What Should State Do About Redevelopment?

Another key provision of the his plan was the elimination of redevelopment and the transfer of those funds to state purposes.  Last week, the Legislative Counsel declared the Governor’s redevelopment plan unconstitutional.

In response to a memo from Republican Assemblywoman Diane Harkey, the Legislative Council questioned whether the Governor could legally take $1.7 billion from local governments in the form of redevelopment money to help balance the remaining state deficit.

As the Bee reported, “Legislative Counsel said the state cannot force local governments to send that money to the state. Instead, it said that money must remain locally. The bill does establish Redevelopment Property Tax Trust Funds in each county that serve as a local collector of the redevelopment tax revenues before sending them to the state. But Legislative Counsel said that mechanism is “not sufficient” to comply with the constitution.”

The League of California Cities Executive Director Chris McKenzie commented on the opinion, “We appreciate Assembly Member Harkey’s opinion request and we are pleased the Legislative Counsel agreed with the League and CRA that AB 101 violates Article XIII, Section 1. We believe it is even clearer that the bill also violates Prop. 22 and Article 16, Section 16 of the state constitution. We will be interested to read the second opinion letter that is expected to address these issues.”

Indeed, Proposition 22 looms large in the opinion expressed by the legislative counsel.

According the legislative counsel, Proposition 22, passed by the voters last fall, “expressly prohibits the Legislature from changing the pro rata shares of ad valorem property tax revenues allocated among local agencies in a county to reimburse a local agency for any new government programs, or for higher levels of service under existing programs that the state imposes upon that local agency.”

The legislative counsel adds, “As to the use of $1.7 billion of property taxes for the 2011-12 fiscal year to reimburse state costs as proposed by A.B. 101, we think the transfer of money in a Redevelopment Property Tax Trust Fund to a Public Health and Safety Fund cannot reasonably be said to be an apportionment to a district, as required by Section 1 of Article XIII A, if the funds are required to be used exclusively to reimburse the state for the costs of providing health care and trial court services, as the Director of Finance directs.”

He adds, “Because the use of the moneys in the Public Health and Safety Fund would be restricted to reimbursing the state for health care and trial court services costs, the moneys would not be available for use by the county to fund its own operations or programs.”

According to the Sacramento Bee, Department of Finance spokesman H.D. Palmer disputed that interpretation, saying the counsel’s office was “finding intent that cannot be found in the constitution.”

“The administration’s opinion remains unchanged,” Mr. Palmer said. “We think this proposal is crafted in such a way we think it will withstand any legal challenge.”

The legislature, aided largely by Republicans, voted in March against ending redevelopment.

However, even proponents of maintaining the agency have pushed for changes.  Argued Sacramento Bee editor Pia Lopez, “Most Californians are no strangers to vacant or decrepit buildings and declining property values – and the crime rates and unemployment that come with them.”

“The issue is how to stop a cycle of decay,” she asks, “Are we better off attempting to rejuvenate these struggling areas – or just throwing up our hands and abandoning them?”

While the California Community Redevelopment Act of 1945 gave cities and counties the power to set up redevelopment agencies to combat the conditions that hindered private development in distressed communities, much of the efforts, including the creation of tax increment financing and the implementation of redevelopment, have been under fire for some time.

Part of the problem again goes back to Proposition 13, as cities and counties “started shifting some redevelopment projects toward sales-tax generation.”

Indeed, Davis’ idea for a Hotel Conference center, focused on the non-blight site where Caffe Italia and the University Inn rest, reflects this impetus.

Along the same lines is Davis’ investment in the auto dealership.

Ms. Lopez argues, “Favoring big-box chain retail, shopping malls and auto dealerships, for example, is far afield from the original redevelopment mission – and out of line.”

Instead she argues, “It is time to reinvent redevelopment for a new era. I’d argue for a return to basics: Rejuvenating distressed communities, largely through provision of infrastructure and preparing sites for development – including, yes, land acquisition, demolition, sewer and water lines, storm drainage, street construction, environmental cleanup. Public infrastructure also includes the traditional public purposes that Ben mentions – such as schools and libraries.”

She continues, “Redevelopment agencies get about $5.5 billion of the $45 billion Californians pay in property taxes each year. That’s 12 percent of total statewide property taxes. Is that too much? Perhaps. Gov. Jerry Brown’s proposal should jump-start a conversation about what we’re getting for the $5.5 billion – and making changes.”

She concludes, “A leaner, more targeted redevelopment strategy can help to expand our tax base and improve quality of life, without raising property tax rates.”

I am not dead set on ending redevelopment either.  I see no good reason to prioritize the state over local government.  I do believe that local government has been fiscally reckless, but it is hard to argue that the state has been a bastion for fiscal sanity either.

At the core, I favor ways to get more local money to schools.  If there is a direct route, then I am for it.  If it takes sending the money to the state to filter it back to schools, I am for that.  Show me the plan.

—David M. Greenwald reporting