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.
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.