without redevelopment. But with downtown grabbing a greater share of money, it stands to reason that someone else has a chance to lose.
After all, there are only so many giant piles of money.