by Dan Oney –
by Dan Oney – Wolk’s legislation, Senate Bill 214, is a compromise between the entrenched camps of the Redevelopment debate. For proponents of eliminating redevelopment, claiming that they are wasteful and operate to the detriment of schools and other core services, it will protect source of revenues to these services from being usurped by redevelopment. For the proponents of redevelopment, SB 214 would allow Infrastructure Financing Districts (IFDs) to absorb many of the functions of the current redevelopment agencies.
“It’s time to look ahead at practical alternatives that retain the ability of local governments to finance economic development,” said Wolk, a supporter of the Governor’s plan and Chair of the Senate Governance and Finance Committee.
Current law already enables a city or county to create an IFD, or a specified area in which property taxes that would ordinarily go to the general fund are diverted to pay for public projects. Qualifying projects would include such as highways, transit, water and sewer projects, flood control, libraries, parks, childcare and solid waste facilities. Unlike an RDA, an IFD cannot divert school property taxes and must have the approval from other local entities within the district. One government cannot raid another.
Comparing an IFD to a RDA, immediately the compromises can be identified:
Redevelopment Agencies have greater access to funding, since they draw from all property tax revenues. IFDs can draw upon about one half of the revenues.
Unlike RDAs, IFDs will not affect school funding.
Redevelopment agencies have the power of eminent domain; while IFDs would not.
Local governments now favor utilizing a RDA structure primarily because school property taxes are the largest contributor to RDA funding, over half statewide, and current law makes forming an IFD a comparatively cumbersome option. Furthermore, unlike an RDA, an IFD cannot use the power of eminent domain. Senate Bill 214 does not change this difference.
The cumbersome nature of the IFD is a result of barriers of entry and the requirement for an involved electorate. Voters must give their approval to create an IFD, approve bond amounts, and issue the bonds themselves. All but the IFD’s bond limits would require a 2/3rds vote.
Wolk’s legislation removes the statutory requirement for voters to approve the formation of an IFD or to issue debt, just as there is no voter approval requirement for RDAs to do the same. The bill also extends the term of IFD bonds from 30 years to 40 years, giving local governments longer to repay their debt and lowering their monthly debt payments.
“Having served in local government, I know how important these kinds of projects are to our communities. My legislation can help local governments continue to fund important economic development, as well as public works projects, without adversely affecting our schools, core local services, or the state general fund,” concluded Wolk.
Should the stakeholders and interested parties buy into her legislation, Senator Wolk’s SB 214 could remove major barriers to passing the Governor’s Budget.
Dan Oney is the Editor of PublicCEO where this article first appeared
What about changing the voting requirements from 2/3 to a simple majority? Having voters scrutinize IFDs strikes me as a good thing, so that they don’t turn into a boondoggle the way many RDAs have,
Good for Lois Wolk, for coming up w some kind of compromise on the RDA issue. I’m not sure about her idea, bc I think it needs to be properly vetted, and I am no expert in this area. But it sure beats the heck out of Brown’s draconian experiment in doing away w RDAs altogether. And it sure beats the heck out of allowing RDAs to continue to operate as they have – w complete impunity in some cities. At the very least, the RDA statutes needed to be tightened to limit what RDAs can spend their funds on, to cut off many of the current abuses. That would probably be my preferred option…
IMHO, this is not an adequate “compromise”. First, it is completely misleading to say that the RDA’s negatively affect the school districts. You might as well say that school construction matching funds negatively affect the cities. It is, frankly, nonsensical. Both school construction and city infrastructure and economic development needs more money from the state then they currently get since prop 13 has eroded our property tax revenue.
I think we all know where the excess state spending is; it is the prisons and the excessive compensation packages of the very highest paid public sector workers (not the rank and file), which include public safety.
If money is tight, this is where the reforms should be concentrated. To pit school districts and cities against each other is deplorable, IMHO.
The current structure of the RDA’s should be retained. It is the only way to assure that some of our tax money is set aside and invested in infrastructure or economic development. If the RDA’s are dissolved, half of the money will be returned to the state (the same as if the state stopped giving matching funds for school construction), and half of it would go back to the general fund, where it would be immediately gobbled up in employee labor costs.
There is a reason the Firefighters’ Union is one of the major supporters of the move to dissolve RDA’s.
Please excuse the hastily dashed off the comments above. I wrote them before going out for the evening; I hope the comments are readable.
I cannot find a copy of the SB 214 on line and judging from on-line comments, others are having the same problem.
From the confused third party descriptions such as the one posted in the Vanguard, it appears that the new vehicle would not include the State contributions that make the RDAs feasible. RDAs involve a State contribution which encourages jurisdictions to set aside money for infrastructure, economic development loans and affordable housing, just as the State provides contributions to School districts in the form of State matching funds in order to encourage districts to bond for new schools. I also don’t see mention of ability to make loans for economic development.
Retaining some level of State supplement is necessary because Prop 13 has eroded city revenue while the State mandates have continued unabated. In Davis, for example, most of the infrastructure that connects South Davis to North Davis was funded by the RDA. The State required growth, but does not allow the city to charge the developer for the infrastructure necessitated by this growth.
A second feature of the proposed SB214 appears to be that the city would have to get approval from the county and school district. I don’t see the carrot or stick that would make that likely to occur. (The school district, for example, does not need city approval to issue bonds). In fact, other districts might well fear that bonds issued by a city RDA could negatively affect their own ability to float bonds or taxes.
Neither school nor city infrastructure and economic development investment are wise areas in which to cut spending. Disbanding the RDAs will save little money because the State is obligated to provide the revenue stream in place when RDA bonds were issued, and most jurisdictions have already issued a lot of bonds.
Concerning our local situation, the Davis School District will not benefit if Davis refrains from issuing bonds. What will happen is that if Davis doesn’t issue bonds, Davis will end up subsidizing those cities that have already committed their RDA funds.
Instead of disbanding RDAs and providing a new vehicle which cannot work because it doesn’t provide the funds necessary to make it work, let’s simply reform existing RDAs. Better parameters can be laid down to assure that the funds are used wisely, and I am sure that other compromises will be forthcoming.
The bill: http://www.leginfo.ca.gov/pub/11-12/bill/sen/sb_0201-0250/sb_214_bill_20110208_introduced.html
Search by author at leginfo.ca.gov because this session’s new bills aren’t posted to all sections yet.
It’s ironic that the I-80 undercrossing keeps being used as a example of why the RDA is good for the city (by Councilmember Greenwald above and David Greenwald in a previous piece).
As many in the bike community know, the undercrossing is a portion of the Putah Creek Parkway that stretches from Aggie Village on the north side of the freeeway to the east end of Oakshade on the south side of the freeway. The PCP, in turn, connects the UCD Arboretum bike system with the rest of the bike system running through South Davis and, ultimately, Mace Ranch (via the Dave Pelz overcrossing).
The problem is, there’s a uncompleted section from Da Vinci Court to the freeway. This forces users to bypass the gap on surface streets through an industrial and poorly developed part of town. The detour makes this wonderful (and very expensive) transit corridor less appealing to children and other individuals with concerns about their safety and security (especially late in the day).
So to me, the I-80 undercrossing — every time I ride it — represents a major failure of our city council, staff, and (now thanks to Sue’s explanation of where the money comes from) the RDA. The incomplete project has sat abandoned for more years than I care to count. I find it hard to comprehend why the city would spend $7.4M on an undercrossing and then fail to finish the job.
So as the council deliberates adopting a whole new portfolio of projects, perhaps they could also make an honest commitment to finish what they’ve started?
Given his stature in the bike community, I would be particularly interested in Mayor Krovoza’s position on completing the Putah Creek Parkway. If the city commits to finishing the PCP by the next election — a goal which can easily be achieved — then they will only be 10 plus years behind schedule when this key piece of city infrastructure is finally complete.
SG: “If the RDA’s are dissolved, half of the money will be returned to the state (the same as if the state stopped giving matching funds for school construction), and half of it would go back to the general fund, where it would be immediately gobbled up in employee labor costs.”
This is precisely what I am afraid of…
SG: “Instead of disbanding RDAs and providing a new vehicle which cannot work because it doesn’t provide the funds necessary to make it work, let’s simply reform existing RDAs. Better parameters can be laid down to assure that the funds are used wisely, and I am sure that other compromises will be forthcoming.”
I tend to agree with you… this would be my preferred option. There are just too many unknowns and possible consequences to throwing the bab
baby w the bathwater…
Boomer,
Thanks for the heads-up about the bike path. I’ll look into it.
Councilmember Greenwald: Thank you for responding and your offer to look into the problem!
I would very much appreciate it if you would post whatever you find out. The reason I make this request is that I’ve made some inquiries and some sanitizing daylight needs to be put on this situation.
You might want to confirm that the city paid for the sound wall along the north side of the Rusk property, and if so how much did it cost the taxpayers. If my information is correct, then the follow-up obvious question is what did we receive in return for providing this expensive amenity to an individual property owner.
The last piece of the PCP will go along the top of the bank on the southwest edge of the Rusk property. Is there a right of way issue? Can we obtain a right of way by eminent domain? I find it hard to believe that we would even begin to construct a $10M+ project without having a clear path to execution. So what changed?
The last piece of the bike path will be relatively cheap. It’s time to finish the job.