The loss of redevelopment agencies in California one year later

May 1, 2013

 

The loss of redevelopment agencies has been devastating for most California cities in the year since the California Supreme Court upheld the dissolution of the 400 or so RDAs throughout the state.

Redevelopment agencies had given local governments the ability to keep portions of property taxes to combat blight. But a year after the RDAs were dissolved, cities and counties are still wondering how they can continue to meet their affordable housing needs and whether they can move forward with projects they promised even though the funds are no longer available or were frozen by the state.

Many cities saw the writing on the wall even before the Supreme Court’s decision in February 2012. They launched a bond rush when they decided it was the safe direction to take in case the state won its fight to dissolve California RDAs. Galt, for example, issued about $9 million in new bonds. It’s estimated that redevelopment agencies sold nearly $700 million worth of bonds between January 1 and March 9 in 2011, compared to $1.2 billion for all of 2010.

However, whether or not bonds are in place, the first response from the state finance department has been “NO, you cannot use the bond proceeds even though the funds cannot be returned.”

We understand the state’s point of view. As governor, Jerry Brown was confronted with a huge problem. The state faced an unbelievable $25 billion budget deficit. Local redevelopment agencies had amassed several billion dollars targeted for redevelopment projects. So Brown effectively seized the money to pay for the state’s struggling schools. It was ironic considering Brown used RDA effectively as mayor of Oakland to transform blighted areas of that city into what many now consider a thriving community.

Years ago when Brown was mayor of Oakland, I attended a University of the Pacific event hosted by a major commercial real estate firm. The event was themed “Outlook for the Future of California,” and Brown was the keynote speaker. As he drew the audience into his stories about redeveloping Oakland, the largest approval and laughter came when he explained, “What I found that you have to do when folks oppose redevelopment and try to block a development project – well, you gotta back up and just run them over.” I believe every city manager in California realizes that is exactly what has happened to RDA.

The positive and negative blogs on this topic are great, as they should be. Many say the elastic definition of blight and the lack of auditing of redevelopment has been a goldmine for consultants and local elected officials who were trying to amass more money fair and square without raising taxes or having voters approve bonds. Others say the process was designed with the concept of stimulating property values to increase and generate new property taxes that otherwise would have remained minimal.

I believe solutions need to be balanced. The meat cleaver approach clearly leaves a bloody mess. I’m the first to defend schools and important social programs, but we have to understand we cannot continue to throw good money after bad. California’s state government knew prior to the great recession that both the school and RDA programs were out of control and needed to be reined in. But the solution should not be to have the pendulum swing 180 degrees and allow overkill. That simply results in a bureaucratic, over-regulated mess that has effectively driven up the cost of building a public school structure to three times the cost of Class-A commercial office buildings.

Regardless of how and from where revenue flows, without prudent self-control and fiscal responsibility we will not recover in a sustainable way into the future.

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