Controversy brews over Calif. redevelopment agencies

OAKLAND, Calif. – A controversy is brewing over Gov. Jerry Brown’s proposal to do away with local Redevelopment Agencies and return their functions to local governments. Doing so would offset state costs by $1.7 billion as part of closing a $25 billion-plus budget gap, and provide local governments with more revenue.

The 65-year-old California Community Redevelopment Act lets cities and counties declare an area blighted and pay for redevelopment with a share of the increase in property tax revenues. Most cities and many counties have established such redevelopment zones. Redevelopment is also a big source of funds for affordable housing, with 20 percent of funds earmarked for that purpose.

Brown and supporters of his proposal say this assigning of property tax revenue to redevelopment deprives other programs, such as education, health and public safety, of funds needed for their services. The governor also proposes making it easier for cities and counties to pass taxes for their local development projects, by lowering the majority needed to 55 percent from the present two-thirds.

Many mayors, county officials and organizations engaged in redevelopment projects argue that shutting down the agencies would make it impossible for older cities like Oakland to undertake the long-term planning needed to revitalize areas, which they say brings job creation and more sales tax revenue.

Oakland Mayor Jean Quan was among mayors from California’s 10 largest cities who met with the governor and legislative leaders last month to urge preserving as much of redevelopment funding as possible.

In statements on the issue, Quan says eliminating redevelopment would “cause serious and permanent economic damage at the local level.” She notes that redevelopment generates over 300,000 statewide jobs each year, contributes $40 million annually to the state’s economy, and typically generates over $2 billion a year in state and local taxes. She says the tax revenue dedicated to redevelopment encourages much greater participation by private investors.

Affordable housing advocates also object to the proposal. Hundreds of demonstrators traveled to the state’s capital, Sacramento, Feb. 15 to show their concern.

On the other hand, California’s non-partisan Legislative Analyst’s Office calls the governor’s proposal generally sound. While redevelopment has revitalized downtown and historic districts around the state, the LAO says, there’s no reliable evidence it attracts business to the state as a whole or increases overall regional economic development or job creation.

The LAO also questions the California Redevelopment Association’s contention that 304,000 part- and full-time jobs are created through redevelopment each year, and says funds designated for affordable housing often languish in redevelopment agencies’ unspent balances.

The California Budget Project, an independent organization analyzing budget issues with an eye to the economic and social wellbeing of low- and middle-income Californians, takes a similar position.

Contra Costa County Supervisor John Gioia, himself a resident of another “old” city, Richmond, says that city has benefited from redevelopment projects. But, writing in the Contra Costa Times, he said redevelopment agencies “have diverted badly needed revenues from vital public safety, education and health programs.” Done properly, he said, Gov. Brown’s proposal to return revenues and responsibilities to local governments can increase their ability to operate public safety, mental health and child welfare programs more effectively.

The state’s 10 largest cities are proposing a counter-plan, initiated by Los Angeles Mayor Antonio Villaraigosa. Under it, the redevelopment agencies would divert about $200 million a year to the state for 25 years, which would let the state finance a $1.7 billion loan – the same amount the governor says the state would save by doing away with the agencies.

As the President’s Day holiday weekend began, the Assembly Budget Committee was reportedly responding to the mayors’ concerns by considering possible alternatives to eliminating the Redevelopment Agencies altogether.