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Solimar Research

Post-Redevelopment Legislation Seeks Direction

Martha Bridegam on
Apr 29, 2014

The California Legislature's post-Redevelopment landscape is in a state of crumble and tentative growth. Like sprouts on a redwood stump, bills have crowded the space left by the 2011 abolition of local redevelopment districts and their tax-increment financing structures. The sprouts have begun variously to strengthen, clump together, or falter, but with little coherence: some of the most vigorous stems are tending in different, possibly incompatible directions. It's uncertain which if any will become new main trunks.

The whole effort proceeds in a state of nervous awareness that Governor Brown has used veto power to shape post-redevelopment legislation to his liking -- mostly, to date, in the direction of Infrastructure Finance Districts (IFDs). Picture him surveying the new growth day by day, pruning shears in hand.

In the current political moment, before the best-nourished saplings shoulder out the rest or the pruning shears descend, what's happening on the broad stump of Redevelopment is a quiet, nerdy debate about the proper functions of government and the reasons why redevelopment districts were created in the first place. It's an opportunity to reconsider what approaches to municipal structures and services are equitable and useful -- one that seems surprisingly little discussed among political activists or the larger public.

The following seems to be the picture, based on reviews of the public record and conversations with Capitol insiders, most of whom asked not to be identified.

Two dominant tendencies appear among the bills: one is to follow signals the Governor gave in January and February that he would look favorably on efforts to expand use of IFDs. The other main approach, which has many supporters other than the Governor, would re-create Redevelopment-like agencies under other names in diminished, restricted forms. The two approaches are in some tension but may not be mutually exclusive.

Among the minor tendencies, SB 1260 uniquely seeks to hedge bets by replacing Redevelopment's old 20% affordable housing set-aside, plus a bit more. It would impose a 25% affordable housing set-aside requirement on either Redevelopment-type or IFD tax-increment districts. Then there are a handful of bills proposing special laws for local circumstances, including in Oakland, Milpitas and San Francisco. And there are breakaway efforts to meet traditional Redevelopment goals by other tax or debt mechanisms entirely.

Two anxious bass notes could be heard under the experts' rapid-fire technical summaries. One was fear that none of the proposed approaches would really gather sufficient tax increment funds fast enough to fund needed (or wanted) projects. Another was fear that, since IFDs do not require any showing of disadvantage in a project area, the IFD approach might not include any requirement for poverty relief to replace Redevelopment's long-misused "blight" requirement.

Infrastructure Structures

As CP&DR has described previously (see http://www.cp-dr.com/articles/node-3429, http://www.cp-dr.com/articles/node-3433, and Bill Fulton's February Insight column in CP&DR's PDF issue), Governor Brown indicated in January that he was willing to see the previously little-used IFD device expanded as tax increment financing -- but subject to limits: an exclusion from affecting school budgets, a "finding of completion" and wrap-up of all repayment disputes involving the sponsoring local government's former redevelopment agency, and a requirement that each IFD be approved by a 55% vote in the proposed district.

On February 18, to the surprise and relief of some, Brown signed Speaker-elect Toni Atkins' AB 471, which allowed IFDs to overlap with former redevelopment districts. However, he did not budge on the requirement to first pay off all ex-Redevelopment obligations to the state's satisfaction. The many local governments that are in litigation with the Department of Finance over ex-Redevelopment money may thus have to compromise their existing claims in order to use the new funding sources.

The Governor's abbreviated January thoughts on the subject appear at pp. 133-135 in his budget summary at http://bit.ly/1rzfckp (3.4MB PDF). His trailer bill expanding those thoughts, dated February 21, is on the Department of Finance site via http://bit.ly/1hCRcFN.

Through a reference to existing code, the trailer bill says the requirement to approve an IFD would be a 55% vote that would vary according to the district's nature: if more than 12 registered voters lived there, they would decide on the ordinary basis of one person, one vote. If there were fewer resident registered voters, then the vote would be taken among the landowners, on a basis of one vote per acre or fraction thereof.

Criticisms of these restrictions, and more fundamentally of the IFD model as envisioned to date, appeared in March from the Legislative Analyst's office at http://bit.ly/1mSq4YJ and in notes by the staff of the state Senate's fourth budget subcommittee at http://bit.ly/1itqyFp.

SB 33 by Sen. Lois Wolk, D-Davis, would revoke the requirement of a vote for an IFD. However, Wolk told CP&DR in January (at http://www.cp-dr.com/articles/node-3433) that last year she held back SB 33 from the final Assembly vote that would have sent it to the Governor because his office "gave clear signals... that he wasn't read to sign it."

As of late April there was no indication of any signal received to the contrary. But SB 33 was being mentioned as part of the picture. Dan Carigg, legislative director for the League of California Cities, said his organization supported it. He was not alone in suggesting the vote requirement made IFDs difficult to use in populated areas.

On the other hand, the appearance of the trailer bill and the signing of AB 471 have been taken as indicators that Brown is willing to have more of a "conversation" about IFDs this spring than previously.

Bills to expand IFDs in specific ways include AB 229 (Perez), for military base reuse and for other environmental and public-works projects in addition to standard IFD purposes; AB 243 (Dickinson), which would carry Brown's 55% vote requirement, somewhat expand standard IFD purposes, and also grant a 25% housing set-aside; and SB 628 (Beall), which would expand IFDs for transit and transit-oriented development, with a 25% housing set-aside. Some of these are formally inactive but all have been mentioned as part of the continuing discussion.

Redevelopment Redux

The measures that could re-create redevelopment districts are at some risk of a veto, but they were discussed as of late April as live bills that could possibly be brought forward for passage. The main such bills include SB 1, by Senate President Pro Tem Darrell Steinberg, D-Sacramento, a bill emphasizing transit-oriented "smart growth" that has been on inactive status since September, and AB 2280, introduced this February by Assemblymember Luis Alejo, D-Salinas.

Likely anticipating the Governor's objections, both SB1 and AB 2280, like the IFD bills, would require a finding of completion from the Department of Finance before the contemplated type of new district could be formed.

SB 1 as of last September's legislative analysis had support from several local governments and associations of local governments, labor groups, the Natural Resources Defense Council, and the Western Center on Law and Poverty. Its primary emphasis is less on relief of traditional "blight" than on transportation, environmental and health problems to be remedied by meeting transit and sustainability goals. There is, however, a 25% affordable housing requirement.

Carigg emphasized the League's support for AB 2280. (The League was opposed to Redevelopment's dissolution in the first place.) He did not consider it contradictory to support a redevelopment-type measure alongside IFD-related legislation, but called on the Governor to allow "a variety of tools in the toolbox". It might be possible, he suggested, for one city to create "an Alejo district" for a poorer area of town, "an SB1" for a transit-oriented project on a rail line, and "on the edge of town there's some new project or something" suitable for an IFD.

As of an early-April legislative analysis, AB 2280 had support from several public employees' associations, the California Building Industries Association, the Western Center, California Rural Legal Assistance and the California Coalition for Rural Housing, in addition to the League. As of that date -- a little over two months past introduction -- it was a smaller list of endorsers than SB 1.

Carigg highlighted provisions in AB 2280 that were meant as safeguards against aspects of redevelopment agencies that became notorious in the past. He said the League had worked extensively with Alejo on "accountability" protections because "it doesn't do anybody any good" to restore the "tool" of redevelopment-type financing only to have "some issue in the newspaper or something" that would lead to legislative re-restriction.

The current AB 2280, which includes Speaker Toni Atkins among its coauthors, would create "Community Revitalization and Investment Authorities" on a restricted Redevelopment-type template. The simplest restriction would exclude school funding from the tax increment arrangements automatically.

In response to redevelopment districts' histories of finding "blight" in unlikely places, AB 2280 would define "blight" partly by local statistics tending to indicate disadvantage, though partly also by the presence of two conditions that seem open to definitional hair-splitting: "deteriorated or inadequate infrastructure" or "deteriorated commercial or residential structures".

In partial response to old and deep urban grievances over "urban renewal" removals of communities of color, AB 2280 would provide for two of five members of an authority's governing board to be local residents. Additionally it would grant local residents and landowners an opportunity every ten years to revoke the authority itself, if they could navigate a difficult double procedure resembling labor union certification: in order to qualify for an election to revoke the authority, opponents would first have to organize a "majority protest", which would be achieved "if protests have been filed representing over 50 percent of the combined number of property owners and residents, at least 18 years of age or older, in the area."

A proposal not exactly in this category, and not itself having much of a chance, but drawing some related heat from property-rights activists, is the Rutan & Tucker "Jobs and Education Development Initiative". This is a statewide initiative measure that, if qualified for the ballot and approved, would restore redevelopment agencies wholesale, but with a lower housing set-aside. The Legislative Analyst's Office analysis is at http://www.lao.ca.gov/ballot/2013/130773.aspx. Opponents and skeptics have derided it as the "Return of the JEDI". (See e.g. http://ij.org/california-redevelopment)

Hedging Housing

SB 1260, by Sen. Mark DeSaulnier, D-Concord, would apply a 25% affordable housing set-aside to either a Redevelopment-type or an IFD-type district, or to both side by side if need be. Like some of the piecemeal IFD bills mentioned above, it addresses the fear for affordable housing that follows from the lack of poverty-relief provisions in IFD law.

A "Fact Sheet" from the Senator's office said it "harmonizes the housing provisions of redevelopment law (as proposed to be amended by SB 1 (Steinberg)) with those of Infrastructure Financing District law." Further, it sets requirements within the affordable housing requirement for targeting to moderate-, low-, and very-low-income residents.

As of an April 2 legislative analysis the measure had formal support from California Rural Legal Assistance and the Western Center. The Santa Monica Mirror reported the Santa Monica City Council endorsed SB 1260 in March. http://bit.ly/1h2QZfr

Carigg of the League of California Cities criticized the IFD end of the bill. He said an affordable housing set-aside could make a pro-IFD ballot measure more difficult to pass where affordable housing is unpopular, and if an IFD is intended for a small discrete project such a sewer line update, the housing set-aside could create enough extra complication to stop the mechanism from being used at all.

City-Specific Bills

A few city-specific bills are stating geography-based claims amid the political morass.

San Francisco's city government is the driving force behind Sen. Mark Leno's SB 1404, which, per a "fact sheet" from Leno's office, would "provide a remedy for the destruction of low- and moderate-income housing units in San Francisco during urban renewal (1955-1975) that were never replaced."

The bill is based on an argument that, owing in part to a bill by then-State Sen. John Burton in 2000, San Francisco's redevelopment agency effectively owes the city 5,947 units of unreplaced housing for Urban Renewal's wholesale destruction of densely populated housing, which would have been largely in the Western Addition and in the Yerba Buena region South of Market. The bill would allow tax-increment financing for such housing to continue to flow from six defined redevelopment project areas. Supporters listed in addition to city government figures are local and regional housing organizations. The Senate Local Government Committee's published legislative analysis is mildly skeptical.

Another bill based on a claim of special crisis is AB 2549, brought by Assemblymember Mark Ridley-Thomas on behalf of Milpitas, which is embroiled in especially high-stakes litigation with Santa Clara County and the state over large, allegedly improper transfers of assets from the redevelopment agency to the city government that created it. An early version of the bill puts the loss at $39 million in local tax revenues with more money sought in the lawsuit. As of April 24 the measure was amended to refer generically to "recent losses of local funding" and "a lack of economic development tools." The meat of the bill hasn't changed, such as it is: it calls for creation of a commission of local dignitaries and area representatives to figure out what can be done about it, and especially how to continue encouraging "economic activity" in "the McCarthy Ranch area of the city near the Newby Island landfill".

Assemblymember Rob Bonta, D-Oakland, has introduced a little-known economic development measure, AB 2292, that does not claim any crisis, but would provide for additional projects at three hotly debated Oakland locations: the former Oakland Army Base, Howard Terminal and Coliseum City. The first of these locations is the site of the much-debated Oakland Global development. The latter two locations are candidates for a proposed pro sports stadium complex. (See http://www.cp-dr.com/articles/node-3476; http://oaklandglobal.com/index.php/project/history-of-site; http://thealamedan.org/news/development-report-meanwhile-oakland .) Assemblymember Bonta's office referred inquiries on the bill to a staffer who had not responded as of this writing.

New Territory

Some legislative plans for purposes that might once have used redevelopment money are moving into other kinds of political territory entirely.

SB 391, by DeSaulnier, would fund housing with a statewide $75 recording fee for real estate documents -- see http://lat.ms/1eYa86W.

The more technically ambitious AB 2729, by Assemblymember Jose Medina, D-Riverside, is titled "Infrastructure Financing" but refers to an entirely separate funding scheme. The bill, which is still in a discussion phase, would expand use of the California Infrastructure and Economic Development Bank, or "I-Bank", to finance more infrastructure surrounding shipping in all its forms, including airports.

What Next?

It's unclear when a break may appear in the current state of uncertainty about which post-Redevelopment bills are possible. The May budget revisions, with their news about the April tax season, could create an occasion for the Governor to announce a changed position, but nothing at that stage is certain.

Which leaves the Legislature tending their respective bits of unevenly verdant regrowth, reaching neighborly accommodations as to gardening in some matters, but mainly waiting for the man with the shears to go to work.