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Budget Stalemate Continues; Redevelopment Still Threatened

Sep 9, 2008

The state budget stalemate may get handed to the new Legislature that is seated in December. In the meantime, lawmakers could pass a series of emergency resolutions authorizing the state to pay its bills.

Last week, people were whispering about this scenario. Now, they are speaking out loud about it. After the 21-13 defeat of the Republican budget proposal in the Senate on Monday, it's clear that lawmakers and the governor are no closer to a budget resolution today than they were in June.

The Republican plan contained one truly stunning provision: A grab by the state of $349 million in undesignated and unreserved low- and moderate-income housing monies held by local redevelopment agencies. The proposal infuriated affordable housing advocates and put redevelopment agencies on the defensive one more time.

By law, redevelopment agencies must set-aside 20% of tax increment for low/mod housing. The undesignated and unreserved monies are those in the housing set-aside fund that the agency has not committed to specific projects.

Recalcitrant cities will indeed let money pile up in the housing set-aside fund because they have little interest in providing affordable housing. More commonly, the money accumulates while redevelopment agencies put together development deals. The fact that the money has not been legally committed doesn't necessarily mean that local officials don't know how they plan to spend it. Development of affordable housing with multiple funding sources can take many years.

The Republican "no tax increase budget" would have allocated this money to the state, killing an untold number of affordable housing projects that are somewhere in the process. The Senate Transportation and Housing Committee estimated the proposal would prevent development of 5,000 to 7,000 affordable units. Among the agencies that could have lost the most were San Bernardino ($11.9 million), Richmond ($14.2 million), Riverside ($11.2 million), Cerritos ($23.6 million) and Pomona ($10 million). Think any of those cities could use additional, decent housing that's affordable to poor families? Maybe even housing for some of the people earning 10 bucks an hour at the 1.3-million-square-foot Los Cerritos Center?

The Republican redevelopment revenue shift would apparently have come on top of the governor's proposed shift of $225 million of redevelopment agency tax increment to school districts annually for three years. In other words, the Republicans would take $1 billion from redevelopment agencies. (I should note that Democrats appear to have accepted the governor's $225 million annual shift.)

I'm trying not to pass judgment on these budget proposals. I'll only say that they would significantly decrease redevelopment activity in California. That might be fine with some conservatives who fret over government intrusion in the marketplace, although I'd suggest those conservatives might want to talk to their friends in the development, construction and retail sectors before pushing too far.

No one seems to know where the budget standoff is headed now. Mike Madrid's California City News offers up these cold hard figures on the budget standoff. Madrid notes that Gov. Schwarzenegger has only 4 months before he must propose a budget for 2009-2010.

Paul Shigley