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Solimar Research

Brown Dips Toe Into Redevelopment Revival -- But With Conditions.

CP&DR Staff on
Jan 9, 2014

Sending the first signal that he is open to re-establishing some form of redevelopment, Gov. Jerry Brown has proposed changes to the Infrastructure Financing District law that would expand the allowable uses for IFDs and lower the voter threshold required to create them. But he would permit the expanded use of IFDs only for cities and counties that have settled out all redevelopment cash payments to other agencies and settled all redevelopment lawsuits against the state moves that may accelerate the redevelopment wind-down process.

The Infrastructure Financing District idea passed the Legislature in the early 1990s as an alternative to redevelopment, permitting the use of tax-increment financing for infrastructure without requiring a finding of blight. But the idea has rarely been used, primarily because they require two-thirds voter approval to be created.

In the budget narrative accompanying his 2015 budget, Brown said he would support expanded use of IFDs as an economic development tool, but only if a city or county has completed its redevelopment wind-down process and resolved all lawsuits with the state over redevelopment.

It was Brown's first cautious step toward reviving the use of tax-increment financing, which was eliminated in California two years ago at Brown's initiative. Since redevelopment was abolished on February 1, 2012, Brown has steadfastly refused to consider tax-increment financing in any form. Late in 2012 he vetoed a bill carried by Sen. Darrell Steinberg that would have permitted tax-increment financing in limited circumstances when consisted with an adopted sustainable communities plan. Steinberg stopped short of putting the same bill on Brown's desk again last fall, instead choosing to hold SB 1 over until this year.

Brown's proposal would expand the use of IFDs beyond infrastructure to include military base reuse, urban infill, transit priority projects, affordable housing, and "associated necessary consumer services." "The goal is to maintain the IFD focus on projects which have tangible quality-of-life benefits for the residents of the IFD project area," said Brown's budget message. Presumably, "transit priority projects" means projects located inside transit priority areas, which local governments can create under SB 743, the California Environmental Quality Act streamlining bill passed last fall.

Brown suggested IFDs could be used in former redevelopment project areas, and also proposed that local government using IFDs for these purposes should be able to adopt IFDs with 55% voter approval. He called for retaining the current ban on using tax-increment from school districts, which means the state general fund would be held financially harmless.

However, he also proposed placing strict limitations on the expanded use of IFDs, linked tightly to the redevelopment wind-down activities. More specifically, cities and counties seeking expanded use of IFDs would have to:

1. Have a "Finding of Completion" from the state, meaning the city or county has paid all unencumbered RDA cash assets to other taxing entities

2. Comply with with all State Controller's Office RDA audit findings.

3. Have no outstanding lawsuits against the state regarding the redevelopment wind-down.

Local governments have literally hundreds of lawsuits pending against the Department of Finance over the redevelopment wind-down. By requiring that the cash be paid and lawsuits settled, Brown may be attempting to accelerate the redevelopment wind-down.