The Morning Report
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If eliminating redevelopment played out like a movie script — an uplifting drama or slasher horror flick depending on your persuasion — the state Legislature’s climactic vote would cut to a closing scene with the head of the city’s downtown redevelopment agency switching off the lights, padlocking the doors and walking away with a wistful glance and his wingtips clacking down the hall.
In reality, the end of redevelopment — and it’s looking likely the Legislature will sign off on it — will be a nasty mess with the climax likely to play out in a courtroom rather than an empty office building.
Gov. Jerry Brown, who proposed eliminating redevelopment as part of his budget package, wants an up or down vote in the Legislature by Thursday. As the day draws near, not many know what’s going to happen.
“A lot of staff is devoted to looking at all the scenarios right now, and they haven’t thoroughly analyzed the various situations,” said Rachel Laing, a spokeswoman for Mayor Jerry Sanders. “I could tell you the 10 different scenarios we’re looking at now, and they’ll be different than what we thought yesterday and probably what we’ll think tomorrow.”
Here are five questions and the best answers I could find about what the end of redevelopment would look like and how it would affect the city of San Diego. The U-T took a stab at this issue at the end of last week.
1. Will redevelopment employees show up for work the day after the law passes?
Yes. There’s still a lot to do. For instance, the city just approved more than $4 billion in projects using redevelopment dollars that would be built over the next four decades. The city’s hope is that the projects are considered an existing redevelopment obligation that the governor has said he’ll honor. Someone has to manage those projects, and unless or until they’re wiped away, city employees will continue to do it.
Further, the city has two nonprofits, the Centre City Development Corp. and Southeastern Economic Development Corp., which manage redevelopment activities downtown and in the city’s southeastern neighborhoods. Eliminating redevelopment through legislation wouldn’t eliminate these entities. That would have to be done separately.
2. Is eliminating redevelopment legal?
We’ll find out soon enough. It is certain that interest groups such as the League of California Cities and California Redevelopment Association will sue over the constitutionality of eliminating redevelopment.
“We are going to be sued,” said Marianne O’Malley, a director with the state Legislative Analyst’s Office. “It’s going to go to the court quickly because this is a major governance change.”
The change would be the way in which property taxes are allocated around the state. Currently, redevelopment agencies receive about 12 percent of those taxes — or $5.7 billion statewide — and that money would flow to cities, counties, schools and, next year, the state.
Redevelopment boosters have made no secret of their legal position, which is based primarily on Proposition 22, a ballot measure passed in November that prohibits the state from taking local dollars. They’ll likely be looking for a judge to grant an injunction against the state allowing redevelopment activity to continue while everything’s sorted out in court.
On the other side, it’s a near certainty that Brown or others will challenge cities’ spending sprees and other imaginative ways of squirreling away redevelopment dollars in recent months. If all those actions are valid, there’d be little money left over to help the state’s budget this year and distribute to schools, cities and counties in the future, which is the whole point.
3. Who holds the power after redevelopment’s death?
Schools and counties, not cities. Brown’s proposed legislation lays out a system for unwinding redevelopment agencies that relies on a newly formed entity, known in the governor’s bureaucrat-ese as a “successor agency.” The agency would figure out how to retire existing redevelopment debt and how much money it would take to do it. Schools and counties have most of the authority to select board members so these agencies are likely to work against cities, which have the most to lose from redevelopment’s elimination.
The agencies will answer numerous important questions like what to do with the property now owned by redevelopment agencies. San Diego, for example, has a four-page list of real estate it owns. The agencies also will determine what debts need to be honored and which don’t.
It would get a lot harder to do both, as the big projects were counting on redevelopment dollars to work.
On Monday, Mayor Jerry Sanders and Chargers President Dean Spanos met to discuss the proposed $800 million downtown stadium, which was expected to need a subsidy from the downtown redevelopment agency. If redevelopment goes away, so does that subsidy, which is such a huge problem that a Chargers official had declared the downtown site “dead” in that circumstance. Further, the NFL is renegotiating its labor deal with players, making a league contribution to a new stadium dependent on a successful end to the negotiations.
With all that uncertainty, Sanders and Spanos talked contingencies. Laing said that the city could try to contribute to the project by using the stadium’s current location at Qualcomm Stadium. That could happen by selling or leveraging the site.
“The idea that you could put a stadium [downtown] is not dead,” she said.
The Mayor’s Office and the Chargers issued a joint statement after Monday’s meeting, saying they’re continuing to work on the downtown site.
Similarly, finding money to expand the city’s Convention Center — now estimated at $750 million — is going through complications of its own beyond the potential end of redevelopment.
Both projects received minimal funding in the city’s $4 billion redevelopment list.
An idea that does look dead is one that could provide relief to the day-to-day operating budget at the expense of downtown redevelopment. For months, council members have pushed to have the downtown agency cover a more than $9 million annual bond payment for a previous Convention Center expansion, despite legal complications. But the move hasn’t appeared on a council agenda, though the Mayor’s Office promised to push the item forward. Now, it could be too late.
“That window is probably gone, unless the Legislature delays,” City Attorney Jan Goldsmith said.
5. When is all this actually going to happen?
It’s looking like Brown’s self-imposed March 10 deadline to pass a budget won’t be met. Republican legislators negotiating with the governor on a deal declared a deadlock on Monday and the governor himself appears resigned to it taking longer.
Still, these negotiations can’t last forever. The most crucial part of Brown’s budget — an extension of temporary tax hikes — needs to go on the ballot in June. The drop-dead date batting around Sacramento, said lobbyist Jonathan Clay, is March 31. State elections officials can’t circumvent a deadline to mail ballots to military personnel overseas, he said.
Once a deal on redevelopment language is reached, Clay expected the process to go quickly with minimal debate, a situation similar to the late-night legislation that eliminated a key downtown redevelopment limit in the fall.
“If they’re on track to getting the deal done and the votes are there, I think it will be very much like that,” said Clay, whose Carpi & Clay firm represents San Diego County and other local governments.
The other date that’s important is when redevelopment’s elimination would take hold. The proposed bill Brown released at the end of February is a “trailer bill,” which wouldn’t become effective until July 1, therefore allowing cities to continue their efforts to try to lock up billions in redevelopment dollars until then. (Brown’s proposed legislation allows for extended review of all redevelopment actions taken after Jan. 1, including San Diego’s $4 billion play.) Other forms of legislation could kill the system sooner.