The California Supreme Court will review a case in which Alameda County and a housing developer argue that a California Environmental Quality Act lawsuit filed by project opponents should have been dismissed because the opponents did not raise their objection during the administrative process. In  Tomlinson v. County of Alameda (see CP&DR Legal Digest Vol. 25, No. 14, July 2010 ), the First District Court of Appeal ruled that the typical requirement for the exhaustion of administrative remedies did not apply in a case involving a categorical CEQA exemption. Alameda County had approved a 12-unit housing subdivision after determining it qualified for a categorical CEQA exemption based on the project's urban infill nature. The appellate court overturned the exemption, ruling it could apply only when land lies within an incorporated city. The two-acre parcel in this case is in unincorporated Alameda County. The state Supreme Court did not accept the case on the specific merits but, rather, on the question of exhaustion of administrative remedies. Although the project opponents had participated in a public review process and even filed an appeal with the Board of Supervisors, they did not question the infill exemption before filing their lawsuit. The question for the state high court is whether Public Resource Code § 21177 required the opponents to raise the issue before filing a lawsuit challenging the county's decision to categorically exempt the project from CEQA review. The First District's decision in  Tomlinson  conflicted with a different First District division's decision in  Hines v. California Coastal Commission , 186 Cal.App.4 th  830. In the latter case, the court ruled that project opponents challenging a CEQA exemption had to exhaust their administrative remedies when there was an opportunity to do so. Much like the proposed Alameda County subdivision, the project in question in  Hines  was the subject of several public hearings. The case on review is  Tomlinson v. County of Alameda , No. S188161.

I have published so many corrections in my journalism career that I now write the correction along with the story. To wit: The following story is all made up. There is no draft EIR for the downtown football stadium yet. Yet few readers are aware that I possess the flawless crystal sphere of Nostradamus, which gives me super powers to see accurately into the future. (Note to editor: Do I have to run corrections for inaccurate statements about myself? I mean, who would know?) Gosh, it's really, really hard to guess what the negative impacts might occur, when building a football stadium with seating for 70,000 or so people rises in downtown Los Angeles. Let's see now. TRAFFIC IMPACT: Slightly negative impact. Recommended mitigation: Add 10 lanes each to the Hollywood (101), Interstate 10, Interstate 5 and Harbor (110) freeways. The side benefit is that Caltrans will be distracted from its long-stated goal of ploughing up the city of South Pasadena to complete the 710 Freeway, to ensure that Pasadena matrons have more convenient access to the burly longshoremen in Long Beach. (What, you didn't know about that?) Suggested mitigation: Convert the Los Angeles Convention Center to a multi-level parking structure. Economically, this is a much better solution for the convention center than trade shows. The Dallas Cowboys charge $75 to park at their stadium. Do the math. AIR QUALITY: Somewhat negative impact. What's another day of 20,000 or 30,000 cars descending on downtown Los Angeles? Aforementioned site already has a lot of cars. Who's to notice? Plus, football teams are frequently on the road, causing congestion and pollution in other cities. Suggested mitigation: Play the entire season out of town. ARCHITECTURAL QUALITY: Teensy-weensy negative impact. I, for one, can think of nothing more pleasant than driving by an enormous building that resembles a very large salad bowl that is spinning rapidly on a turntable, with the lettuce beginning to fly out. The only drawback to this design is that we can still see the 53-story Marriott Hotel tower, standing all by itself on the southern end of downtown like a great big you-know-what. Suggested mitigation: Make the stadium at least 10 stories higher. ECONOMIC IMPACT ON CITY OF LOS ANGELES: Negligible, if you don't count the $300 million in bonding authority that the developer is requesting from the city. The developer promises to service the debt. Insofar as we are doing away with redevelopment (at last report), the city will not need this money for any other purpose, such as housing, parks, etc. Plus: We have a fictitious consultant's report that will tell us all the benefits that the city will enjoy from this massive, ugly and inappropriate sports facility. SUMMARY OF FICTITIOUS CONSULTANTS' REPORT: "We see very positive economic benefits accruing to the City from the construction and operation of said Stadium … If we tabulate all the increase in receipts going to parking valets, tee-shirt vendors, caterers providing food and drink to corporate fat cats entertaining their equally fat clients in exclusive sky boxes, plus the assorted sex worker or two, we arrive at a conservative estimate of $20-$30 billion of economic benefit for the City in the next two decades. Yessir! No doubt about it … (P.S. Please take notice of the Invoice attached to this Report for $250,000, which is the cost of cooking up this nonsense for the City Council.)" Outrageous distortions? Perhaps. I'll make you a deal: All interested readers should bookmark this article and wait until the actual Draft EIR and Consultant's Report actually come out. I promise you that the predictions obtained from the flawless crystal sphere of Nostradamus will be alarmingly close to actuality. --Morris Newman

Gov. Jerry Brown's proposed state budget will do more than merely plug a $24 billion deficit. According to some, it will also lead to shuttered factories, recidivism among ex-convicts, and the flight of companies and jobs to rival states such as Arizona, Nevada, and Texas. Faltering clothing manufacturer American Apparel could be pushed closer to the brink of bankruptcy.  At least if Brown's proposal to do away with Enterprise Zones is adopted along with the proposed elimination of the redevelopment program. Despite the program's geographically oriented name, California's Enterprise Zones are not technically designed to foster urban renewal. They are, rather, employment programs that use a variety of incentives -- mainly state tax credits -- to encourage employers to hire workers in designated areas. Much like California's far more widespread system of redevelopment, cities and counties have embraced Enterprise Zones as crucial components of their local economic development plans.  City officials say that the loss of both would be a devastating one-two punch, depriving them of major tools to promote local development. Because redevelopment is operated on a locality-by-locality basis, Enterprise Zones are considered the state's largest economic development program.  Though redevelopment, with nearly 400 active agencies and a sophisticated lobbying infrastructure, has been fighting a vocal battle since the governor's Jan. 11 budget announcement, backers of Enterprise Zones are only now rallying to save the program, even in the face of studies suggesting that they are ineffective. At least one piece of legislation has been introduced to reform Enterprise Zones, and localities are launching a lobbying effort in Sacramento.  "It just seems wrongheaded to me," said Craig Johnson, Enterprise Zone manager for the City of Long Beach and president of the California Association of Enterprise Zones. "This is not a program to be thrown on the scrap heap but a program to be taken advantage of and utilized." Johnson said that the program helped to create or retain up to 10,000 jobs in 2010 alone.  The governor's budget proposal did not mince words regarding Enterprise Zones. Cutting the program would, according to the proposed budget, save $381 million in 2010-11 and $581 million in 2011-12. But beyond that saving, the budget implies that it would also be getting rid of a program that has been ineffectual and even mildly detrimental to the state's economy. The draft budget states that Enterprise Zones shift "economic activity from one geographic region within California to another geographic region within California."  The budget proposal even implies that the program is less than a zero-sum game because most jobs created under the program would have been created anyway. Therefore, the allocation of tax credits to those jobs results in an estimated $60,000 net loss to state coffers per job.  Administered by the Department of Housing and Community Development, the Enterprise Zone program is limited, by statute, to 42 zones throughout the state at any given time. Zones have a lifespan of 15 years. The budget also targets similar, but much less widespread, programs including Targeted Tax Areas, Manufacturing Enhancement Areas, and Local Agency Military Base Recovery Areas. There are no limitations on the physical size of Enterprise Zones, but at least 50 percent of zone residents must make less than median income in their respective counties.   The state estimates that these areas encompass 1.5 million workers, only a fraction of whom are actually involved in the Enterprise Zone tax credit program.  The budget cites a 2009 study by the Public Policy Institute of California, claiming that Enterprise Zones failed to create a net gain in jobs.  "Our main finding…was that Employment Growth in enterprise zones was no faster than growth in very similar comparison areas," said Jed Kolko, co-author of "Do California's Enterprise Zones Create Jobs?" "We concluded that, for what we believe to be the program's primary goal, enterprise zones on average had no effect." Kolko said that many companies were not even employing intended workers, because targeted workers were defined so broadly that many jobs went to workers who were not at risk or under-employed in the first place. As well, the tax credits apply to certain capital expenses, so businesses could invest in machinery without hiring additional employees. Therefore, while companies may have benefited from the tax credits, the program did not create intended employment gains.  Watchdog groups such as the California Budget Project have reviewed existing literature on Enterprise Zones and reached similar conclusions.  "Contrary to public perceptions, this is a program that benefits the largest, wealthiest corporations in California, not small business," said Jean Ross, executive director of the group California Budget Project. Ross added that companies might choose to locate in an Enterprise Zone as opposed to another part of a given metro area.  Based on the research of PPIC and others, the governor's budget concludes that Enterprise Zones are "not of statewide interest" but rather are "local economic development run through the tax system."  Backers of Enterprise Zones say that--especially on this point--the governor could not be more mistaken.  "I would disagree with the assertion that there isn't a net benefit," said Assemblymember Cameron Smyth (R-Santa Clarita), whose district was just awarded a new Enterprise Zone. "If we don't have Enterprise Zones it's just going to reshuffle those dollars outside of California."   "Our neighbors are aggressively pursuing California companies," said Johnson. "Our response should not be a collective shrug." Officials from both sides of the political aisle say that Enterprise Zones offer a poignant foil that illustrates the unfriendliness of California's business environment. They cite states such as Nevada, Arizona, and Texas that actively lure businesses away from the state with the promise of lower taxes and lower costs of doing business. Enterprise Zones, backers say, are one of the only tools the state has to enable the state to compete with those plum offers from California's neighbors.  "California has not had a overall plan, strategy when it comes to the issue of keeping and growing jobs, as opposed to other states," said George Runner, a Republican member of the Board of Equalization (2nd District). "Enterprise Zones have become the tool for local governments to do that competition when they know that there's this giant sucking sound from other states."  "We keep hearing from businesses that there needs to be reform when it comes to tax structures and regulation…that the state of CA can become more business-friendly," said Assemblymmeber Manuel Pérez (D-Indio). "To some degree, I agree with them."  Runner has even proposed effectively doing away with Enterprise Zones by extending their benefits to the entire state.  In sharp contrast with the literature, local administrators of Enterprise Zones bring up seemingly endless examples of companies that were considering relocating out of state and were persuaded to stay by Enterprise Zone incentives. Johnson cited a Bayer pharmaceuticals factory that set up in Berkeley; South Gate Community Development Director Steve Lefever of the City of South Gate said that his region's Enterprise Zone attracted an American Apparel factory.  The macroeconomic argument for saving Enterprise Zones is the same as that for saving redevelopment: they both generate economic activity which, in turn, generates tax revenues and incalculable positive local externalities.  "It's helped us retain and grow some of the jobs here," said Rick Farley, City of Oroville  Enterprise Zone and Business Assistance Coordinator. "Historically this area has been very reliant on natural resources—logging, mining--as the lumber mills have closed we've been working to attract other types of businesses." The mantra for Enterprise Zones is "reform, don't eliminate." Taking an early lead in that effort is Assemblymember Pérez, who last week introduced a package of Enterprise Zone reform bills: AB 231, AB 232, and AB1X 11. These bills would, respectively, promote greater oversight and reporting, tighten the defintion of Targeted Employment Areas, and promoted improved linkages with workforce and community development agencies.  Johnson of the California Association of Enterprise Zones said that his organization fully supports reform to make the program more accountable and effective. He said that proposals such as salary caps or more fine-grained designation of eligible workers might be entertained.   "One thing that the California Association of Enterprise Zones has acknowledged all along is that there's no such thing as a perfect program," said Johnson.  Contacts & Resources California Department of Housing and Economic Development Enterprise Zone Program Map of Statewide Enterprise Zones Craig Johnson, President, California Association of Enterprise Zones ,  Jed Kolko, Associate Director and Research Fellow,  Public Policy Institute of California , (415) 291-4400 Manuel Pérez, Assemblymember, 80th District  (Indio),  (916) 319-2080 Jean Ross, Executive Director, California Budget Project , (916) 444-0500 Cameron Smyth, Assemblymember, 38th District (Santa Clarita), (661) 286-1565

This is how far out of whack things have gotten in Sacramento: Jerry Brown is now the one who sounds sane. Earlier this week, Brown canceled the planned sale of 11 state-owned office complexes to a group of private investors calling themselves, ironically enough, California First. The deal would have netted the state about $1.2 billion, equal to roughly 5% of the state budget deficit. I hated the idea and said so last April. The Legislature didn't think much of the sale either, but members held their noses and voted for it as part of the state budget package. Arnold Schwarzenegger, who was a savvy real estate investor before he became governor, gave lawmakers no choice. Rather, the governor who claimed to spurn budget gimmicks charged forward with the plan to sell commercial real estate in a lousy market and to spend the one-time proceeds on continuing expenses. Thankfully, former members of state building authorities in Los Angeles and San Francisco – whom Schwarzenegger fired for daring to disagree with him – tied up the sale in court long enough for Brown to kill the scheme. In canceling the deal, Brown cited a Legislative Analyst's Office study that equated the sale to a 35-year loan at 10.2% interest, or double the interest rate the state pays on its general obligation bonds. According to the LAO study released in November, the sale would end up costing the state an extra $6 billion over 35 years. Brown charitably called Schwarzenegger's plan "short-sited" and "not prudent." Instead, the new/old governor proposes borrowing $1.2 billion from special fund reserves and paying the money back over three years at a total cost to the general fund of about $18 million. Now, remind me again which governor is the fiscally responsible Republican and which one is the tax-and-spend Democrat with far-out ideas. – Paul Shigley

Quick: what economic sector most reminds you of Los Angeles? Hollywood? Aerospace? Yoga? According to sports and entertainment giant AEG and a certain pastoral insurance company, it's none of the above.  Last week AEG announced that Los Angeles' nonexistant downtown football stadium, to be developed door to Staples Center and LA Live, will be funded in part by a sponsorship by Farmers Insurance. Thus, the world will know Los Angeles as the home of -- I'm not kidding -- Farmers Field.  I suppose it makes sense in a roundabout way, since it will probably be the only farmer's field in the entire county. Granted, Farmers Insurance is actually based in Los Angeles, but no one is likely to know that. This is thus the strangest naming-rights deal since the Phoenix Cardinals, who were desperate to move out of a college stadium (Sun Devil Stadium), moved into a stadium named for a college (University of Phoenix Stadium). For this deal, AEG will get $700 million towards total development costs that exceed $1 billion. At least Farmers will get its money's worth, since everyone who hears the name is going to do a double-take.  Let's see what else is the matter here:  CEQA Exemption AEG President Tim Leiwickie has told the Los Angeles City Council that AGE is asking state lawmakers to approve a CEQA exemption for the project. Raise your hand if you're surprised. When CP&DR was covering the end of last year's legislative session, the Planning & Conservation League was making a lot of noise about the possibility that AEG would seek a CEQA exemption. The previous year such an exemption had been granted to a competing project  to be developed by Ed Roski's Majestic Realty Co. in the City of Industry. At the time I spoke with AEG Vice President Michael Roth, who swore up and down that a stadium was just a glimmer in AEG's eye. He assured me that no CEQA lobbying was going on and that no such plans were in the works. Let's just say that he was pretending to be candid, and I was pretending to believe him.  But Roth could even have argued that he didn't want a CEQA exemption, because thanks to the Industry precedent, AEG would probably get one whether it liked it or not. As CP&DR Publisher Bill Fulton wrote in December 2009, "it would be impossible now for the state to deny the same exemption to football stadiums." Basically, Ed Roski has done everyone else's lobbying for them.  Location As I wrote a few months ago, Los Angeles has a perfectly good, centrally located, well used site for a football stadium. In fact, it doesn't just have the site. It has the actual stadium: the Los Angeles Memorial Coliseum. Granted, the Coliseum needs an overhaul. But what it doesn't have is an adjacent hotel-and-entertainment complex to lure football fans and their wallets. Instead, the Coliseum is a public facility in the middle of a public park.  Funding For $700 million the residents of Los Angeles can probably tolerate a lot. But the city is still being asked to float $350 million in bonds to cover the demolition of the unloved West Hall of the Convention Center and other local improvements. Fortunately, members of the Los Angeles City Council seem to be wary of the potential public cost. Then again, there's no bigger power broker in City Hall than AEG these days.  Design & Roof I'm not about to say that the stadium needs a starchitect. But the three designs  proposed by mega-firms Gensler, HKS, and HNTB have about as much charm as as an industrial feedlot. Two features common to all three designs stand out: First, no matter how many Justin Bieber concerts it will accommodate, a retractable roof should be outlawed in Southern California. Toronto, yes. Los Angeles, no. Second, does it have to be an enclosed box? All three designs stand so tall that they appear to sever all connection to the surroundings. If you're going to put a stadium downtown, why not at least offer views of its skyline? (Something that Pittsburgh's Heinz Field does particularly well.)  Urbanism Although I still prefer the Coliseum site, I'll give the AEG stadium some credit. Whereas some baseball stadiums have been masterfully integrated with their urban environments (Camden Yards, AT&T Park), football stadiums have never been quite so cozy. At least AEG's is not flung beyond the suburbs, divorced from the city that it represents (like New York's Meadowlands and Phoenix's U of P Stadium). It's even kind of close to transit (the Blue Line/Expo Line).  For all the strikes against it (oh yeah, there's also a recession going on, and LA has no football team), I have a gut feeling that this thing is going to happen. So dust off those overalls, jump on the light rail, and get ready for some football. The L.A. Tractors are coming to town.

In advance of the Feb. 9 Senate Governance and Fi­nance Committee hearing on the fate of redevelopment, the Legislative Analyst's Office has produced an extensive briefing paper encouraging senators to ask some hard questions about Gov. Jerry Brown's proposal to eliminate redevelopment and redistribute its tax increment.  The meeting agenda  <.doc> includes time for speakers from the LAO as well as from organizations such as the California Redevelopment Assoication, the League of California Cities, and the California Budget Project. Representatives of the League and CRA have already said that they will encourage legislators to oppose the governor's plan. The briefing paper encourages senators to consider six broad categories of concern:  1. Dissolving Redevelopment Agencies. What will happen to agencies' contracts and outstanding bonds? Does Proposition 22 prevent dissolution without legislation? What will the 'successor agencies' be? 2. Budget-Year Effects. Do RDA's debt obligations amount to more or less than the Department of Finance's estimate of $2.2 billion? How will the redistribution of the tax increment work? And can it be allocated to schools and trial courts, as the governor proposes?  3. Out-Year Effects. After the intial windfall, what will be the long-term fiscal effects of eliminating redevelopment?  4. Affordable Housing. Will the 20% set-aside be dissolved along with the rest of redevelopment? Can local agencies successfuly inheirit RDAs' affordable housing programs?  5.  Measuring Outcomes. How will the state determine if the elimnation of redevelopment created a net gain for proposed beneficiaries?  6. Economic Development Alternatives. How can the state and localities promote local economic development in the absence of redevelopment?  To read the entire briefing paper and all of the LAO's questions, please click here <.doc> .  Info:  Senate Governance and Fi­nance Committee  "Restructuring Redevelopment: Reviewing the Governor's Budget Proposal" 9:45 a.m. to 12:00 noon Wednesday, February 9, 2011 State Capitol, Room 112

A few weeks ago, I had a good time taking apart anti-anti-sprawl critic Wendell Cox's self-referential analysis supposedly showing that highly regulated metropolises have higher housing costs because they are highly regulated. (" Wendell Cox's Voodoo Economics .") In sum, Cox concluded that because any variation in housing cost must be due to regulation, all variation in housing cost must therefore be due to regulation. One thing Cox didn't consider was the possibility that higher housing prices might have something to do with higher incomes. It stands to reason that metros with higher incomes might have higher housing prices. As the average homebuyer knows, the question of how big a mortgage you can carry – and therefore how much you can pay for a house – is directly connected to how much money you make. So it was a little surprising to see Cox's New Geography piece the other day , which analyzed income trends in 28 large metros from 2000 and 2009.  The changes in income were all over the place and Cox seemed a bit baffled by the whole thing (why would incomes in Atlanta and San Jose go down so much, while they went up so much in Baltimore and Pittsburgh?).  One thing that struck me is that most of the metros Cox looked at in his income analysis were also metros he looked at in his housing price analysis. Since Cox didn't bother to draw the connection, I decided to do it myself. In his housing analysis (which was based on 2010 data), Cox picked 11 metros – six of which he characterized as having strict land use regulations and five of which he characterized as having looser land-use regulations. He concluded that the strictly regulated metros had much higher home prices than they "should," while in the other metros the home prices were just about right. (His definition of "should" meant calculating construction cost for the average home in each metro area and then adding 25% to cover what he believes the cost of land and regulation "should" be.) In his income analysis of 28 metros, Cox used five of his "highly regulated" metros – Washington-Baltimore (which were combined in the housing price analysis but separate in the income analysis), San Diego, Seattle, Portland, and Minneapolis-St. Paul.  He also used three of his loosely regulated metros – Houston, Dallas-Fort Worth, and Atlanta. He used 2009 data for income, which lines up pretty well with 2010 data for home prices. So, I thought it would be interesting to compare the difference in income in Cox's metros to the difference in home prices. I used his three loosely regulated metros. On the highly regulated metros, I wanted a comparable number, so I threw out San Diego (which even Cox's fans admit is a weird outlier) as well as Minneapolis-St. Paul, which I personally think isn't very highly regulated and is much smaller than the three loosely regulated metros. I left in Baltimore and Washington (which I counted twice in the housing to make up for the fact that the income numbers were separate) as well as Seattle (a pretty good comparable in size to the three loosely regulated metros) and Portland (because, while it's small, it's everybody's favorite example of regulation). Admittedly, I wound up with one big metro in the Mid-Atlantic and two in the Northwest. But the other three are all in Texas and Georgia, so it seemed fair. In a nutshell, here's what I found: In 2010, the average home price in the four highly regulated metros was 38.9% higher than the average home price in the three loosely regulated metros. But – and here's the interesting thing – the median income in the highly regulated metros was 20.6% higher than the median income in the three loosely regulated metros. Cox's "growth management" metros have higher home prices. But they also have higher incomes. You can't draw a causal connection from my back-of-the-envelope analysis, but you could certainly hypothesize that about half of the additional home price (20% out of the 40%) is due to higher incomes. This would mean that somewhere between 0% and 20% would be due to stiffer regulation. There may be other factors, such as overall availability of land supply because of topography and public land ownership (a particular issue in Seattle). I can't say for sure, but this smells right to me. Some years ago when Rolf Pendall and I reviewed the literature on urban growth boundaries, we came to the conclusion that – to vastly oversimplify – the evidence showed that UGBs increase home price somewhere between a little and a lot. So I'll stipulate right now: Stiff regulation adds somewhere between 0% and 20% to the price of a house. Remember, this is all based on Cox's own data and analysis – from two different pieces of research that he never put together. The other funny thing about his metro income analysis is that he does truly seem baffled by the fact that metros with stagnant populations (like Pittsburgh) are seeing their median incomes go up, while metros with growing populations (like Atlanta) are seeing their median incomes go down. He wants to use this data to also refute the smart growth crowd – his basic argument being that this data proves prosperity doesn't like in a big, populous central city and that regional prosperous may depend on decentralization and sprawl in the suburbs, where the population is still increasing in some of these metros. But that's old-fashioned thinking – the kind that equates prosperity with population.  As Pittsburgh and Baltimore and Cox's own St. Louis have proven, you can increase incomes and wealth without increasing population – because the measure of prosperity in America today is not the number of people but the skill and creativity they bring to creating wealth. The "growth without growth" phenomenon is very real, as I noted in a recent Planetizen column excerpted from my book Romancing The Smokestack – and it reveals that the old pro/anti sprawl debate is virtually irrelevant when we talk about economic well-being. --Bill Fulton

Governor Jerry Brown's "State of the State" speech last night was probably so familiar that you might have thought you'd written it yourself. He outlined, in remarkably plain terms, the crisis that the state faces and, unlike his predecessor, took an adult approach to bipartisan cooperation. In his eyes, there were no girlie-men in the chamber. Instead, his rhetoric suggests that he was speaking to a group of public servants with different ideologies and a common challenge.  It's rare these days that political discourse includes so much as a cursory gesture towards respect for the opposition. Usually one party decries the others as whackos, incompetents, and traitors -- no matter how many elections they win. And yet, there was Brown, planting his flag directly down the middle of the aisle: "If you are a Democrat who doesn't want to make budget reductions in programs you fought for and deeply believe in, I understand that. If you are a Republican who has taken a stand against taxes, I understand where you are coming from." Is anyone in DC listening to this? Partisanship is only one divide, however, that the new governor will have to address en route to saving, or collecting, $24 billion. So far, Brown has yet to breath a word about Prop. 13 reform, which would the game-changer (as well as the first sign of the Apocalypse, if you ask some people). Instead, Brown is picking less daunting battles. As CP&DR -- and every other news organization in the state -- has already covered extensively, his b id to eliminate redevelopment has stirred the passions of a remarkably powerful constituency: nearly every city and nearly every local official in the state.  Last night, the governor held his ground, saying unequivocally, "I come down on the side of those who believe that core functions of government must be funded first." Sacramento insiders with whom I have spoken say that he's going to hold his ground.  Of course, this is asymmetric warfare, because there is not really such thing as an "anti-redevelopment" constituency. Sure, there are free-market advocates such as the Reason Foundation. And there are scholars who -- more often than not -- throw up their hands and say, "I don't know" when you ask them if redevelopment creates a net economic or social gain for the state. The silent majority, however, seems to be on the governor's side. A recent PPIC poll suggests that over 60 percent of Californians approve of the elimination of redevelopment in order to help balance the budget. Whether they feel this way because they believe that redevelopment is evil or because they simply don't know what redevelopment is is anyone's guess.   The governor is, however, getting an earful from everyone from the California Redevelopment Association to the mayors of the state's ten largest cities, who descended upon the Capitol en masse a few days ago. As Brown acknowledged in his speech, "Mayors from cities both large and small have come to the capitol and pressed their case that redevelopment is different from child care, university funding or grants to the aged, disabled and blind." And Brown is favoring the latter.  Of course, Brown now stands in an interesting position, which is either incredibly powerful or monumentally hypocritical, depending how you look at it. Not long ago, Brown was one of those mayors (albeit in much headier economic times). And you can bet that if he were still mayor of Oakland and Gov. Whitman were making same proposal, he would be making the same pleas.  Brown has tried, somewhat successfully, to evade the hypocrisy trap by resorting to candor. In numerous public statements, he has freely--almost cavalierly--acknowledged the usefulness of redevelopment in restoring, for example, his beloved Fox Theater in Oakland. But he follows this admission almost always by wave of incredulity: wouldn't it be nice if we lived in a state where we didn't have to sacrifice such nice things as restored movie palaces?  Yes, it would. But, thus far into Brown's third term, it seems that we may not.  --Josh Stephens

The constitution mandates that we build highways, but not bike lanes. So says Duncan Hunter, a freshman Republican congressman from suburban San Diego. I'm not making this up. A short interview with Hunter, a member of the House Transportation and Infrastructure Committee, posted by DC Streetsblog is the talk of the alternative transportation crowd. " SB : But you're OK with mandating highways?" "DH : Absolutely, yeah. Because that's in the constitution. I don't see riding a bike the same as driving a car or flying an airplane." Read the whole thing here . What the constitution actually says, in Article 1, § 8 is, "The Congress shall have power … to establish post offices and post roads." That's as close as the constitution gets to highways, possibly because the automobile had not been invented yet. In the 18th century, post roads were traversed by horse and buggy (which would definitely qualify as alternative transportation today!). I should note that Hunter represents a region that, thanks to the San Diego Association of Governments, is pursuing just about every idea there is for getting people out of their cars and onto trains, trolleys, buses, bicycles and even their feet. The new congressman appears unaware of this trend. I wrote two months ago that the new Republican majority in the House of Representatives could be bad news for alternative transportation which, in turn, would be bad news for California, where alternatives to the car are becoming mainstream. The news is starting to look disastrous. – Paul Shigley

The core of California redevelopment law tells redevelopment agencies what they can fight against – blight – and it enables them to identify project areas in which to do so. Generally, the law does not, however, indicate what blight should be replaced with. As a result, critics have charged that redevelopment often funds vanity projects such as stadiums at the expense of what they consider more socially beneficial developments. The one major exception to this is affordable housing. A 1976 update to state redevelopment law requires that redevelopment agencies set aside 20% of their tax increment revenue for the provision of affordable housing. The California Redevelopment Association estimates that redevelopment agencies have contributed to the production of 98,000 units of affordable housing since 1993. Set-aside funds totaled $5.6 billion in 2007-08. In short, redevelopment is a common source of funds for affordable housing developed by nonprofits. Redevelopment funds are in almost every affordable housing deal in California and are the second-biggest source of funds in the state, after federal funds. Advocates of affordable housing fear that Gov. Jerry Brown's proposed elimination of redevelopment will also be a death knell for affordable housing. "Our program has generated about 1,000 units, and then (with the budget proposal) it just stops," said Philip Lanzafame,  Chief Assistant Director of Community Development in Glendale . "Every project that we could conceive of in the future is in jeopardy." Although the proposed budget would redirect much of redevelopment's tax increment to local agencies and services, it does not provide for ongoing funding of affordable housing. It merely provides that existing housing funds that are already in redevelopment agencies' coffers would be transferred to local housing authorities. Obviously, those funds will be available to complete affordable housing projects already planned. But after that transfer, localities would be on their own. "About $1 billion per year flows from the tax increment," said Paul Zimmerman, executive director of the Southern California Association of Nonprofit Housing. "None of the proposals on the table replace those programs and that financing." Although estimates vary, most agree that California faces a grave shortage of both market-rate and affordable housing. Redevelopment monies are one of the three main funding sources used to make affordable developments viable statewide. The others are state bond funds and federal funds, administered through the Department of Housing and Urban Development. Many cities have their own housing programs, including affordable housing trust funds. The federal government is threatening to cut back on HUD funding, and Proposition 1C bonds – the largest state housing bond – had, as of December 2009, only $800 million left out of a total of $2.8 billion approved by voters in 2006. "With the bond proceeds from the Prop 1C and the infrastructure package, just about spent, redevelopment monies for low and moderate income housing are about the only state-mandated program left that addresses the housing prices," said Zimmerman. By many accounts, redevelopment has not addressed housing all that well. A September 2010 report by the Senate Office of Oversight and Outcomes found that many of the 42 agencies in its sample spent the majority of their housing funds on administration and planning rather than on development of actual housing. The report contends that agencies have little accountability and spend housing monies in questionable ways. Reports such as this have fueled the notion that redevelopment agencies are ill-equipped to provide for affordable housing, regardless of the social benefit that the housing would provide. Affordable housing advocates say, however, that these failures are not reason to do away with redevelopment agencies. Julie Spezia, executive director of advocacy group Housing California, said that agencies that are not spending their affordable housing monies may be doing so at the behest of their cities – not because they are averse to developing affordable housing. "We don't think that the redevelopment agencies are running amok and doing things that the cities aren't actually wanting them to do," said Spezia. In fact, in most cities the city council and redevelopment board are one in the same. As such, Spezia and Zimmerman both said that redevelopment provides critical funding and that the system should be reformed rather than eliminated. If they are eliminated, even the fate of the agencies' existing housing funds is uncertain. The budget calls for the funds to be " shifted to local housing authorities ." Though this budget language implies that funds would go to public housing authorities that build and run public housing projects—as opposed to nonprofit and market-rate developers that include affordable housing in their portfolios—this intention is far from certain. Larger cities have municipal housing departments that promote affordable housing in a variety of ways, and it is unclear whether those departments would be eligible (or able) to receive funds—or whether the funds could be directed at the discretion of local officials. In many places, neither municipal departments nor public housing authorities exist, and the only viable agencies would be county housing authorities, which could receive significant windfalls depending on how many cities are in their jurisdictions and how much funding those cities have amassed. In the absence of clarification from Sacramento, however, the elimination of redevelopment could be synonymous with the elimination of affordable housing entirely. "When you get down to a lot of cities that are under 50,000, many of them don't even have housing departments," said Zimmerman. "Their redevelopment agencies are their housing departments." Larger cities will likely be able to absorb those funds and continue with redevelopment agencies' housing plans. "We would do whatever we're called upon to do," said Doug Guthrie, general manager of the Los Angeles Housing Department. "We've got good staffing here. Many of the programs we run are very similar to CRA's programs." Guthrie added that CRA is a crucial partner in the department's five-year housing program, contributing $50 million of tax increment investment annually. Other cities are not so bullish. "I don't know that Sacramento has thought all of this through," said Glendale's Lanzafame. "It's all pretty vague, and we're all left wondering ‘what if' and what's going to happen." Contacts: Doug Guthrie, General Manager, Los Angeles Housing Department  http://lahd.lacity.org  (866) 557-7368 Philip Lanzafame, Chief Assistant Director of Community Development, City of Glendale, (818) 548-2005 Julie Spezia, Executive Director, Housing California  http://www.housingca.org  (916) 447.0503 Paul Zimmerman, Executive Director, Southern California Association of Nonprofit Housing  http://www.scanph.org (213) 480-1249

As with so many trends, the use of tax-increment financing for redevelopment began in California. Since being created here in 1952, this vital aspect of redevelopment has spread to 48 other states. And yet if Gov. Jerry Brown's current budget proposal passes, it may very well die in the state where it was born. It is not going quietly. In the two weeks since Brown announced his intention to eliminate redevelopment in California as part of his proposal to cut the state's $24 billion deficit, what used to be a relatively obscure system intended to eradicate blight has been thrust into tumultuous debate. Redevelopment agencies are taking aggressive steps to protect their funds – though it's not clear whether these steps will withstand legal scrutiny. And the California Redevelopment Association has gone into "campaign mode" to try to block Brown's proposal. Mayors from the state's ten largest cities have met with Brown to plead their case, but so far Brown has not backed down. Meanwhile, a poll by the Public Policy Institute of California released Jan. 26 suggest that cities face an uphill battle: 66 percent of Californians favor the elimination of redevelopment.             At stake is $5 billion in redevelopment tax-increment funds currently controlled by redevelopment agencies, mostly associated with cities. The state's redevelopment agencies, led by the California Redevelopment Association, are insisting that the tax increment that they reap from redevelopment projects belongs to them. Their argument centers on the notion that redevelopment monies create significant positive externalities that other forms of state or local spending do not. These redevelopment advocates –say that up to 300,000 jobs and countless billions of dollars worth of development are in jeopardy.   Despite the stakes, many redevelopment officials say that the governor's announcement caught them by surprise. Just two months after winning a major victory with the passage of Proposition 22, they find themselves scrambling to shore up both funds and public support. "We're both shocked and disappointed that there was no forewarning and no discussion with any of the interested parties before the governor released his budget," said Long Beach Redevelopment Agency Executive Director Amy Bodek. The proposal would shut down all 400-plus city and county redevelopment agencies and thousands of redevelopment project areas. Officials from every city in California have lamented the threat to both specific projects and their local economies. (Counties do not use redevelopment as much as cities do.) Projects that are in jeopardy include such high-profile projects as a new football stadium in San Diego, a new Oakland A's ballpark in San Jose or Fremont, museums, transit oriented developments, and infrastructure projects throughout the state. Many agencies have gone so far as to approve new projects in the past two weeks in order to shield funds from a shutdown that would take place July 1 if the governor's proposal is enacted. The proposal makes it clear that the state will continue to honor existing obligations, via what the governor's proposal describes as "successor agencies." The board of the Los Angeles Community Redevelopment Agency approved $930 million in new investments for over 200 planned projects Jan. 14. That figure includes $35 million for the recently unveiled Broad Art Museum on Grand Avenue and $50 million for an adjacent Frank Gehry-designed mixed use complex. It also includes $20 million for the highly publicized "Clean Tech Corridor," plus countless smaller projects that are slated to receive CRA investments of as little as $50,000. The Los Angeles City Council still must approve the projects. The San Francisco Redevelopment Agency is considering similar moves to support mega-projects such as as Hunters Point and Treasure Island, both of which would include thousands of units of housing. The city council in Long Beach approved $1.2 billion in total obligations, including both ongoing and new projects. The San Jose Redevelopment Agency approved a more modest $58 million in new obligations – including funds for a new ballpark – while Fremont approved $140 million for the construction of its new BART station. The Culver City City Council even enacted a purchase agreement, worth $14 million, to transfer ownership of an existing municipal parking garage from the city to the redevelopment agency. The move would presumably get the garage on the agency's books and thus decrease the amount of funds that the state would be able to absorb and reallocate. In Glendale, the city council approved a host of projects—including a library, football fields, and pedestrian improvements—worth a total of $480 million in tax increment, according to Philip Lanzafame, Chief Assistant Director of Community Development. The redevelopment agency is also supporting a highly publicized expansion of the Americana at Brand mall. "We entered into cooperation agreements with the city to obligate those projects that were included in our five-year implementation plan," said Lanzafame. Long Beach's Bodek said that the threat of being shut down July 1 evinces a "misunderstanding" of how redevelopment projects work. She said that her agency reserves the right to continue entering into new contracts, especially on projects—such as a fire station currently under construction—that are already underway but may need amendments. "We cannot afford to jeopardize those projects," said Bodek. Though securing funds may seem like an underhanded move while the budget debate just gets started, Lanzafame said, "all the cities that are working on this strategy or similar strategies had been put in this position by Sacramento, because there had been very little conversation with local jurisdictions." Many officials had in fact expected the Legislature to pass legislation preventing this rush to secure funds, but thus far none has materialized. Senate Pro Tem Darrel Steinberg has indicated that he favors a compromise between the governor and redevelopment agencies and is not pushing any such legislation. In an initial report published the day after Brown released his budget proposal, the Legislative Analyst's Office warned that agencies would attempt to fast-track projects and therefore decrease the amount of tax increment that the state could recoup. The governor's budget estimates that once all other obligations are paid, the elimination of redevelopment will create a net gain of $1.7 billion for the state. Most of these monies will be returned to localities in the form of funding for schools and trial courts.  CRA spokesperson Krista Noonan said that CRA does not have accurate records of what agencies are doing statewide. She said that CRA is telling agencies they can approve projects "that are all set and ready to go, but if you have future projects we've told them to hold off on those." Indeed, that's far from the only thing that has eluded accurate record-keeping. Just about every aspect of the governor's proposal is at issue, ranging from the true value of the re-appropriated increment to the legality of the plan itself. Redevelopment officials argue that redevelopment is enshrined in the State Constitution and that Proposition 22 prevents the state from appropriating local redevelopment, and transportation, funds. The governor's office will likely argue, however, that redevelopment agencies exist only with the approval of the Legislature and governor and therefore can be eliminated. Beyond the legal arguments lies a deeper, and seemingly intractable debate over the effectiveness of redevelopment. Almost all involved – including CRA Executive Director John Shirey – acknowledge that the state's dire fiscal situation requires shared sacrifice. However, redevelopment officials contend that the value of redevelopment to localities far outweighs the property tax revenues that are diverted from the state's coffers. They say the proposal is therefore "penny-wise and pound-foolish." (Also, redevelopment agencies have already surrendered more than $2 billion to balance the state's budget.) But even this contention relies more on anecdotal evidence and casual studies than on a comprehensive, rigorous evaluation of redevelopment. State Controller John Chiang announced Jan. 25 that he would review 18 agencies statewide by mid-March (see InBrief). Redevelopment has suffered some scathing critiques, most notably from both the Los Angeles Times and the Senate Office of Oversight and Outcomes in September, which found that many agencies were failing to produce affordable housing and were instead stockpiling the 20 percent of their tax increment that is supposed to go to affordable housing. More broadly, agencies have been accused of cronyism, overly liberal definitions of blight, and lack of transparency. "Are there abuses in redevelopment agencies in terms of a more expanded view of blight? Certainly," said Renata Simril, managing director at real estate services firm Jones Lang LaSalle and formerly a developer with Forest City Enterprises. "That's not an issue of all redevelopment agencies are bad. It's more of an issue of an appropriate….regulation and approval method." Academically, the governor's proposal has stirred debate over whether redevelopment actually creates a net benefit statewide or whether its incentives and subsidies simply draw development into certain areas rather than others. Redevelopment has vexed scholars mainly because, they say, it is almost impossible to design a study that filters out other variables and hones in on a causal relationship between tax increment spending and the economic activity that is associated with redevelopment. It is, in short, impossible to evaluate what would have been developed in the absence of redevelopment. "It's hard to do an in-depth study on a policy like redevelopment," said Jed Kolko, research fellow at the Public Policy Institute of California. PPIC's only major study of redevelopment came out in 1998 and did not find significant benefits from redevelopment. Studies in other states have been similarly inconclusive. "The TIF area might grow or it might just be pulling growth from other areas," said Joan Youngman, senior fellow with the Lincoln Institute of Land Policy. "That's one of the concerns: If you're just moving development around instead of creating something new." Youngman also noted that much of the increase in TIF revenues are due to inflation, not proactive efforts to stoke development. As well, even if redevelopment does legitimately create local multipliers that justify the investment of tax increment money, critics of redevelopment still note that when dealing with the statewide budget, everything is relative. "I think you can say that (there are positive externalities) about almost everything, and certainly people do say that about other areas of the budget that are also slated for large reductions as well," said Jean Ross, executive director of the California Budget Project, a nonprofit watchdog organization. "We're looking at large cuts proposed to health programs that pull in, in some cases, 2-to-1 federal match. Those certainly have large multiplier effects." This lack of certainty has meant that the debates over the governor's proposal fall largely along the lines of self-interest. City councils across the state have passed resolutions opposing the proposal while others – especially firefighters and teachers unions – have praised it as an appropriate windfall. "For the state continuing to subsidize a program that has mostly local benefits, it seems like a program that would be appropriate for realignment or shifting it down to the local level," said Mark Whitaker, senior fiscal and policy analyst at the Legislative Analyst's Office. Counties are caught somewhere in the middle, according to Paul McIntosh, executive director of the California Association of Counties. Counties have frequently feuded with municipal redevelopment agencies over the fact that redevelopment can detract from county coffers. "There has been that natural rub and a great deal of skepticism on behalf of counties looking at cities that are using redevelopment….for projects that are, in the county's opinion, questionable redevelopment projects," said McIntosh. However, he also noted that 23 counties have their own redevelopment agencies, which the governor's proposal would eliminate alongside the city agencies.    But the proponents of redevelopment argue that a statewide perspective is beside the point: redevelopment, they say, was designed as a catalyst for local development, especially in places that need it most desperately. "There is an inherent gap between the cost of construction and the rent that you can derive in those markets," said Simril. "Greenfield development is easier than infill development. Infill development requires incentives," said Chris Redfearn, director of the Graduate Program in Real Estate at USC. "There's a sense that agglomeration is more beneficial for society—that we all benefit from having cities organized in a certain way." The nature of those benefits—or lack thereof—will likely be scrutinized in the coming weeks. Big-city mayors will be meeting with the governor to plead their case, and the Senate and Assembly budget committees will be holding hearings Feb. 3 and 7, respectively. Contacts & Resources: Amy Bodek, Long Beach Redevelopment Agency, (562) 570-6615 Jed Kolko, Public Policy Institute of California  http://www.ppic.org/ , (415) 291-4400 Philip Lanzafame, Chief Assistant Director of Community Development, City of Glendale, (818) 548-2005 Krista Noonan, Director of Communications, California Redevelopment Association  http://www.calredevelop.org/ , (916) 448-8760 Chris Redfearn, Director, USC Graduate Programs in Real Estate, (213) 821-1364 Jean Ross, Executive Director, California Budget Project  http://www.cbp.org/ , (916) 444-0500 Renata Simril, Manging Director, Jones Lang LaSalle, (310) 595-3660 Mark Whitaker, Senior Analyst, Legislative Analyst's Office, (916) 319-8335 Joan Youngman, Senior Fellow, Lincoln Institute of Land Policy  http://www.lincolninst.edu/ , (617) 661-3016

What would life be like in California without redevelopment? This is not a question that most cities, planning consultants, or urban developers in California have ever wanted to ask. But now Gov. Jerry Brown has forced the issue. Cleverly skirting the long-standing legal skirmishes over whether it's constitutional to take money away from redevelopment agencies, Brown has proposed simply abolishing the entire system, which can be accomplished via statute. The redevelopment establishment – accustomed to head-on assaults on its revenue but not its  reason d'etre  – never saw this one coming. "Shell-shocked" is far too kind a term to describe their current state. To be sure, killing redevelopment would create a major disruption for the people who work in the redevelopment establishment – redevelopment agency employees, lawyers, consultants, bond underwriters, and others who have devoted their life to the intricacies of the California redevelopment system. Some would lose their jobs or, at the very least, a lot of their income; some would keep doing what they're doing now; and some would adapt to the new world. For these folks – who, frankly, make up a significant portion of the audience for this publication – the prospect of a world without redevelopment is pretty scary. But what else would happen? The main thing that would happen is that California's tax-increment machine would come to a halt. Some projects would continue to move forward for those redevelopment agencies that still have a lot of bond revenue. But new activity would cease, and gradually cities would have to figure out how to attract real estate development – and build public infrastructure – in priority areas without using the funds available from tax-increment. On the one hand, it would create a more level playing field; on the other hand, it could place priority locations with expensive problems – brownfields, downtowns with small parcels – at a significant disadvantage compared to greenfield sites. Over the decades, redevelopment has been idealized as a highly effective tool to "save cities" and demonized as an evil plot by which big government and big developers squeeze the little guy. At different times in different cities, of course, it has been both. In recent years, however, redevelopment has increasingly been about one thing only: Cities capturing property tax increment dollars. Though complicated as a technical process, redevelopment in concept is pretty simple. It relies on finding one condition – blight, whatever that is – in order to obtain unusual powers of eminent domain and capture the lion's share of future increases in property tax revenues (otherwise known as tax increment). Eminent domain used to be a big deal – the only way to remove the hold-out brake-shop owner from blocking construction of your convention center – but the truth is it's rarely used these days. Fire-breathing redevelopment opponents have scared cities out of using it much. What cities are really after is the property tax increment. In a post-Proposition 13 world, it is the only way that a city can increase its share of the property tax pie. By unilaterally declaring an area "blighted" and creating a redevelopment project area, a city that typically receives about 15% of property tax revenue can capture – even today – about 65% of new revenues. (Older project areas still get close to 100% of this "tax increment".) In other words: Find blight and most of the future tax revenues in an area belong to you, not to the county and the school district. The state gets involved because, under court cases governing equalization of school funding, the state must replace all school funds lost to redevelopment. Is it any wonder that blight, as redevelopment wags like to say, is in the eye of the beholder? Is it any wonder that cities have pursued redevelopment as aggressively as possible in the three decades since Proposition 13 outlawed any increase in property tax rates? Is it any wonder that California uses tax-increment financing far, far more than any other state? And it is any wonder that the redevelopment establishment has had to play a defensive game in Sacramento – giving up tax-increment and flexibility inch by inch – since the last time Jerry Brown was governor? But other than redirecting property tax revenue from counties and school districts to a city's redevelopment fund, what is the endgame? The redevelopment establishment is fond of referring to redevelopment as California's largest economic development program – and they're right. As Brown's proposal has reminded everyone, redevelopment is a multibillion-dollar-a-year economic development program. But is it meant to generate a net increase in economic activity? Or is it meant to direct real estate development into specific, preferred locations – to combat poverty, for example? The redevelopment establishment uses both of these rationales depending on the situation, and in fact redevelopment is used for both these purposes – and many more besides. This has always been the big question about redevelopment in California. Tax-increment financing is an extremely flexible local funding tool. And part of the reason that it's so popular – and used in so many different ways, some legitimate and some not – is that it's just about the only tool cities have. This flexibility has always been the appeal of redevelopment to local officials. It's also what drives Sacramento finance nerds crazy about it. And therein lies the dilemma. On the one hand, redevelopment is the only game cities have to play – and those that play it well can show dramatic results. On the other hand, if you're the governor of California and you're going to put several billion dollars a year into economic development, would you pick this? A hodge-podge of subsidizes for both affordable and market-rate housing, big sales-tax generators such as retailers, some industrial development, hotels, and whatever else each city around the state thinks is important? The good thing about the current debate is that, after decades of attack-and-retreat skirmishing between Sacramento and the redevelopment establishment, Jerry Brown has finally called the question. For the first time in six decades, California has the opportunity to re-examine redevelopment's goals and purpose. After all, Brown is doing something more than just calling for the end of redevelopment. He has almost also promised "a new tool" for local governments to pursue economic development. But that moment could be squandered in the heat of the moment. The default solution would be more of the same: the redevelopment establishment again coughs up some more tax increment and gives up some flexibility, in exchange for continuing to exist. This is just an extension of what's been happening for years. On the other hand, Brown could try to use his leverage to force more fundamental changes that make redevelopment more useful and politically sustainable without doing away with it completely. For example, California could adopt a more targeted tax-increment program, aimed at specific situations such as transit-oriented development and brownfields. And such reform could do away with the blight finding, which has little more that a façade for decades. Yes, there would be a lot less flexibility for cities and redevelopment would be a smaller program under this kind of reform. But it would bring California in line with other states. Priority locations would still qualify for a break. And redevelopment abuse would be much less likely – making it a less juicy target for Sacramento year after year and, for that reason, a tool that cities know they'll have. That would be a real step toward a sustainable California – not just fiscally but politically as well.