What Should State Do About Redevelopment?

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redevelopment-2Governor Brown’s Plan is in Trouble, Based on Legislative Counsel’s Opinion and Legislative Action –

While Governor Brown has had some success in his plan to close the budget deficit, his plan has hit a number of critical stumbling blocks.  It is well known that the Governor is now unlikely to get a chance for voter approval of a tax extension.

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.

Locally, the City of Davis has moved quickly to tie up redevelopment money in new projects, moving forward with designs for a new Hotel Conference center that would net the city a good deal of new tax revenue and hopefully counter the university’s foray into a similar investment.

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

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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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4 thoughts on “What Should State Do About Redevelopment?”

  1. Dr. Wu

    [quote]While Governor Brown has had some success in his plan to close the budget deficit, his plan has hit a number of critical stumbling blocks. [/quote]

    DG You are being generous. I support Jerry’s plan but it looks DOA to me.

    [quote]“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.”[/quote]

    RDA’s are mostly run by rah rah types who love any type of development–big box etc and love spending taxpayers money even if it is wasted. I’ve seen many areas developed only to languish (e.g., downtown Tracy) due to poor planning and excess retail. I’ve seen RDA money used to support big box stores (e.g., Home Depot in Clearlake CA). In our own fair City the auto give away was a complete waste of taxpayers money in my opinion. The conference center may be better but has anyone noticed UC Davis also has plans to expand their center?

  2. E Roberts Musser

    [quote]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.[/quote]

    You would have thought the Governor would have done a more thorough job of making sure his proposal to end RDA’s would pass constitutional muster…

    [quote]Locally, the City of Davis has moved quickly to tie up redevelopment money in new projects, moving forward with designs for a new Hotel Conference center that would net the city a good deal of new tax revenue and hopefully counter the university’s foray into a similar investment.[/quote]

    I wondered about the University’s plan to build a hotel/conference center; and how that would work with the city’s plan to build a competing hotel/conference center. From this article, I presume the university has abandoned its idea of building a hotel/conference center on campus? UCD is okay with the city providing the hotel/conference center? I’m a bit surprised, since it was my understanding that UCD had private donors all lined up to build a Hilton hotel/conference center wasn’t it?

    [quote]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.[/quote]

    Any time the state has a hand in “filtering” money back to schools from the state, that means much of the money will never reach the schools, but will be swallowed up by state bureaucracy first and foremost.

  3. Dr. Wu

    THe University has prepared a “Tiered Initial Study” for a conference center expansion available at:

    http://sustainability.ucdavis.edu/local_resources/docs/onlinedocs/hotel_expansion/IS Hyatt Place Hotel Expansion and Road Extension.pdf

    They prepared an EIR for the first study which stated that adding hotel space at the University would actually benefit downtown Davis hotels since it would lead to increased demand. They provided no evidence for such an assertion, which was quite convenient since anyone who has taken Econ 101 (apparently this does not include the consultants hired by UC Davis) knows that increasing the supply of hotel rooms in the area would [i]hurt[/i] local Davis hotels.

    UC Davis has a right to develop this property but they do not have the right to be intellectually dishonest and pretend it will not have consequences to the City. Transient Occupancy Taxes are an important source of revenue for many cities.

  4. E Roberts Musser

    To Dr. Wu: So is the University still planning to build its hotel/conference center? Or is this project on hold? (Thanks for correcting me about it being the Hyatt rather than the Hilton.)

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