Redevelopment Vetoes Lead to Disappointment, Cautious Optimism

 

Over the past year, even the most irate objectors to Gov. Jerry Brown's dismantling of redevelopment held out hope that in agreeing to kill redevelopment, the legislature would invent a new, better system for stoking local economic growth. Last week, the governor dashed those hopes. 

Facing a total six bills designed to replace aspects of redevelopment or otherwise help cities with local economic development, Brown vetoed all six. In his veto statements, Brown indicated that it was too soon to consider alternatives. The wind-down process has been tumultuous for many cities, but almost all have clamored for immediate relief for the billions in tax increment funding that they have collectively lost this year. 

Despite the governor’s seemingly indiscriminate vetoes, they came as a shock to neither supporters nor critics of redevelopment. 

“I’m not 100 percent surprised,” said Jean Hurst, senior legislative representative of the California State Association of Counties. “The governor put significant time and energy into the dissolution process.”

League of California Cities Legislative Director Dan Carrigg said that he was “certainly disappointed” but that he was not necessarily discouraged by the vetoes, even if many cities were hoping for relief sooner rather than later. Peter Detwiler, former staffer for the Senate Government and Finance Committee, said, “I didn't read it as ‘hell, no.’ I think he said, ‘not now, not yet.’”  

Brown was unusually complimentary the concept of replacing redevelopment, despite his veto. In his veteo of Senate Bill 1156 he wrote, "the planning and investment that is envisioned by this bill would help to develop and redevelop a California that is sustainable and thriving." But he wrote that he would " prefer to take a constructive look at implementing this type of program once the winding down of redevelopment is complete.”

Supporters of redevelopment are cautiously optimistic. 

“We can see in the governor’s veto messages that he seems to have left the door open for a return of those bills or a reopening of that discussion once the redevelopment process has kind of played itself out,” said Carrigg. He was hopeful that the dissolution process would adhere to the schedule set forth in the “touch-up” bill, Assembly Bill 1484, passed over the summer. (The League has since filed suit to block some of the provisions of that bill.)

The vetoed bills include the following, listed by their official titles and sponsors: 

• AB 345 by Norma Torres (D-Pomona) – Redevelopment. 

• AB 2144 by John A. Pérez (D-Los Angeles) – Local government: infrastructure and revitalization financing districts. 

• AB 2551 by Ben Hueso (D-Chula Vista) – Infrastructure financing districts: renewable energy zones.

• SB 214 by Lois Wolk (D-Davis) – Infrastructure financing districts: voter approval: repeal. 

• SB 1030 by the Committee on Budget and Fiscal Review – Redevelopment Property Tax Trust Fund allocations: excess Educational Revenue Augmentation Fund moneys.

• SB 1156 by Darrell Steinberg (D-Sacramento) – Sustainable Communities Investment Authority.

Three of the bills would have changed the state’s notoriously restrictive laws concerning infrastructure financing districts, through which a local government can levy special taxes on local residents and businesses for the purpose of investing in locally serving infrastructure projects. SB 214 would have made the most drastic changes to this system, changing the voter-approval threshold from 2/3 to 55%. 

Historically, IFD’s have not been heavily used because they cannot be used in redevelopment project areas and require 2/3 voter approval, not only for the formation of the districts, but also for the issuance of bonds backed by projected tax increment revenues in the districts. Many, however, see a gentler version of IFD law as a way for cities to revive many of the infrastructure-related functions that redevelopment agencies served. 

"The governor's veto does nothing to remove the obstacles barring many local governments from utilizing infrastructure financing districts for public infrastructure investment, like flood protection and clean drinking water,” said Wolk in a statement to CP&DR. “I remain committed to making it easier for local governments to utilize IFDs to fund important projects, without adversely affecting our schools, core local services, or the state general fund.”

(Brown did, however, sign a bill authorizing the creation of an IFD for the America’s Cup yacht race in San Francisco next year. Detwiler postulated that such a move was appropriate given that the IFD is for a specific, clearly defined event and not for general economic development.)

SB 1156 would have come closest to a replacement for traditional redevelopment. It was designed to complement Senate Bill 375 by giving cities more tools to promote development in districts heavily served by public transit. Many such districts are in former redevelopment project areas. It has nearly universal support from local officials and statewide advocates of local economic development. 

The bill would have enabled cities to form “Community Development and Housing Joint Powers Authorities” to carry out much the same functions as redevelopment agencies did. These authorities would have been funded by tax increments as long as they prepared plans to offset any loss of tax revenues incurred by local schools. It also would have allowed localities to implement local sales taxes, with voter approval.  

Redevelopment had long drawn the scorn of many county officials who felt that it allowed cities to unfairly siphon away tax money that would have, in part, ended up in county coffers. However, even some county officials supported SB 1156 because it explicitly attempted to address some of those concerns by giving counties input into cities’ use of tax increment financing. 

“SB 1156 provided that authorization for counties and cities to come to the table together and say that we agree that this is an appropriate use of tax increment dollars, as opposed to a more unilateral approach,” said Hurst. 

Steinberg has already vowed to reintroduce a version of SB 1156 and make it one of his highest legislative priorities next year. 

In an Oct. 2 letter to supporters, Steinberg wrote, "Looking ahead to next year, it is imperative that the Legislature and Governor reach an agreement on a new set of tools for local economic development and affordable housing." Steinberg wrote that he will reintroduce it on the very first day of the legislative session, with the designation SB 1. 

Brown indicated that he feared that such new tools would distract cities from the burdensome process of winding down their former redevelopment agencies. 

"Expanding the scope of infrastructure financing districts is premature," Brown wrote in his SB 214 veto statement. "This measure would likely cause cities to focus their efforts on using new tools provided by the measure instead of winding down redevelopment. This would prevent the state from achieving the General Fund savings assumed in this year’s budget."

Brown's veto messages indicate that he supported the spirit of many of the bills that he vetoed, thus simultaneously giving cities hope, while telling them to hang on for another year. 

Even supporters of redevelopment are sympathetic to this approach, saying that there are too many uncertainties to come up with a suitable replacement for redevelopment just yet.   

At the same time, cities are caught in an uncomfortable period of limbo and are trying to encourage development regardless of what happens in Sacramento. They would, however, like some help in the meantime. 

“The business of our economy doesn’t stop or isn’t necessarily synchronized with the state budget,” said Carrigg. “There’s all sorts of infrastructure challenges that are out there….there were a lot of city officials that would just like to get to work on dealing with those challenges.”

Some hope that an extra year will result in a stronger, better economic development tool from Sacramento. 

“(The governor) is signaling a redevelopment recess,” said Detwiler. “The whole policy community—the fiscal and urban renewal community—needs to see how this post-redevelopment period settles out and really what are the assets and liabilities.”

Detwiler also speculated that Brown is more focused on Proposition 30, his package of tax increases aimed at balancing the state budget, than he is on any other issue. 

“Anything that might deflect that focus (on Prop. 30) had better be for an awfully good reason,” said Detwiler. “Right now there is no awfully good policy reason to sign IFD bills or redevelopment reincarnations.”

At the very least, this year’s bills may pave the way for those future incarnations. Though city officials have had choice words for the governor, and tempers have often flared, they seem to accept his veto messages in good faith. 

“The bright spot is that the governor’s veto messages certainly, in my mind, don’t close any doors,” said Carrigg. “They seem to indicate a delay connected to budget issues and the unwinding of redevelopment.” 

Whenever it comes, a replacement for redevelopment will likely impose new challenges on city administrators—and a quick fix should not be expected. 

“We know that there are other economic development devices out there,” said Detwiler. “They are politically much more difficult to use and require more managerial skill, more political leadership, and a genuine cultivation of public support. Well, duh. Of course.”

Editor’s Note: This story is an updated and expanded version of a blog post that ran online Sept. 30. 

Contacts

Dan Carrigg, Legislative Director, League of California Cities, 916.658.8222

Jean Hurst, Sr. Legislative Representative, California State Association of Counties, 916.327.7500