Bill would bring California redevelopment agencies back to life

Housing apartmentSACRAMENTO – California’s redevelopment agencies were a fixture on the local political landscape for six decades, as they guided development policies and grabbed “tax increment financing” that localities used to pay for infrastructure improvements, downtown renovations and affordable-housing projects. They had some notable successes but generated enormous controversy before Gov. Jerry Brown shuttered them in 2011.

They were designed in the 1940s to fight urban blight. But the agencies were criticized for their use of eminent domain on behalf of private companies; for running up debt without a vote; for the subsidies they ladled out to developers; and for financing big-box stores and auto malls rather than helping inner cities spruce up. The governor ultimately killed them because these agencies had become a drain on the state’s general-fund budget, consuming 12 percent of the budget.

It was a shock to see such a powerful sector dry up, as local agencies morphed into “successor agencies” that had nothing left to do other than pay off existing debt. But the redevelopment industry – the developers, lobbyists, city officials and low-income housing advocates – never really went away. Each year since 2011, lawmakers have proposed and sometimes passed measures that incrementally bring back the redevelopment process.

The way that complex process worked in the past involved city councils essentially creating agencies that target “project areas” for subsidy. The agencies would float debt to fund infrastructure and pay subsidies to developers who build things within those areas. Cities often would subsidize retail projects because of the sales taxes they provided. The gain in the property taxes from the new development was designed to pay off the debt.

But those taxes often come out of the hide of other public services, such as schools and public safety. The state budget had to backfill the losses and the result was the budgetary drain that the governor plugged. But with the state’s fiscal situation having improved markedly since 2011, legislators have been less concerned about any financial impact of revived agencies.

In 2015, the governor signed Assembly Bill 2, which created Enhanced Infrastructure Finance Districts (EIFD) that have many similarities to the old redevelopment project areas. Under the old law, redevelopment officials would simply declare an area blighted before gaining new powers of subsidy and debt funding within that area. Under what some called Redevelopment 2.0, those borrowing and spending powers were limited to infrastructure projects.

To prevent some of the old fiscal abuses, the new EIFD process bans the newly created agencies from unilaterally creating project areas that would steal tax revenue from counties, fire authorities or school districts. Instead, they would have to gain the approval of the other districts, thus providing incentive for a less controversial project. These projects also lacked the affordable-housing requirement that was found in the old redevelopment law.

This year, affordable housing is the Legislature’s pet issue in its final week of session. The governor and Democratic leaders have promised a legislative package to deal with the state’s housing crisis. Lawmakers also are considering Assembly Bill 1568 by Assemblyman Richard Bloom, D-Santa Monica, which would add a housing component to those infrastructure districts. Critics say it’s creeping redevelopment, combined with an expanded ability for local governments to raise taxes.

“Local governments have been without a reliable financing mechanism to invest in economically depressed, transit-rich areas since the demise of redevelopment agencies in 2011,” Bloom said in a Senate Rules Committee analysis. This proposal “provides local jurisdictions with the authority to finance infrastructure and affordable housing using new sales and use taxes in addition to property tax increment within qualifying districts.”

Lawmakers are expected to make technical amendments Friday and then send it to the Senate floor for a vote Monday. The bill requires that the Enhanced Infrastructure Financing Districts use the new taxes to fund affordable housing on infill sites. The measure has passed its committees on a largely party-line vote, with most Democrats favoring it and most Republicans opposing. It’s backed by several planning and local-government organizations, and has a high likelihood of making it to the governor’s desk by the Sept. 15 deadline.

If that’s so, then it will be interesting to see whether Gov. Brown, who fought so hard to eliminate redevelopment agencies, is willing to let them return incrementally, albeit with a different name and somewhat different rules.

Steven Greenhut is Western region director for the R Street Institute. Write to him at [email protected]

This article was originally published by CalWatchdog.com

CA Senate Approves Bill to Bring Back Redevelopment

affordable housingCalifornia has moved one step closer to the return of redevelopment and the controversial power to seize private property through eminent domain.

The state Senate approved legislation Wednesday that would give local governments the power to create new entities, known as community revitalization authorities, to stimulate economically-depressed or crime-ridden areas. Assembly Bill 2 would grant these new government agencies broad powers to issue bonds for the purpose of investing tax funds in infrastructure, affordable housing and economic revitalization projects.

“Redevelopment was a multi-purpose tool that focused over $6 billion per year toward repairing and redeveloping urban cores, and building affordable housing, especially in those areas most economically and physically disadvantaged,” argues the bill’s author, Assemblyman Luis Alejo, D-Salinas, according to a legislative analysis. “Since the dissolution of redevelopment agencies, communities across California are seeking an economic development tool to use.”

However, property rights advocates warn that the bill’s language contains no restrictions on eminent domain and could resurrect the abuses made possible by the Supreme Court’s controversial Kelo decision.

“Today, the state Senate passed a land grab bill that will make it easier for government to seize homes, businesses and places of worship by eminent domain!” the California Alliance to Protect Private Property Rights, an opponent of the bill, posted on itsFacebook page.

4 GOP Senators Join Democrats to Pass AB2

Republican Senator Anthony Cannella of Ceres, who introduced the bill on the Senate floor, argued that AB2 will provide economic stimulus to disadvantaged communities.

“This will grow jobs, reduce crime, repair deteriorating and inadequate infrastructure, clean up brownfields and promote affordable housing,” he said.

With Cannella’s support, the bill passed on a 29-10 vote — with the support of all but one Democrat and four Republicans, including Sen. Tom Berryhill of Twain Harte, Sen. Bob Huff of Diamond Bar and Sen. Sharon Runner of Antelope Valley.

Under the bill, a Community Revitalization Investment Authority could be created by a city, county or special district if certain conditions are met. The first requirement is that the area have an annual median household income that is less than 80 percent of the statewide median. Additionally, three of the following four conditions must be met:

  • Unemployment that is at least 3 percent higher than the statewide median unemployment rate;
  • A crime rate that is 5 percent higher than the statewide median crime rate;
  • Deteriorated or inadequate infrastructure such as streets, sidewalks, water supply, sewer treatment or processing, and parks;
  • Deteriorated commercial or residential structures.

Private Property Rights Threatened

Only one senator, Republican Jim Nielsen, R-Gerber, spoke in opposition to the bill.

“This is the resurrection of the redevelopment agencies – the failed redevelopment agencies,” he said. “They absolutely exploited and will continue to exploit – under the provisions of this bill – the seizure of private property under eminent domain.”

Eminent domain is mentioned in the bill 21 times. The Legislative Counsel’s bill digest explicitly states, “The bill would authorize an authority to acquire interests in real property and exercise the power of eminent domain.”

Although the bill subjects private property to eminent domain, government agencies would receive a special carve-out from the practice.

“Property already devoted to a public use may be acquired by the agency through eminent domain, but property of a public body shall not be acquired without its consent,” the bill states.

Sen. Bob Huff: “We led the charge to save redevelopment”

In 2005, the U.S. Supreme Court ruled in Kelo v. New London that government agencies have the power to seize property for economic development. The decision was widely criticized across the political spectrum and inspired states to pass tougher laws limiting governments’ eminent domain powers. Here in California, the momentum for property rights reached its zenith in 2011, when Gov. Jerry Brown pushed through a plan to end redevelopment as part of his plan to balance the state budget.

Huff, who until recently served as Senate GOP leader, downplayed the “scare stories” of eminent domain abuse by private property advocates and reminded his colleagues of his past work with Sen. Rod Wright to save redevelopment agencies.

“We led the charge to protect redevelopment because it was one of the few economic developments that cities had,” Huff said on the Senate floor in support of AB2. “It was also one of the few ways to generate revenue for our affordable housing.”

With the Senate’s approval, the bill returns to the state Assembly for concurrence, where it is expected to pass with widespread support.

In May, AB2 passed by a 63-13 vote – without a single member – Republican or Democrat – voicing opposition. A dozen Assembly Republican lawmakers, including Assembly GOP leader Kristin Olsen, joined the Democratic majority in backing the bill.

Originally published by CalWatchdog.com

California Supreme Court takes on legal battle over redevelopment

From Oakland Tribune:

With once powerful redevelopment agencies such as San Jose’s on the brink of extinction, the California Supreme Court this week will consider whether state lawmakers staged an unconstitutional raid on redevelopment coffers to help close a multibillion-dollar budget deficit.

The state’s high court will hear arguments Thursday in a lawsuit brought by redevelopment backers arguing the move to seize redevelopment money statewide violates a voter-approved ballot measure last year, which barred the state from taking away local government funding to pay its bills.

The prospects for California’s precarious budget and the future of the state’s 398 active redevelopment agencies hang in the balance.

(Read Full Article)