Get CP&DR
  • Become a subscriber
    Get access to all CP&DR premium articles including the past article archives.
Connect with CP&DR

facebook twitter

Follow us on Facebook and Twitter

Articles by Category
Solimar Research

Loss of Redevelopments Funds Hinders SB 375

Redevelopment agencies in California are often asked to carry a heavy load: fighting blight, promoting economic development, transforming brownfields, and creating communities. Now add to that list the modest task of combating global climate change � at the very moment when they have fewer funds than they have had in decades.

Senate Bill 375 seeks to reduce California's greenhouse gas emissions through the coordination of land use and transportation planning. But the state's most recent $2 billion raid on redevelopment funds is merely the latest shift of funds away from redevelopment agencies, many of which were already coping with lean budgets.

"Planning and redoing land uses is certainly an important piece of reaching 375," said Greg Devereaux, county administrative officer of San Bernardino. "But in many markets the type of development�smart growth development, denser development�needs assistance to make it work in the market." Devereaux was formerly Ontario's city manager and a member of the SB 375 Regional Targets Advisory Committee.           

Much of that assistance would, under normal economic circumstances, likely come in the form of redevelopment monies � agencies that are almost always focused on exactly the kind of high-density, mixed-use, infill development required to meet SB 375's goals.

"I think that redevelopment is probably going to be the most important tool to implementing SB 375," said Andy Agle, Santa Monica Director of Housing and Economic Development. "Their core mission is about compact infill development in already developed areas.  The agencies have already done so much to push that type of smart development."

"Southern California�has some of the most severe pollution problems and the highest traffic congestion problems in the county," said Don Spivack, Deputy Chief of Operations and Policy at the Los Angeles Community Redevelopment Agency, which has project areas surrounding existing and planned rail stations throughout the city. "Hand-in-hand with the expansion of the metro system is making communities walkable�that helps to reduce greenhouse gases."

However, this year, in the wake of a $2.05 billion transfer of funds from the state's redevelopment agencies to the Supplemental Educational Augmentation Fund (SERAF), monies to support that kind of development have all but evaporated.

"Redevelopment agencies will never have any ability to do long-term planning, make any investments where they can assure that the money is going to be there," said John Shirey, executive director of the California Redevelopment Association.

The current funding take covers only this year and next year, and Assembly Speaker John Perez (D-Los Angeles) recently announced that he does not intend to seek further transfers.

"I have no interest in going after redevelopment money as a way to balance our budget this year," Perez announced June 2.

That news, however, is not as good as it might seem for redevelopment agencies' long-term prospects. Allowing redevelopment agencies to keep their tax increment in 2012 still does not solve a grave long-term problem for those agencies. Indeed, the very fact that the speaker refers to the choice of whether or not to take redevelopment funds points to an uncertainty that can devastate agencies' planning strategies and their ability to float bonds.

"Who's going to bond against an uncertain source?" said Devereaux.

Adds Lisa Fall, administrative officer of the Long Beach Redevelopment Agency: "When we were going through the rating process, SERAF was clearly on the minds of the rating agencies."

Redevelopment Needed to Implement SB 375

This crisis comes at the very moment when SB 375 is scheduled to go into effect, thus setting up another conflict between the state's efforts to balance its budget � including similar transfers of transit funding � and the implementation of SB 375. Eighteen of the state's metropolitan planning organizations have been working on their Sustainable Communities Strategies, and draft targets of regional GHG emissions are due from the Air Resources Board at the end of this month. Final targets are to be released in September.

Though many planners and redevelopment officials express enthusiasm for SB 375's goals and the types of development that the law promotes, they have widely lamented that it comes with virtually no funding assistance. SB 375 will offer a modest array of incentives but, officials say, they pale in comparison with the costs of assembling land, providing affordable housing, and providing infrastructure for infill developments.

"(Compared to) the value of the incentives in 375�the cost of steel and parking decks in multifamily development far exceeds any regulatory relief that's provided," said Devereaux. So,without a steady stream of redevelopment funding, those targets may become ever more difficult to reach.

"These sorts of TOD, especially ones that are in redevelopment areas, are extremely difficult (to develop) in the first place," added Pahule. "Some projects that we consider mission-critical are not able to move forward."

Redevelopment assistance is crucial to SB 375 in large part because redevelopment agencies are already doing the sort of work that SB 375 calls for. They operate in established urban neighborhoods that, though economically depressed, can accommodate higher density development.

Redevelopment funds and planning have been at least partially responsible for the residential boom in many of California's downtowns. Gary Gallegos, executive director of the San Diego Association of Governments and RTAC member, said that the creation of San Diego's downtown development area was a "key to the success" of the addition of over 10,000 housing units there.

"Most redevelopment areas are in the center cities," said Gallegos. "In most of these cases there are very few instruments that one can use to sponsor the proper kind of change, whether from a planning point of view or a design/construction point of view."

Moreover, many of the state's redevelopment project areas encompass mass-transit systems, which continue to expand in part because they have funding for capital projects that was set aside before the economic crisis or that was approved in part as an economic stimulus. In the absence of redevelopment funds, many existing and planned rail lines will deliver passengers to parking lots and busy streets rather than gleaming new transit oriented districts.

TOD Projects Now On Hold

This dismal possibility is most palpable in the northern part of Los Angeles County's San Gabriel Valley, which is scheduled to welcome the first phase of the Foothill Extension of the Gold Line light rail line by 2015 and the second phase by 2017. Cities including Azusa, Montclair, Monrovia, and the eight others along the 24-mile extension have each laid out plans to take advantage of the line. Now many of those plans are in jeopardy.

At the very least, officials say that almost every project in the pipeline will be delayed�and so will the environmental benefits.

Azusa's 1,250-unit Rosedale development has been put on indefinite hold. The Monrovia Redevelopment Agency salvaged its 55-acre Station Square mixed-use project, but only by refusing to pay its SERAF payment. In doing so, it faces the "death penalty" of not being allowed to initiate any new projects until the payment is made.

"All of our redevelopment funds are tied up in buying properties and assembling land for�Station Square," said Monrovia City Manager Scott Ochoa. If fully built out, Station Square could have as many as 3,500 units within walking distance of the Gold Line.

Meanwhile, in Sacramento, Chris Pahule, assistant director for community development at the Sacramento Housing and Redevelopment Agency, estimates that fully 70 percent of the stations along the region's two light rail lines are encompassed by redevelopment project areas and may not be developed without redevelopment funding assistance.

In Santa Monica, redevelopment plans call for infrastructure improvements to enhance stations along the planned Expo Line, which will connect the coastal city with downtown Los Angeles. Agle said that many projects to add bike and pedestrian connections to Expo Line stations are already moving forward but that bigger projects may be stalled. The city's redevelopment agency owns the land where the line will terminate and intends to build a major multimodal facility there�if it has the money.

Ballot Measure Would Prohibit Future Transfers

The California Redevelopment Association is currently sponsoring a ballot measure that, if passed in November, would prevent further transfers. Supporters of the measure say that it is crucial for regaining long-term stability and for ensuring that SB 375 can hit its long-term targets.

Some tense rhetoric underscores the conflict between the state and local agencies.

"If we lose the war, really all bets are off," said Agle. "Goodbye to all of these really important projects and, I think, goodbye to having an important tool to implement SB 375."

Many transit oriented developments would have to wait indefinitely and thus risking the possibility that SB 375's benchmark years � 2020 and 2035 � will come and go while sustainable plans get supplanted by developments that are less than environmentally friendly. Unlike transit agencies, which can add or reduce service relatively easily, redevelopment deals in more permanent projects. 

"If that land gets built on with the wrong kind of development, it's not a matter of just waiting for the resources to be available," said Devereaux. "That land is out of play for 40-50 years."

Even though redevelopment agencies are not explicitly charged with mitigating GHGs, redevelopment officials say that they are acutely aware of the role that they can play in implementing SB 375, if and when they secure their coffers.

"As we update our policy documents, we've been paying close attention to make sure that we've been consistent with the goals of the legislation," said Sacramento's Pahule.

From its inception, SB 375 was not designed to provide funding for implementation or to help cities comply with the plans set forth by the MPOs. The final report of the Regional Targets Advisory Committee notes that SB 375's success depends on a complex web of market- and government-driven forces. It also acknowledges the challenges of promoting smart growth without dedicated state funding.

"The current state budget issues have diminished the ability of cities to address these deficiencies by reducing redevelopment funding," states the report, which was published even before the funding take was finalized. "The most recent example of conflicting state policies is the disconnect between an emissions reduction strategy that encourages infill in built out areas and the current state budget that redirects the best source of funding for such development: redevelopment dollars."

As redevelopment agencies across the state ponder their fate and scramble to keep projects afloat, the SERAF's harm to not only redevelopment but also the state's much-touted environmental efforts has become an ironic symbol of the tension between the state and local governments.

"Certainly the RTAC made that connection," said Devereaux. "The report was available prior to the latest raid and the latest budget. If they weren't aware, shame on them."

Contacts:

Andy Agle, Director of Housing and Economic Development, City of Santa Monica, 310-458-2251

Greg Devereaux, County Administrative Officer, County of San Bernardino, (909) 387-5418

Gary Gallegos, Executive Director, San Diego Association of Governments, (619) 699-1900

Lisa Fall, Administrative Officer, Long Beach Redevelopment Agency, (562) 570-6615

Scott Ochoa, City Manager, City of Monrovia, (626) 932-5550

Chris Pahule, Assistant Director of Community Development, Sacramento Housing and Redevelopment Agency, (916) 444-9210

John Shirey, Executive Director, California Redevelopment Association, (916) 448-8760