Last year, California ended Redevelopment as a way for local government to use public monies that would go for redevelopment and other major infrastructure repair projects.
Last week marked the beginning of the new legislative session and Senator Lois Wolk introduced SB 33, a measure which would “update Infrastructure Financing District law, to make it a useful tool to help cities maintain, repair, and rebuild critical infrastructure and create economic development in their communities.”
In her release, the senator’s office claimed the law would “remove obstacles barring the use of Infrastructure Financing Districts (IFDs), a flexible financing tool that can be used to pay for public works projects, create high-paying jobs, and promote sustainable growth.”
“Having served in local government, I know how important public works projects are to our communities. I also know that local governments need the flexibility to determine local priorities,” said Senator Wolk, Chair of the Senate Governance and Finance Committee. “My legislation will give local government officials a flexible, rigorous tool to finance public works projects and promote economic development, while embedding more program and fiscal accountability measures.”
Senate Bill 33 makes it easier for local governments to utilize IFDs. IFDs, like redevelopment agencies, which were dissolved by the California Supreme Court in January, 2012, can be used to divert property taxes from a local government’s general fund to pay for public projects such as highways, transit, water and sewer projects, flood control, libraries, parks, child care and solid waste facilities.
According to the senator’s office, “Unlike redevelopment agencies, IFDs require the consent of local agencies before diverting their tax increment. Additionally, unlike redevelopment agencies, IFDs do not divert school property taxes or use the power of eminent domain.”
The League of California Cities is a key proponent of the new legislation.
“I applaud Senator Wolk’s commitment to removing unnecessary obstacles hindering the use of IFDs, a useful financing tool that can be used to support a wide variety of local infrastructure,” said Daniel Carrigg, Legislative Director of the League of California Cities. “California’s local governments face many challenges in financing and upgrading infrastructure to meet the needs of our growing population and support a prosperous economy. By enabling the use of IFDs, SB 33 provides a real solution to these challenges.”
According to literature from the League, they worked “in a collaborative effort with Sen. Wolk to identify amendments to the law that would make it more workable by removing cumbersome voting thresholds that were not legally necessary, authorizing rehabilitation and maintenance, and other changes.”
Last fall, there were competing measures put forward to Governor Brown that would allow local agencies “to develop infrastructure and promote economic development in the wake of the loss of redevelopment.”
The League ended up supporting what was then SB 214, over competing bills from the Speaker (AB 2144) and Senator President Pro Tem (SB 1156), “because it is viewed as the most developed, flexible and useful tool that can be used by the widest variety of cities.”
SB 33 is identical to SB 214.
The focus was on making the IFD, which had been on the books for over 20 years but rarely used, a more useful tool.
There were a number of problems with IFD as it currently existed. Chief among them was the fact that the law – while it allowed the use of tax increment to fund infrastructure, it required two public votes at a two-thirds vote threshold.
Wrote the League last September, “These dual vote requirements are massive hurdles sufficient to deter most agencies from looking further.”
Among other things, Senator Wolk’s legislation removes the statutory requirement for voters to approve the formation of an IFD or to issue debt, just as there was no voter approval required for the formation of redevelopment agencies.
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
However, last October, Governor Brown vetoed SB 214.
In his veto message, the governor wrote, “This bill eliminates the voter requirement for a city or county to create an infrastructure financing district and expands the types of projects that may be financed by such an entity.
“This measure would likely cause cities to focus their efforts on using the new tools provided in the measure instead of winding down redevelopment. This would prevent the state from achieving the General Fund Savings assumed in this year’s budget.”
In reaction, the League wrote, “The veto of SB 214 is obviously disappointing for communities that are ready to move on and were looking to use tax-increment financing to address infrastructure issues and create jobs. Next year could have been a time for preparing new economic foundations.”
They add, “Now, regrettably, it appears instead 2013 will be another year of state officials sifting through redevelopment Recognized Obligation Payment Schedules (ROPS), asset lists, and other required documents looking for budget tidbits to benefit the state general fund. “
However, the League saw a positive light as well, in his veto message for Senator Steinberg’s SB 1156, where the governor wrote, “I am committed to working with the Legislature and interested parties on the important task of revitalizing our communities.”
The League said, “This is a good signal. Perhaps when the Governor is signing bills in September 2013, local and state officials can begin to work together again to restore California’s infrastructure and economic competitiveness.”
Senate President Pro Tem Steinberg also reintroduced his redevelopment replacement tool.
Will the governor be more willing to sign legislation this year to replace redevelopment, particularly in light of the passage of his measure? That remains to be seen.
In the meantime, Senator Wolk said, “I remain committed to making it easier for local governments to utilize IFDs to fund important projects like flood protection and clean drinking water without adversely affecting our schools, core local services, or the state general fund.”
—David M. Greenwald reporting
I like voter approval of large expenditures of local money
At first blush, I agree with Gov Brown
But tell us more ?
Why won’t he veto SB33 if it is identical to 214?
If identical what role did Lou’s Wolk have?
Confusing article!
SODA: Legislators will often get a bill through a second time. There might be some changed circumstances in terms of the budget. The Governor seemed to leave it open.
What are you finding confusing?
The PEU-cartel will not allow it.
The media will regurgitate the message that it will hurt our kids.
Other than these two problems, it makes perfect sense.
“The PEU-cartel will not allow it.”
What does that even mean? Last time, the only reason it wasn’t passed into law was the Governor vetoed it. The Governor does what the Governor wants.
The governor vetoed it for the same reason that he has failed to adequately address public employee union pensions. Why did he work to scrap RDAs in the first place?
Until the PEU-Democrat political corruption is destroyed, even semi-maverick Governors like Brown are powerless to pass legislation the unions feel threatened by. I doubt this bill will pass the Senate. If it does, I expect Brown to veto it.
Why did it pass the Senate last time then?
“Why did he work to scrap RDAs in the first place? “
funding
Different Senate this time.
“Funding”? You mean that he saw a way to divert more local tax revenue to the schools at the expense of business and economic development to relieve pressure on state government for having to cut the obscene pay and benefits of unionized state workers as a way to stop the cuts to education. What a scam.
Looking at the way RDA funds were used in many cities, I’d RDA’s were the scam — diverting local tax revenue from schools and city governments to fund downtown prettification projects and stuff like what Stockton did.
It was confusing bc title indicated to the naive (me!) that it was new and Sen Wolk was the creator.
When in the middle there was the statement about identical to old bill, I was surprised and wondered why again, why now, why credit Wolk, why article?
Maybe too early in the am?
There were more good RDAs than bad RDAs. The problem was that the bad ones tended to be in poorly-run larger cities like Stockton. So, the inflated dollar argument was used to kill the actual real benefits that many other communities had derived.
If RDAs hadn’t worked, then there would not have been any net increase in tax revenue that the Democrat-union cartel salivated over and eventually scammed to steal from local communities.
The destruction of RDAs was the unions demanding the Democrats find another source to loot rather than demand the union members give up their obscene pension benefits. It was similar to what we see happening in our national march toward European socialism… leftists unable to feed their own insatiable appetite for tax-revenue loot and mooch more and more from the people and programs that actually produce it.
The irony in all of this is the kids.
– The kids get their crappy public school education experience extended.
– The kids have fewer job prospects in the private sector because of the death of RDAs.
– The kids that get a job in the public sector will not have anything close to the level of rich pay and benefits of their senior co-workers.
Yet, the kids came out in droves to give the same political party that is screwing them more power to screw them again and again.
The problem with kids is that “I told you so” is what we are SUPPOSED to be saying to them until they graduate and get real job. They are idealists and unknowing of the real world until then. Unfortunately, the Democrats have ensured that it comes with the tragic lesson of their voting themselves a much lower standard of living.
Do you understand why it’s hard to have a reasonable discussion with you, Jeff?
Don, I think that is an unreasonable response.
The policies and legislation being put forth by this Democrat-controlled state government are anti-business, anti-enterprise and pro public employee union. These political leaders are allowed to stay in power and do these things because of the people that vote to keep them in power. Until those people begin to understand and calculate the long-term economic damage being done to them personally, they will keep supporting these politicians.
The bill was vetoed the first time, and either it will be killed in the Senate or it will be vetoed again. Because those that are in power benefit from their union connection and the ignorance of voters not recognizing they are being screwed by it.
Regarding SB1156(Steinberg) last year; quoted in the LA Times:
[i]Brown liked the idea but wrote in his veto message: “I prefer to take a constructive look at implementing this type of program once the winding down of redevelopment is complete and General Fund savings achieved.”[/i]
Maybe you could try to remove certain words from your lexicon: [i]bloated, loot, moochers, European socialism[/i], and [i]crappy[/i] all come to mind.
RDA’s were seriously abused in many cases. Often they ended up funding cozy relationships between downtown developers and the politicians they supported. They were often used to allow eminent domain proceedings against small businesses and small property owners. Some of the most ardent opponents of RDA’s are libertarians and conservatives who can document extensive abuses of the powers redevelopment agencies were granted.
Yes, personally I’d rather have money for teachers than for downtown projects in most cases. More to the point, I don’t see why tax funds should be encumbered for those projects when usually there is a developer able to fund it.
Some private-public partnerships are reasonable. But I doubt you can reasonably assert that most redevelopment funds were used as intended (following a common-sense definition of blight) or used efficiently or effectively.
Just the history of how the Davis RDA came into existence and how it was used — regardless of the merit of the projects — should give you pause about RDA’s.
Hey, Jeff Boone raises some good points. And if there is any us who understand the fiscal side of these commercial projects, it’s Jeff because he runs a large organization that issues loans for commercial projects. Don’t be so fast to black out his comments.
Now, on the political stuff, Jeff and I probably disagree somewhat. But when it comes to “just follow the money,” Jeff is the man on the job.
(Remember Nixon and the Plumbers? The Bag Man with the sachels of cash was Fred LaRue, and I went to high school with his daughter. The phrase “just follow the money” came from that political scandal.)
For an example of the CC rushing to spend money without any voter oversight at all, just check out what they did with the downtown parking garage deal at 3rd to 4th, E to F St block? They rushed out to buy bonds, and the project was completely devoid of any rationale planning, and now we are spending about $97,000 per month of precious tax dollars on the bond debt, for NOTHING. (And Joe did not vote for it.)
The RDA was mostly out of control, and it was used to fund local insiders/elites.
Examples? the auto dealer contract/sweetheart loan; and the sweatheart loan to Cafe Italia.
[i]Maybe you could try to remove certain words from your lexicon: bloated, loot, moochers, European socialism, and crappy all come to mind.[/i]
I will consider this suggestion.
[i]RDA’s were seriously abused in many cases. Often they ended up funding cozy relationships between downtown developers and the politicians they supported.[/i]
Sure, just like the unions fund cozy relationship with the politicians that promise to reward them. The difference is that there are plenty of examples of good RDAs and projects that did what they were supposed to do… turn blighted non-producing areas into new eceonomically-viable areas. These good RDAs and good projects got trashed because of a minority of bad players. Now that mechanism is gone. How do you revitalize an area with many property owners if we are lacking RDA?
The fact is that the governor would not have raided the RDA piggybank if the state budget wasn’t so screwed up from over commitments of unionized public sector labor pay and benefits.
The problems with RDAs could have been addressed and solved by legislation. They didn’t have to be eliminated.
As I understand IFDs, they would not be as beneficial or effective… assuming this bill would pass… and I don’t think it would.
[i]”just follow the money,” Jeff is the man on the job.[/i]
Thanks Mike.
Money is just one obvious benefit that people pursue, but is the primary one.
In terms of politics, I think we share a level of frustation for our politicians failing to make the timely and righteous decisions related to our state, county and city long-term fiscal health. RDAs were a tool in the revenue generation tool box that is now gone.
This argument about it benefiting developers or property owners is a bit irrational since developers and property owners would naturally be involved in any re-development. The justification is the long-term downstream tax revenue benefit derived from taking a non-tax revenue-producing area and making it economicially active. Think garden that will eventually bear fruit.
The state is eating the plants in the garden even as many bear fruit on the argument that people (the unions) are hungry and the garden is not producing enough.
Jeff Boone: “[i]How do you revitalize an area with many property owners if we are lacking RDA?[/i]”
Eminent Domain (and the guts to use it).
[i]” These good RDAs and good projects got trashed because of a minority of bad players.”
[/i]
How do you know it’s a “minority”? What makes you think sweetheart deals, giveaway leases, tax swaps, and favorable non-competitive development agreements aren’t standard operating procedure?
Want an example? Just take a look north at Woodland. The Woodland Record has a long series of stories on the relationship between Petrovich, Pimentel, and the Woodland RDA. Here’s one link which happens to contain a large number of other links (copy and paste URL’s) to the twists and turns up there:
[url]http://woodlandrecord.com/pimentel-will-leave-legacy-of-petrovich-projects-redevelopment-waste-and-b-p2661-1.htm[/url]
Do you have some kind of analysis that shows the benefits of RDA’s? Because the last time we discussed this in 2011, you posted a study which concluded:
[i]”This study’s results suggest 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, and those
projects that came closest defined blight broadly and included
large amounts of vacant land. Tax incentives can lead
cities to designate too many areas as blighted, and if true
blight is targeted, an area is unlikely to generate enough revenue
to earn the tax increment revenues.”[/i]
On the plus side, Lois Wolk’s bill apparently eliminates eminent domain.
I know you don’t like to give Governor Brown credit for anything, but I think at this point the unions don’t really see him as an ally.
“Different Senate this time.”
Not different enough that’s going to take the outcome.
“”Funding”? You mean that he saw a way to divert more local tax revenue to the schools at the expense of business and economic development to relieve pressure on state government for having to cut the obscene pay and benefits of unionized state workers as a way to stop the cuts to education. What a scam.”
If by divert you mean cut money from, I guess so. Brown’s probably least endeared to the unions of any major Democrat, and he hasn’t been afraid to piss them off at many points during his career. So I’m not buying your argument here.
“It was confusing bc title indicated to the naive (me!) that it was new and Sen Wolk was the creator.
When in the middle there was the statement about identical to old bill, I was surprised and wondered why again, why now, why credit Wolk, why article?
Maybe too early in the am?”
Fair enough. It wasn’t my intention to imply this was new, only that it was one of several possible replacements.
[i]Brown’s probably least endeared to the unions of any major Democrat[/i]
Do you have proof of that? I think it is just spin.
Brown has done the absolute minimum one would expect for a tough-talking Democrat governor that frequently confers with his union benefactors and PR handlers.
[i]”Eminent Domain (and the guts to use it).”[/i]
Eminent Domain should only be used when the total redevelopment property is blighted, nonfunctioning and condemnable. Unfortunately the typical redevelopment project scope includes viable functioning property. The result, when using eminent domain, is material harm to responsible property owners for the “greater good”. That is completely unacceptable.
RDA is a much better mechanism because it is a tool for collaboration and cooperation instead of a punitive top-down, government grab of other people’s property.
The argument that RDA is exploited for gifts to developers from politicians is a non-starter if the alternative is eminent domain… since ED has frequently been used for the very same… government taking property from others to give to developers that provide a promise of greater tax revenue to fund the beast… the one that is generally union-powered.
“Do you have proof of that? I think it is just spin.”
Proof? I don’t know that there is such a thing. I know many were not happy with the pension reform he pushed through. I know growing up that teachers were angry at some of his decisions. Does that constitute evidence in your book? Or do you think all Democrats are the same?
Jeff: [i]The argument that RDA is exploited for gifts to developers from politicians is a non-starter if the alternative is eminent domain[/i]
I’m baffled by your whole argument here. Eminent domain isn’t an alternative to redevelopment, it is a standard tool of redevelopment agencies. And with the Kelo decision it became permissible for local governments, through RDA’s, to seize perfectly good homes and business properties on behalf of major development projects.
[url]http://en.wikipedia.org/wiki/Redevelopment#Urban_renewal[/url]
For someone who goes ballistic about any link between politicians and unions, you seem totally oblivious to, or unconcerned by, the politician/developer nexus.
I also think it’s interesting that Jeff sees the push to kill RDA as union based, when building trades are a powerful union in the Democratic party and they want RDA (obviously).
An overview of Infrastructure Financing Districts, including information about last year’s version of Lois Wolk’s bill: [url]http://www.edacademy.org/wp-content/uploads/2011/AC11PPT/IFD Conference.pdf[/url]
Fascinating discussion today.
Can anyone put into lay terms, and with an example of an expected project, what an IFD project might look like in this town?
As to unions, again, their job is to ASK, and the public elected officials are to evaluate and say yes or no, or compromise. So don’t knee-jerk against unions.
The CC (me included) did not have to cave in to the 3% at 50 policy 12 years ago, but we did. I am one of the five CC members who own that one, and every time I hear about a tree trimmer being laid off, or the pools closed, or the kids rec program prices being raised above what a poor family can afford, it makes me sad. But I don’t blame the union reps who got us to give it to them. Only the five of us are to blame.
[i]For someone who goes ballistic about any link between politicians and unions, you seem totally oblivious to, or unconcerned by, the politician/developer nexus. [/i]
Don – that is a fair point. Eminent domain is a separate issue from RDAs, even though they have been used together. I hate the use of ED unless the entire property is blighted and non-functioning. In other words, if there is a single privately-owned parcel in the project property that has a viable residence or business, I say hands off unless the owner WANTS to sell. The greater good in this case does not justify the means.
What I have seen is RDA providing a mechanism for incorporation and improvement of a multi-parcel project in a way that fosters cooperation and collaboration. Downtown Winters is a great example. ED is frankly a hostile takeover by government. Hostile takeovers rarely foster cooperation.
[i]I also think it’s interesting that Jeff sees the push to kill RDA as union based, when building trades are a powerful union in the Democratic party and they want RDA (obviously).[/i]
David – this is another fair point. I should have clarified that I am referring to the public employee unions… those that would not support any diversion of tax revenue to private-sector interests. I do agree that private-sector trade unions would tend to support any program that provided jobs and contracting opportunities.
There seems to be a good GOP divide and conquer opportunity here somewhere. I actually thought we would see more of it this election… private-sector labor, including union labor, rejecting Democrats on the basis of their support for the public-sector unions that are bankrupting cities and states across the country.