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Redevelopment is dead, as we noted earlier today.
That doesn’t mean it won’t rise again. More lawsuits could come. Big-name San Diego politicians, and plenty of others, want the Legislature to create some other system for economic development and affordable housing.
For now though, redevelopment as we know it is done, thanks to a ruling from the state Supreme Court upholding the state’s right to dissolve its own program.
The impacts to San Diego are immense.
Redevelopment touches education, city neighborhoods, infrastructure, planning, the county budget and even plans for a new Chargers stadium. Everyone I spoke with is still trying to figure out exactly what the ruling means for their organizations and interests, many hours after the court ruling. It’ll likely be that way for a while.
“That’s going to take a long time for people to sort out,” said Bernie Rhinerson, the chief of staff for the San Diego Unified School District.
With that in mind, here’s a rundown of what we know now on some key areas and some background:
Looking for a way to encourage development in rundown neighborhoods, the state created redevelopment in the 1950s. The idea: spur growth that wouldn’t happen absent government investment.
Let’s use downtown San Diego as an example. The city had to prove it was blighted and the state allowed it to become a redevelopment area. City loans helped spur development. Along with inflation, this helped increase property values. And that increased the property tax revenue the area generated.
The redevelopment designation allowed the city to keep a share of these property taxes — money that would’ve otherwise gone to schools, the county and other agencies.
The program allowed city leaders to spend it on development and infrastructure downtown.
It continued on and on. As property values rose, the additional property tax generated stayed downtown, giving its redevelopment agency more money to work with. That’s money that did not go back to those other agencies or to the city’s day-to-day budget, which covers services in all neighborhoods.
San Diego’s leaders credit redevelopment with downtown’s famous resurgence. But the program has also tended to stray far from its original purpose. With the state’s finances a mess, it became a natural target.
When redevelopment first began, school districts were a natural check on it. They would raise objections to redevelopment if it got too costly for them. Only truly blighted areas generating very little in property taxes already would make the cut.
But then the state agreed to make up for whatever schools lost from redevelopment. Schools no longer objected to redevelopment areas and they proliferated. This became a major state expenditure and a subsidy of local development.
That’s what motivated Gov. Jerry Brown’s charge to kill it. With the state distressed, he no longer wanted to pick up that $1 billion tab. He used education as a key selling point in his plan — if you kill redevelopment, you save funding for education.
There’s been the hope that this move would mean more funding for schools. That’s not necessarily the case.
San Diego Unified, you might have heard, has flirted with the possibility of insolvency.
The governor’s budget this year already counted on redevelopment’s demise and the $1.7 billion that could come with it. The district isn’t necessarily rejoicing then. “There’s a sense of relief,” Rhinerson said. Had the ruling gone the other way, schools could’ve faced the prospect of major midyear cuts (just weeks after narrowly avoiding them).
The long-term windfall, Rhinerson said, is more difficult to forecast for now. “It could be a dollar, it could be tens of millions of dollars,” he said.
The long and short of it: The state’s burden for education has been lessened, but what actually ends up in schools’ accounts will depend on what legislators do with that extra money.
One of the more immediate reactions to the ruling: What does this do for the Chargers’ desire to build a downtown stadium?
The team and city had both looked to redevelopment to help fund it. However, the fate of redevelopment has been in question all year. Both sides have been preparing for this moment.
“We had assumed last Fall that redevelopment funds would not be available,” Chargers special counsel Mark Fabiani said in an email, “and so we proposed a combination stadium-convention center expansion concept which we believe could be financed without redevelopment dollars.”
That was what my friend Scott Lewis was talking about when he declared that the Chargers had gone nuclear.
“We had already anticipated that it might be off the table,” said Rachel Laing, the mayor’s spokeswoman. She said the mayor’s financing consultant had been preparing his plan with the possibility that redevelopment money wouldn’t be available in mind. That plan is due out in March.
Still, financing options for a new stadium seem to be shrinking. Perhaps public ownership will catch on?
That $4 Billion Remaining
In the run-up to redevelopment’s death, the city of San Diego made a brazen move. It sought to lock away $4 billion in future redevelopment money decades into the future.
We put together a graphic explaining what it was spending the money on and where.
The move may have been brazen. But the city doesn’t seem so sure it will work.
The City Attorney’s Office said the law that killed redevelopment also allowed the state to challenge and unwind certain types of deals.
“So that might throw into question a lot of what went on with that $4 billion in allocations,” said Jonathan Heller, the city attorney’s spokesman.
The lawyers, he said, are pouring through the documents.
This is a big part of what redevelopment agencies do.
As redevelopment evolved, the state eventually forced agencies to spend 20 percent of their money on affordable housing.
The industry is naturally reeling today. Advocates and affordable housing developers immediately called for the state to find a new way of funding it.
City Neighborhoods and the County
Last year, the city of San Diego had begun the process of extending redevelopment’s life downtown. Assemblyman Nathan Fletcher and Mayor Jerry Sanders ended up short-circuiting that process and forged a hushed, late-night bill in the Legislature that took care of it.
Before they did it, some council members had expressed uneasiness with keeping redevelopment downtown alive because it was sequestering money that could’ve headed to other neighborhoods.
The county likewise loses out on its share of property tax when a neighborhood enters into redevelopment. It stands to benefit as well as a result of today’s decision.
Like nearly everything touched by redevelopment, how much so remains to be seen.
I’m the editor of VOSD. You can reach me at firstname.lastname@example.org or 619.325.0526.
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