For 65 years, redevelopment has helped define how California pays to improve rundown communities. Under a proposal floated by new Gov. Jerry Brown, that might change.
Brown, who was sworn into office Monday, is considering eliminating redevelopment agencies statewide, according to the Sacramento Bee.
For San Diego, anything that would come close to eliminating redevelopment would lead to a profound change in how the city does business.
San Diego has used redevelopment subsidies to build some of its best known civic projects: revitalization of the city’s Gaslamp Quarter and the development of the Horton Plaza mall and Petco Park. It’s using redevelopment money to help finance the new $185 million main library and could need it to build a Chargers stadium and expand its Convention Center.
Redevelopment is designed to revitalize ailing communities. It allows municipalities to sequester property taxes, using that money to subsidize development and make public improvements. It’s become fundamental to the state’s tax structure. But redevelopment also takes property taxes that otherwise would go to schools, counties and municipalities’ day-to-day budgets.
The governor could be considering redevelopment reform because the state is left picking up the tab for school funding that’s lost when the tax money goes to a redevelopment area. About 400 redevelopment agencies exist in California and they collected $10.2 billion in revenues in 2008.
Brown, the Bee reported, wants to use redevelopment money to plug a hole in the state’s $28 billion budget deficit and then redirect funding to counties and schools thereafter.
Similarly, there have been growing concerns that communities are using redevelopment money for the wrong reasons, said Michael Jenkins, a redevelopment attorney and former top San Diego redevelopment official. He wasn’t surprised Brown was moving toward reform.
“The state has, for years, chafed at how the redevelopment law has placed an increasing burden of funding schools onto the state’s general fund,” Jenkins said. “It’s a bigger issue than just that, but it’s reflective of the fact that, to a large degree, local government is using redevelopment as a revenue source rather than as a means to eliminate blight.”
These arguments have been central critiques of October’s late-night legislation that eliminated limits on San Diego downtown redevelopment. The legislation netted the downtown redevelopment agency a big share of an estimated $6 billion in future downtown property tax dollars.
Mayor Jerry Sanders, who helped lobby for the legislation, believes that redevelopment benefits the entire city by boosting economic development and increasing sales and hotel room taxes.
“Obviously we’re opposed to anything that will hamper redevelopment,” said Rachel Laing, a Sanders’ spokeswoman.
Rumors that Brown would look to redevelopment as part of his budget plan have been floating around the capital. Laing said that leaders of the state’s largest 10 cities knew that Brown would target redevelopment. A top local labor leader and the head of the state’s redevelopment association had heard similar buzz.
But no one realized it could be to this extent.
“A full dissolution, this was not something that was on the radar,” Laing said.
While redevelopment in downtown San Diego grabs most of the headlines, redevelopment exists in numerous other neighborhoods around the city and the county.
Redevelopment backers argue that the process would be central to the state’s economic recovery.
“Redevelopment supports jobs,” said John Shirey, executive director of the California Redevelopment Association. “It supports affordable housing. It supports building infrastructure. All those things that are fundamental to get an economy back on its feet, which I hope this governor would care about.”
Brown didn’t mention the plan in his inaugural address Monday and a Brown spokesman declined to comment other than saying the governor will release his budget proposal Jan. 10.
Jenkins said Brown’s proposal could be the starting point for negotiations that would allow the state to take more redevelopment funds. Last year, the state took $1.7 billion from redevelopment agencies, though voters in November approved Proposition 22, which was designed to block similar efforts.
All sorts of complications face any effort to eliminate redevelopment.
Most notably, redevelopment agencies owe more than $28.8 billion in long-term debt, primarily in municipal bonds. San Diego’s agency alone owes nearly $1 billion. Redevelopment agencies need revenues to pay off those bonds, and it’s unknown who would take over redevelopment agency debt should the agencies be eliminated.
“If you’ve set up an agency and said it can collect revenue until 2043 and issued bonds already, I don’t see how legally you can back off the promises you’ve made to investors and bondholders,” said Alan Gibson, a director with Fitch Ratings.
Similarly, it’s unclear how November’s passage of Prop. 22 might determine whether Brown’s ultimate plan needed voter approval.
Shirey said if Brown wanted to eliminate redevelopment all together it might not require a voter referendum, but he would need to study the governor’s full proposal.