This morning’s Sacramento Bee points out that those who own the land and buildings in downtown Sacramento pay an estimated 31 million dollars in property taxes every year. Contrary to popular belief, most of that money does not go to fund schools or the local government.
Rather, 26 of the 31 million dollars goes directly to the city’s redevelopment agency (RDA) which ostensibly uses money to “subsidize development projects, build affordable housing, fix up rundown buildings and beautify streets.”
“Ultimately, this is a question about the allocation of local property taxes,” said Marianne O’Malley, the general government section director of the Legislative Analyst’s Office to the Bee for their article on Monday morning.
Writes the Bee, “There are about 400 redevelopment agencies statewide. Their mission is revitalizing areas that local governments designate as blighted. Their primary tool: a funding system called tax increment financing.”
The Bee also gives a good explanation as to how the process works. When an area is designated as “blighted” and an RDA is formed, the property tax base is frozen. Over time, as the value of property rises, in part perhaps because of redevelopment efforts, but mainly because land had been dramatically appreciating in value until the last few years, the amount of money that local governments and schools can collect is frozen at the original land value and tax rate.
The RDA then pockets whatever increases there are to tax revenues, less a percentage that can get passed through to local governments and schools. Our own pass-through agreement works on this principle, siphoning off money to the county in an agreement that precludes them from developing on the city’s periphery.
If RDA’s were abolished as Governor Brown proposes, that money could go directly to cities, counties, and schools and help restore revenues depleted by budget cuts in the last four years.
Ms. O’Malley told the Bee that the reason school districts have not cried foul is that the state is required to reimburse the school districts for funds that they lose due to redevelopment.
This means that that the state has contributed roughly $1.8 billion a year to schools to reimburse for lost money due to redevelopment agencies. In a time when the state is having to cut billions from the budget, that $1.8 billion could help buffer the next blow.
If redevelopment worked as it was designed, cities could utilize the funds to develop blighted areas, triggering economic development and job growth, eventually leading to higher property taxes as the values go up.
The problem, as the California Budget Report indicates, is that the research indicates mixed results, at best.
“First, it’s unclear whether TIF [tax increment financing] boosts property values and results in increased property tax revenues,” they write.
“While the research finds mixed results, the most comprehensive independent study of California’s RDAs, conducted by the Public Policy Institute of California (PPIC), found that redevelopment activities in most RDAs studied failed to generate enough growth in property values to account for the tax increment revenues diverted to redevelopment,” they write.
The PPIC study concluded that “the existing tax increment system is not an effective way to finance redevelopment. Few projects generate enough increase in assessed value to account for their share of these revenues.”
Furthermore, they point out that research indicates that the these projects simply shift economic activity within municipalities rather than creating additional economic activity.
“For example,” they argue, “one study suggests that when employment increases in TIF (“tax-increment financing”) project areas, it decreases in other parts of the city, which could mean that TIF projects draw jobs from elsewhere in the city, rather than generating new jobs.”
The legislative analyst’s office also concluded, “There is no reliable evidence that redevelopment projects attract businesses to the state or increase overall economic development in California. The presence of a redevelopment area might shift development from one location to another, but does not significantly increase economic activity statewide.”
Governor Brown’s proposal will not get through without a strong fight. Already more than 100 mayors and city councilmembers throughout the state have come together to protest the Governor’s plan, calling it an illegal money grab and warning that they will sue the state if it is adopted.
“We would hate to have to take the state to court in order to uphold the will of the voters, but we will do it if we are forced to do it,” said Chris McKenzie, executive director of the League of California Cities.
Some have pointed out that Governor Brown himself had redevelopment funds at his disposal when he was mayor of Oakland.
“I don’t think it’s right to deprive the leaders of Oakland or any city the use of a tool that he [Brown] used in order to create jobs and create housing in Oakland,” Mr. McKenzie said.
Meanwhile, cities are rushing through projects before the state cuts off funding.
The Bee wrote last week in an editorial, “Whatever legislators and local government leaders think of Gov. Jerry Brown’s plan to phase out local redevelopment agencies, the idea deserves serious consideration. To allow that debate to take place, steps must be taken to prevent cities, counties and agencies from rushing through new projects – thus making it even more difficult and expensive to unwind the redevelopment mess.”
While the City of Davis has proposed a number of projects with redevelopment money and the city itself relies on the pass-through agreement to prevent the county from developing on its periphery, in the end we have to look broader and question the utility of such a fund that prevents money from being used by the local government and schools.
—David M. Greenwald reporting
There was an interesting op-ed piece in Sunday’s Davis Enteprise by Tom Elias that discussed this issue: “Redevelopment agencies in some cities have been accused of using the “blighted” tag to get rid of homeless enclaves and other populations unwanted by wealthier citizens of the same locales. Because the agencies have a lot of leeway, prices they pay for property sometimes can be well above market values, an incentive for owners to sell without a fight. All in all, these [RDA] agencies have been a major vehicle for local politicians to promote business in their cities and decide who benefits.”
My big concern is if the RDAs are ended, will the money actually trickle back down to local level, or is this just a way for the state to balance its own budget on the backs of the counties/cities by literally taking away local funding? Will the money actually go towards our schools, or be swallowed up by the state bureaucracy, so that local schools don’t really benefit that much or as much as they should?
The political corruption of RDA funds to pay-off political IOUs to supporting developer-deep-pockets is sadly predictable. As we are considering the appointment of an interim Council member, first consideration needs to be given to the individual’s POPULIST credentials while being wary of those who most likely,despite their protestations, hope to get on the inside track towards a future State Assembly seat.
I think redevelopment practices are like affordable housing policies: they don’t accomplish their original and intended purposes, so they should be abolished. In the case of RDA’s, they siphon off money that local and state government could use for purposes that more closely reflect the will of the voters. If a local government wants to tear down downtown businesses and build something new with tax dollars, let them take that to the voters and see if it truly reflects the priorities of the public. Would you rather have the city funding deferred maintenance on local streets, have the state funding schools?
I think this may turn out to be one of this governor’s more far-reaching and important proposals. What Governor Brown is doing is calling into question several of the basic funding mechanisms the state has been using, and in each case his proposal would likely lead to greater local control over the funds. Needless to say, there are very strong vested interests in the status quo.
[quote]
I think redevelopment practices are like affordable housing policies: they don’t accomplish their original and intended purposes, so they should be abolished.[/quote]
Well said Mr. Shor.
Don Shor: “and in each case his proposal would likely lead to greater local control over the funds.”
I agree w the general sentiment of doing away w RDAs in principle, but I have to keep asking, will it actually lead to greater local control? Will doing away w the RDAs result in that funding trickling down to the local level? Or is it just smoke and mirrors, so the state can balance its budget on the backs of local gov’t? I think it is important to ask the hard questions of Brown, before we go down this route. He needs to make some guarantees – not just pass the buck to local gov’t. State gov’t is notorious for taking away money from local gov’t to balance its own messed up budget…or am I missing something here?
[i]”My big concern is if the RDAs are ended, will the money actually trickle back down to local level, or is this just a way for the state to balance its own budget on the backs of the counties/cities by literally taking away local funding?”[/i]
I think the money will go to the school districts and the counties. The RDAs are basically equal to cities. So this proposal is a shift of funds from one local entity to two others.
[i]”I think redevelopment practices are like affordable housing policies: they don’t accomplish their original and intended purposes, so they should be abolished. In the case of RDA’s, they siphon off money that local and state government could use for purposes that more closely reflect the will of the voters.”[/i]
Given that most RDAs (such as in Davis) are really just the city government, though one with a somewhat restricted mandate, I think the cities could live with the termination of RDAs as long as the money going into them would go directly into the coffers of the cities. But that is not what will happen, so cities are upset with this idea, which they see as getting their pockets picked.
RDA’s are just expensive scams. Good old fashion honest private development would do much better.
Is RDA money being used for the work being done on the sidewalks and streets downtown?
What are some examples of where RDA money has been spent in Davis?
In general, I think I would much rather see this money going to the schools and other general fund needs. Subsequently, taxpayers can vote for higher taxes if they want to subsidize a development.
Here is the portion of the city budget that deals with the redevelopment agency:
[url]http://cityofdavis.org/finance/budget/10-11/pdfs/16. Redevelopment-Agency-Final-10_11.pdf[/url]
[i]”Is RDA money being used for the work being done on the sidewalks and streets downtown?”[/i]
In part, yes.
Here is where the money for all of the bulb outs for the “CIP8163 – Second Street Pedestrian Improvements” came from ([url]http://cityofdavis.org/meetings/councilpackets/20100615/03F Second Street Corridor Improvement, CIP 8163 SR.pdf[/url]):
Federal Stimulus Funds = $512,623
RDA Funds = $191,252
RIF* Funds = $48,530
Storm Sewer Funds = $48,530
[u]CDBG** = $30,000[/u]
Total Contract = $830,934
*RIF = Road Improvement Fund
**CDBG = Community Development Block Grant
Don, your link did not work.
Adam, if you care a lot about this question, I recommend you write an email to the City Clerk, Zoe Mirabili. Ask her this: “Please provide for me a list of the expenditures of Davis RDA in the 2009-10 fiscal year; and please provide a brief description of each project funded by the Davis RDA.”
She will get back to you within 2 weeks with that answer.
RDA funds have been critical to providing much needed affordable housing in Davis.
From Non Profit Housing of Northern California
•Did you know that redevelopment agencies are the second largest funders of affordable housing in California, second only to the federal government?
•Since 1999, redevelopment agencies have helped 166,779 households find affordable housing, and 87% of these households had low or very low incomes.
•Since 1995, 91,000 housing units have been built with redevelopment funds.
•Within one year, the estimated impacts of building 100 rental apartments on a metro area include $7.9 million in local income; $827,000 in taxes and other revenue for local governments, and 122 local jobs.
_______________________________________________________________________
My critique of the Davis RDA funds is the quasi-secrecy surrounding these funds. City staff appears to use this as their own piggy bank and there seems to be no public oversight or outside monitoring over the use of Davis RDA funds. There is a certain review of City funds but no place where Davis RDA funds receive the same external review. There should be and the City Council should put in place a public process for monitoring use of Davis RDA funds.
Look at DACHA for example. $4 million in public funds from RDA are made available to a board composed of people that are not eligible to serve and a membership not eligible to vote. The board breaks various laws (Corporations Law, Davis Sterling Act, Cooperative Law, and Non Profit Law). The arbitrator appointed by Yolo County Superior Court stated in his report filed with the Court.
“What is curious is that representatives of the City of Davis were present throughout the entire time when the new Board took these untoward actions and they did little to discourage the Board”. (Page 5 of Arbitration Award)
“The testimony by three members from DACHA who appeared at the arbitration can only be described as cavalier. For the most part their testimony was characterized by failures of memory, contradictions and a certain inability to admit even their own written words. Two of these members appear to have been in serious arrears in their fees during times that they were members of the Board, in direct contravention of the bylaws”. (Page 7 of the Arbitration Award)
The DACHA members used those public funds to pay off $40,000 in their personal delinquencies, pay themselves $83,000 in interest on $271,000 of shares and then send themselves checks amounting to about $200,000.
City staff suspended the repayment of public funds so that DACHA could pay for its private legal bills. This appears to be an amount between $100,000 and $116,000. Later City staff appears to have provided about $60,000 in additional public funds to DACHA’s lawyers. All this to an ineligible nonprofit public benefit corporation board.
City staff said they would come back to Council with a report on my questions and the use of funds relating to DACHA. That full report has nor been provided. City staff has admitted they have spent $269,000 so far on their own legal costs.
City staff also changed the terms of the loan to set the prices for DACHA units at 80% of median income. However, none of the DACHA residents were ever qualified at 80% of median income. They qualified at up to 120% of median income. And there has been no requalification. So we now have what may be a major gift of public funds.
So the DACHA repayment to the City was set at $7,668 per month less than any of the residents qualified for. This unwarranted change meant that the City will lose $5,060,880 in RDA fund repayment income on the 20 homes. That’s a lot of public money to give away.
Surely with all of these actions taking place around the use of public funds there ought to be some review of use of RDA funds.
Yet still no willingness by the Council to conduct an independent investigation.
David Thompson, President
Twin Pines Cooperative Foundation
It seems that pasting links from the city web site often doesn’t work. Here it is:
http://cityofdavis.org/finance/budget/10-11/pdfs/16. Redevelopment-Agency-Final-10_11.pdf
You’ll have to copy and paste it.
I have problems with the pdf links from the city web site.
Go to the city’s budget page for this year: [img]http://cityofdavis.org/finance/budget/10-11/[/img]
Scroll down to item 16 and click on that pdf document.
Rifkin: “I think the money will go to the school districts and the counties. The RDAs are basically equal to cities. So this proposal is a shift of funds from one local entity to two others. “
You “THINK the money will go to the school districts and the counties” but you don’t know for sure. And that is the problem – we don’t know for sure…sorry but I don’t trust the state to eliminate RDA funding, and then turn over all those tax dollars to the schools and counties. Call me a cynic…
Adam Smith: “What are some examples of where RDA money has been spent in Davis?”
Just recently RDA funding was allocated for building a second screen into the Varsity Theater; and bringing a Hanlee’s VW dealership to South Davis…
Here’s a useful overview from the L.A. Times: [url]http://articles.latimes.com/2011/jan/20/opinion/la-ed-redevelopment-20110120[/url]
Ending redevelopment agencies isn’t the end of affordable housing. It isn’t even the end of redevelopment. It just changes the financing structure. In fact, it makes it more transparent and gives local voters more control: the other part of Brown’s proposal would allow voters to pass redevelopment bonds at 55% instead of 2/3 vote.
From the article:
In its “Arrested Redevelopment” series in October, The Times detailed the bumbling of small-city agencies in which redevelopment officials tasked with spending millions of tax dollars to build commercial projects and affordable housing produced few results and lacked accountability. A third of the state’s agencies, which spent a combined $700 million in housing funds from 2000 to 2008, did so without constructing a single new unit, the investigation found. The state lacks the power to enforce laws requiring agencies to produce housing, and lacks the money even to audit required housing construction.
[i]”You “THINK the money will go to the school districts and the counties” but you don’t know for sure. And that is the problem …”[/i]
Well, it shows my ignorance on the topic, but it is not really a problem with the proposal.
Here is where the LAO says ([url]http://www.lao.ca.gov/handouts/state_admin/2011/Redevelopment_1_19_11.pdf[/url]) the funds would go: [quote]Beginning in 2012-13, any property tax revenues remaining after the successor agencies pay redevelopment debt would be distributed to other local governments in the county following provisions in existing law, except that:
The additional [b]K-14 property taxes[/b] would augment their existing state funding (not offset state education spending under Proposition 98) and would be [b]distributed to districts[/b] throughout the county based on enrollment.
The [b]property taxes[/b] that otherwise would be distributed to enterprise special districts [b]would be allocated instead to counties[/b]. (These districts primarily are fee-financed water and waste disposal districts.)[/quote] Also this: [quote]Many redevelopment agencies maintain large housing fund balances meant to support low- and moderate income housing. The Governor proposes to shift the existing balances to local housing authorities.[/quote]
Rifkin: “Well, it shows my ignorance on the topic, but it is not really a problem with the proposal.”
I don’t think it is ignorance on your part at all. What the governor is proposing sounds good on paper. I’m just not convinced all the RDA money will actually find its way to local gov’t like it should. So I want a guarantee that it will. If the governor is not willing to give a guarantee, then you can rest assured the state is going to skim off some/much of what was the RDA funding for itself.
I know I am not alone in this fear. For instance, the plan to push state responsibilities onto counties, like taking inmates from state prison, is fraught with problems. As the counties point out, is the state going to send along the commensurate funding that should go w those responsibilities to house those prisoners? I very much doubt it, and so do the counties very much doubt it.
Don Shor: From article in LA Times: “A third of the state’s agencies, which spent a combined $700 million in housing funds from 2000 to 2008, did so without constructing a single new unit, the investigation found. The state lacks the power to enforce laws requiring agencies to produce housing, and lacks the money even to audit required housing construction.”
So would turning RDA money over to local gov’t, the same gov’t that misused the housing funds, be any improvement? Hmmmmmmmmmmm… I like the idea of doing away w RDAs, bc I do think a lot of the funding is misused. But I want to be assured 1) all the RDA money will be given back and not some or most of it skimmed off by the state; 2) and the RDA funding is used in fact for our schools and county services that are woefully underfunded in a responsible way.
Now does anyone actually believe this is going to happen w Brown’s plan? Again, call my cynical, but I don’t. The voters need to make sure there are stringent conditions on these drastic changes – now is the time the voters have some actual leverage to make demands…
First, I urge you to read the Legislative Analyst’s analysis that Rich provided the link for. It presents the pro’s and con’s of the governor’s proposal from an unbiased source. NOT all of the money would be given back, but MOST of it will not be skimmed off.
I’m curious: you have been very critical, as far as I can recall, of every aspect of the governor’s budget proposals. So how would you propose the state resolve its budget problems?
[quote]The DACHA members used those public funds to pay off $40,000 in their personal delinquencies, pay themselves $83,000 in interest on $271,000 of shares and then send themselves checks amounting to about $200,000.
[/quote]
LOL — Dump all this subsided housing and market meddling nonsense.
Don Shor: “I’m curious: you have been very critical, as far as I can recall, of every aspect of the governor’s budget proposals. So how would you propose the state resolve its budget problems?”
I’m actually in favor of some of Brown’s proposals – just leery of the way he is going to implement them. And the public needs to be wary, and demand some accountability. I read that Lois Wolk is Chair of the Committee that is going to oversee some of what goes on, which is perhaps a good sign. But I do not think we the public should just blindly agree to proposals, w/o insuring that there are some strings attached to agreeing w those proposals.
An example of this at the federal leval was the bank bailouts. I was in favor to some extent of bailing the banks out – but not without strings attached. But apparently not much in the way of strings were attached, and guess what? Banks were paying their management huge bonuses and holding lavish parties as they were accepting the gov’t bailout money.
Turning state functions over to counties in CA sounds great in principle – but what if the commensurate funding to go w it is not forthcoming? That will put counties in worse shape than they already are in. How is that an improvement? You’ve just admitted that not all the RDA money will end up in the hands of local gov’t. Why not? If Brown is serious about doing away w RDAs, to give local gov’t more control, then why not turn ALL the money over? Exactly how much is going to be kept back by the state? My guess is that in the ultimate end it will be quite a bit. I read somewhere that for every $10 million, the cities would only be getting $2 million back (cannot remember where I read this unfortunately – my apologies).
And you did not answer my question. If local gov’t has been guilty of mismanaging RDA funds, and you do away w RDAs, and turn some of the money back to the very entities that mismanaged the funding in the first place, how is that going to help anything? I’m not the only one w many of these concerns – they have been expressed in the news media by many people in positions of power. This is not idle speculation…
Geez, I tune out for a few days and you guys go off the deep end. I am amazed at what I am reading here, generalizations run amok. You would be forced to cancel ALL government programs if you held them up to the same standard invoked here. Should we stop funding the DJUSD because some school boards around the state make dumb ass financial decisions? Should we also stop funding the Davis police dept. because some police departments around the state are inefficient? It makes no sense to criticize our RDA, let alone dissolve it, because RDAs in other communties squander their resources. Some RDAs have done a good job, some have not. The RDA in San Diego, for example has absolutely transformed downtown SD. It would be akin to scoring an own goal for any Davisite to wish the demise of our own RDA. Now a healthy debate on how our RDA prioritizes projects is another matter.
It is outrageous for anybody from the State to critize what local governments are doing with their financial resources. They really need to shut up and concentrate on their own self inflicted disaster.
DTB: “It is outrageous for anybody from the State to critize what local governments are doing with their financial resources. They really need to shut up and concentrate on their own self inflicted disaster.”
You make a very interesting point…