Land Saved for A’s Stadium in Limbo; Legislators Look at New Finance Options

When Gov. Jerry Brown ordered in 2011 the dissolution of California’s 400-plus redevelopment agencies, San Jose was forced to halt the kind of subsidized development that built much of downtown over the past two decades. Forty-two city landmarks exist because of the now-defunct Redevelopment Agency: the San Jose Convention Center, Adobe headquarters, the upscale Tower 88 apartments, San Pedro Square—all were funded in some way through money borrowed against future boosts to property tax.

That didn’t go over so well with local powers-that-be, obviously, as the city must now pay off its debt service before passing on millions in annual tax revenue straight to state coffers.

But the legal fight over former RDA properties and cash is far from over.

State Controller John Chiang announced in a report Thursday that some of the properties the city transferred in 2011, including land by Diridon Station planned for a future Oakland A’s stadium, was unlawfully shifted. Chiang says that the city should not have transferred $148.1 million in cash, land and other assets from San Jose’s RDA to its successor agency. Proceeds from the sale of those properties should have gone to schools, public services and paying down leftover redevelopment debt, Chiang says.

“The governor and legislature made it clear that redevelopment assets need to go toward retiring RDA debt and funding critical services at the local level,” Chiang says. “Our reviews in San Jose and elsewhere are meant to ensure that happens.”

But San Jose Mayor Chuck Reed begs to differ.

“I am disappointed in the findings,” Reed said in a statement. “The properties transferred to the city include assets that serve a civic or government function, and likely will fall under the government use provisions of the new redevelopment dissolution law and my expectation is that the Oversight Board will make the same findings.”

While the state report doesn’t help the chances of the A’s relocating to San Jose, it doesn’t kill the proposal for a baseball stadium to be built in San Jose. County Supervisor Dave Cortese said Thursday that the county could help in reformulating an agreement.

Replacing redevelopment
While the state tries goes through hundreds of post-closure redevelopment audits—28 are complete to date—lawmakers are figuring out how to replace what was lost in the RDA-fueled era.

State Aseemblymember Nora Campos (D-San Jose) introduced a bill last month, AB 690, which basically resurrects redevelopment by allowing a simple majority of voters to form “job and infrastructure districts.” Unlike redevelopment agencies, which formed districts based on loosely interpreted definitions of “blight,” this one targets areas with high jobless rates, creating 10 well-paying jobs for every $1 million invested.

“Unemployment is the new blight,” says Campos, the speaker pro tempore, in a statement introducing the proposed legislation. “Though our economy is showing signs of improvement, there are still 1.8 million Californians who are looking for work. California needs a program to help local communities attract and keep jobs.”

State Senator Lois Wolk (D-Davis) came up with her own version of tax-increment financing (TIF) legislation earlier this month. SB 33 would loosen up existing laws about forming what’s called an Infrastructure Financing District, making them easier to form by allowing local agencies to create them without voter approval.

The districts in Wolk’s plan use growth in property taxes, not new taxes, to fund development “without adversely affecting our schools, core local services, or the state general fund,” she says.

Reed, in Washington D.C. on city business this week, wouldn’t comment on the Campos bill or anything like it, his staff says, because he hasn’t had time to read them yet. The San Jose Chamber of Commerce also declined to comment on a bill it hasn’t yet reviewed.

David Vossbrink, communications director for the city of San Jose, says the city could use a new model to replace redevelopment, but it has to be a step up from its predecessor.

“Over the years we opposed efforts to eliminate redevelopment because that would take away a valuable and effective tool for California’s cities to use to eliminate blight, create jobs, develop the economy and support the creation of affordable housing,” Vossbrink says. “Legislative efforts to provide cities with new economic development tools to replace what was lost with redevelopment might be a good thing, perhaps, but the challenge, as always will be in the details. Our City Council has not yet taken any positions on these bills, and staff will be reviewing them to see whether we should. At this time it’s too soon to say how we will come down.”

While the city’s elected leaders seem weary to opine about the bills, Harry Mavrogenes didn’t hesitate to express his support for anything that revives some semblance of redevelopment agencies. The former head of San Jose’s RDA, who’s now a San Joaquin County executive, says he’s rooting for one of the bills to go through. Since several lawmakers have offered some version of it, he thinks they’ll eventually get together to mix the best parts of each legislative proposal into a refined version—and then hope Brown doesn’t veto the bill.

Competing with out-of-state industry
California’s had a tough time competing without redevelopment, says Mavrogenes. Forty-seven other states have some version of it, including Texas, which makes it easier to woo companies out of California.

“We have so many requirements and no incentives to set up shop here,” he says. “It makes it very difficult for local governments to bring in more jobs.”

Brown vetoed similar TIF bills last year, saying it was too soon to reintroduce redevelopment-like measures because actual redevelopment agencies are still winding down. Of the 400 ordered closed, only 17 have actually liquidated, according to the state Department of Finance.

Maybe Brown still thinks it’s too soon, but local governments are champing at the bit for some type of economic development tool.

“I don’t know what’s on his mind right now, but if he looks at what’s going on around him, as other states take our businesses away, maybe he’ll change his mind,” Mavrogenes says. “I know he’s trying to create an economic development impact during his time in office. This is a powerful way to do that.”

In the meantime, San Jose’s been creative in coping with the loss of redevelopment, Mavrogenes says. He commends the council for offering tax breaks to developers to spur more high-rise construction.

Critics of redevelopment say replacement legislation could open the door to the same abuses that plagued the agencies in the past. But Mavrogenes hopes lawmakers will include protections against “corporate welfare” handouts and disingenuous interpretations of blight.

“Here’s a chance to come up with something better,” he says.

Jennifer Wadsworth is the news editor for San Jose Inside and Metro Silicon Valley. Email tips to [email protected] or follow her on Twitter at @jennwadsworth.

8 Comments

  1. I think San Jose’s problem is that it imposes too many regulations that make things unattractive, and rather than trying to reduce the red tape, it wants to create something to mitigate the financial impact of the red tape.  It’s the equivalent of an obese person taking drugs to mitigate the unhealthy effects of being obese.

    I think people in government love these sorts of solutions, because it takes the pressure off correcting problems, and instead creates more government.  Which is great if you’re in government, but not so great if you want real solutions.

    A friend that lives downtown once said to me that San Jose makes all these regulations and restrictions that actually create blight, by making it hard to make changes or improvements to anything over 50 years old.  Once things are blighted, someone comes along with redevelopment money, and razes the blight.  He said that the concerns about historical this, and neighborhood that seem to go away when things are redeveloped.

    Also, if I read it correctly, the threshold is 55% for Campos’ bill.  It also mandates that if housing is funded, 20% must be low income housing, and if low cost housing is removed, it must be replaced.

  2. This is exactly why Chuck and his cronies have screwed this city.  Lets give millions away and lie to the votes to get what we want.  So much for transparency and open negotiations with the unions.

    Example,

    City has come out in their 4th meeting with the Police officers unions.  On the table no to any pay raises, no to everything the POA has presented. And if you want to go to arbitration, the city version of Measure V is that the most you can be awarded is a 1.19% pay raise.

    Thank you Chuck for a police academy breeding ground.  Because as soon as most of these officers pass the training program they will be leaving for greener pastures.  And you think it is bad now, wait till you impose sick time buyout rules effective July 1, 2013.  Many more officers will jump ship.  Gee we haven’t even ended March and we have 10 murders.  On track for a new record.

    Thanks for you concern about public safety.  You have no intention to open the new substation because you do not have the manpower to do it.  Finally, I love the cities goal to purchase cheap patrol cars and ignore standard regulations.  Maybe the police can all drive electric cars and save the city some gas.

    • The exodus of officers will just increase with this latest proposal by the city. Those officers that hung on thinking things might improve can see the city has no such intentions, and in fact things will continue to precipitately slide backwards for officers. There are so many SJPD officers going thru the hiring process with other departments right now that will soon be gone given the latest offer by the city. Many recruits will leave once they finish the FTO program. What does it say about SJPD’s salary and benefit package when absolutely NO experienced officers from other departments apply here?? The destruction of this department continues. There are so many good women and men left at this department, who have given their heart and soul to this city, that will soon be gone due to the draconian city management. How is it that Chuck Reed ignores court rulings with impunity, and there never seem to be any consequences? Lets face facts regarding this land decision – Chuck Reed will never transfer this land as ordered by the State Controller, and NOTHING will ever happen as a consequence.

    • Some good points. It irks the hell out of me that police get bennies like lifetime sick pay payouts that are not available to private sector workers. But you have to pay what the market wants. Still the mayor acted wisely when he did because he faced a huge financial storm and did not want to kick the can down the road like every other politician. Just because the economic climate is improving it does not mean the state or the city have dealt with promises made to unions that they may never be able to fulfill without major tax increases.

      • Lifetime sick pay payouts? Where did you come up with that?  If officers had been on for at least 15 years, when they left, whatever sick time they had left in their “bank,” they were given as a ONE TIME payout. Officers who choose not to use sick time can really squirrel some money away.  But that also probably means they are showing up to work sick, instead of taking care of themselves, or not taking care of sick family members. If you are going to get bent, get your facts straight first.

  3. San Jose’s Biggest problem is that Mayor Reed is a proven liar and a cheat , $650 million dollar pension lie , paid back misappropriated funds , Illegal campaign contributions , illegal land deals , Illegal ballot measure ………….. Anybody else see a pattern here ? This Mayor has blamed all of the Citys woes of Employee pansions , but nobody talks about all of these questionable and more than likely illegal dealings. I just dont get it .

  4. Reed would be devastated if he didn’t have the ability to put taxpayers in another $10 Billion of debt…  That’s in today’s dollars.  Not “unfunded liability” like the $650 Million pension shortfall (that doesn’t exist).  Even if such pension woes were true, it would amortized over 30+ years like a mortgage.  San Jose’s RDA debt is in today’s dollars, is very real and your elected leaders want to add to it!  (By the way, pension funds are rebounding quite well from the stock market crash… but no news coverage of that.  Only reform gets ink.)

    The baseball stadium land would be a gift of $22 Million to Wolff and the City would get about $1 Million per year in revenue.  So that’s about 22 years of debt, just for the land.  Necessary upgrades to streets, sewers, water mains, traffic control during construction, traffic light retiming and tons of other considerations are apparently cost neutral… since Rufas never mentions them.  He maintains that the stadium is a win-win.  Reed has been caught lying dozens of times and the City is losing lawsuit after lawsuit under his guidance.

    There are 2 other funds the City operates besides the General Fund.  We only hear about the “deficit” that is in the General fund.  A 10% reduction to both of the other funds would easily solve any General funding problem the Council has.  A ballot measure making the Charter changes would have easily passed and would be 100% legal.

  5. Mayor Reed claims we don’t have the money to pay for public safety….why is it he can find money to give away to Lou Wolff and other private developers. Its not time to build new but to rebuild what we have lost. This city is falling apart around us, not just in the area of public safety but roads and other infrastructure. Stop the new projects, get back to basic services and rebuild what has been lost. Then we can look at building new.