Sacramento Bee Columnist Dan Walters wrote a piece that recently appeared in the Mercury News that voiced support for the governor’s plan to take money from the state’s redevelopment agencies to help close the state’s budget deficit. The article got the attention of San Jose’s Redevelopment Director, Harry Mavrogenes. Their debate is instructive. Here’s a second look at some of their arguments.
“Redevelopment funding is one of the few tools that local governments still have to generate economic activity, meet the infrastructure needs for a growing economy and build badly needed public buildings.”
“Predictably, local redevelopment agencies are howling about what they see as an arbitrary raid on their funds. On closer examination, however, Schwarzenegger’s property tax shift makes a lot of sense…Any increases in property taxes are retained by the agencies rather than shared with counties, schools, and other local government entities.”
“The governor’s budget proposal would divert $10 million of the San Jose Redevelopment Agency’s tax increment revenues annually for three years. While this is 5% of our gross revenue, it is a much higher percentage of our net revenues after paying our debt service, obligations to the county, affordable housing fund, and other commitments. Because the agency is able to bond its revenue at a ratio of 10 to 1 ($10 for every dollar of tax increment revenue) the total reduction is closer to 10 times that over three years.”
“The rub is that the state constitution requires that any losses of property tax to schools must be back filled from the state general fund, an indirect state subsidy for redevelopment estimated at $2 billion a year. It’s simply irrational that state funds should underwrite auto malls, big-box retailers and other projects that local officials favor.”
“A common misconception is that redevelopment agencies underwrite auto malls or big-box retailers. Redevelopment agencies use their resources for vital needs: infrastructure, affordable housing, and revitalization of rundown areas.”
Who do you believe?
(Sources: Mercury News 9/4/08 and 9/8/08)