LAO Issues Report on Redevelopment Wind-Down
Amid confusion and frustration on the part of former redevelopment agencies, the Legislative Analyst's Office released a report today analyzing the wind-down as dictated by Assembly Bill X1 26 and making recommendations for some legislative patches to that law.
The report reviews the history of RDAs, the events that led to their dissolution, and the process communities are using to resolve their financial obligations. The report recommends the Legislature amend the redevelopment dissolution legislation to address timing issues, clarify the treatment of pass–through payments, and address key concerns of redevelopment bond investors.
Overall, the report is lukewarm on the former redevelopment system as a statewide economic development tool. It notes that the TIF financing system--which represented 12% of the state's total intake of property taxes--cost the state as much as do the University of California or Cal State systems "but did not appear to yield commensurate statewide benefits."
But with the die already cast in favor of disbanding redevelopment, the report offers analysis of how much money the state actually stands to recoup and discusses the wind-down process. It notes that the estimated $1.8 billion that is estimated to be distributed to local governments in 2011-12 and 2012-13 could be off by "hundreds of millions of dollars" and it reiterates the fact that the dissolution of redevelopment does not increase total revenues -- it just redistributes them.
"As we look over the estimates, we point out that there’s a large degree of uncertainty," said Marianne O'Malley, the report's lead author. "Not in the long term, but in the short term, how much and when is not clear."
Other major findings and near-term recommendations include the following:
- Although ending redevelopment was not the Legislature’s goal, the state had few practical alternatives.
- Design of replacement program merits careful consideration.
- The redevelopment agency unwinding process could yield important civic beneﬁts.
- Hold hearings to promote local review over use of the property tax.
- Provide funding to train K-14 oversight board members.
- Alternative use of redevelopment assets raises difﬁcult policy and ﬁscal issues.
- Key state and local choices will drive state ﬁscal effect.
- Clarifying amendments would help implementation of ABX1 26.
- Clarify treatment of pass-through payments.
- Address timing issues.
- Clarify authority to take actions to ensure that funds are available to pay bonded indebtedness.
The report also anticipates alternatives to redevelopment that might emerge. They include strategies and tools, usable at the municipal and/or statewide level, such as business improvement districts, infrastructure financing districts, property tax debt override, regulatory changes (such as relaxing parking requirements, changing zoning, streamlining project approvals, etc.), and state housing assistance.
Despite the complexity of the wind-down process and the uncertainties that the report identifies, O'Malley said that she came away believing that the process could spark a healthy discussion about local development and the use of property tax money. She noted that the competing interests of the members of the oversight boards will ensure that there will be vigorous debates over whether to continue certain projects or whether to liquidate them and return the funds to the respective local entities.
"I think those kinds of political debates about how the property tax should be used is long overdue in California," said O'Malley. "I started off looking at the oversight board and getting very worried at the complexity of all of this and then I started thinking that there are some enormously good civic side benefits that could result."
The full, 32-page report can be found here: