Should California End Redevelopment Agencies?

Last week, RDA director Harry Mavrogenes and the San Jose City Council said they would work to keep the Redevelopment Agency going despite Gov. Jerry Brown’s intention to shut down agencies statewide.

An article in the Mercury News closed with the following paragraph: “The governor’s finance office said Brown has not wavered on his position and cited a study released Tuesday by the state’s Legislative Analyst’s Office. The report offers support for Brown’s plan to eliminate the agencies and replace them with other ‘tools to finance economic development.’”

The Legislative Analyst’s Office (LAO) is a non-partisan office that provides fiscal and policy information and advice to the state legislature. Here are some highlights (and “lowlights”) from the LAO’s report, “Should California End Redevelopment Agencies?”

“Redevelopment’s share of total statewide property taxes has grown six-fold (from 2 percent to 12 percent of total statewide property taxes). In some counties, local agencies have created so many project areas that more than 25 percent of all property tax revenue collected in the county are allocated to a redevelopment agency, not the schools, community colleges, or other local governments.”

“Redevelopment: Findings from research and studies:
Positive: Flexible tool that can improve target areas. Helps build affordable housing.
Negative: No evidence that redevelopment increases overall regional or statewide economic development.
Diverts revenues from other local governments and increases state
education costs.
Has limited transparency and accountability.”

“While redevelopment leads to economic development within project areas, there is no reliable evidence that it attracts business to the state or increases overall regional economic development. Instead, the limited academic literature on this topic finds that—viewed from the perspective of an entire city or region—the effect of this program on property values is minimal. That is, redevelopment may cause some geographic shifts in economic development, but does not increase the overall economic activity in a region.”

“To the extent that a redevelopment agency receives property tax revenues without generating an overall increase in taxes paid in the state, the agency reduces revenues that otherwise would be available for local agencies to spend on non-redevelopment programs, including law enforcement, fire protection, road maintenance, libraries, and parks.”

“Redevelopment agencies lack some of the key accountability and transparency elements common to other local agencies. Specifically, unlike other agencies, redevelopment agencies can incur debt without voter approval. Redevelopment agencies can also redirect property tax revenues from schools and other local agencies without voter approval or the consent of the local agencies.”

“While the Governor’s plan would phase out the existing redevelopment system, it also proposes a constitutional amendment to allow local voters to approve tax increases and general obligation bonds for economic development purposes by a 55 percent majority. At this time, details on this portion of the proposal are not available. As we understand it, cities and counties would retain the powers granted to them under redevelopment law except for the use of property tax increment revenue. In the place of tax increment revenue, the proposal would lower the voter threshold for other financing mechanisms that local governments could use to pursue economic development activities that are currently carried out by redevelopment agencies.”

“Given the significant policy shortcomings of California’s redevelopment program, we agree with the Governor’s proposal to end it and to offer local governments alternative tools to finance development. Under this approach, cities and counties would have incentives to consider the full range of costs and benefits of economic development proposals.”
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Read the Legislative Analyst’s Office (LAO) report here.

16 Comments

  1. Findings from research and studies:

    Positive:
    Flexible tool that can improve target areas. Helps build affordable housing.

    Negative:
    No evidence that redevelopment increases overall regional or statewide economic development.
    Diverts revenues from other local governments and increases state education costs.
    Has limited transparency and accountability.”

    Based on this scorecard I find a high degree of similarity between the plusses and minuses of “redevelopment” and those of “political graft.” Historically, graft has proven itself a flexible tool for problem solving, so much so that it in many cities (including San Jose), and in a variety of situations (such as obtaining permits or gaining approval for a project), it has often been the only surefire tactic. That said, its downside has been well-documented and the case for eradicating it from government overwhelming.

    And now, it seems, the case against redevelopment has also been made. And is anyone really surprised? We taxpayers haven’t a chance of ever seeing a return on our redevelopment “investment” downtown, in which billions have delivered little more than an ongoing and embarrassing identity crisis. That our mayor intends to continue using redevelopment to secure and ready land for his billionaire buddy, despite the results of the state’s non-partisan report and the budget crisis, speaks volumes about his personal competence as well as the credibility of his commitment to budget reform.

  2. Declaring the orchards of North San Jose as ‘blight’ so tens of millions of dollars could be diverted to Downtown projects is a great example of the abuses of our RDA.  Now they are building thousands of new residential units in North San Jose with no money for the General Fund to pay for all the city services which these new residents will need.  Our city can’t afford to continue diverting money from the General Fund to build pet projects like stadium.

  3. “No evidence that redevelopment increases overall regional or statewide economic development. “

    – The major argument for redevelopment have been proven false – Dah

    “Has limited transparency and accountability.”

    – No Surprise, that redevelopment hides who gets our taxes, faked economic benefits and will not publish a complete redevelopment tax spending list so public can see who got our tax money

    Redevelopment is “legalized political corruption ”  –  paying politicians for tax money and taking private property to give to political contributors and insiders private profits

    Close RDA’s “legalized political corruption ” NOW

    Thank you Gov Brown

  4. The San Jose RDA is a boondoggle. It is taxpayers money being used to fund wealthy business owners and to get politicians elected.  Period.  All one needs to do is follow the money.

    We all know that Yes on V&W was near and dear to Reed.  (Oliverio too as we’ve seen with the signs).  So who better to help out with campaign contributions than people who will benefit the most from RDA funds (Hand outs for affordable housing).  In the likes of:

    California Apartment Association,
    Core General Contractors,
    Greenwaste Recovery,
    South Bay Development Co.,
    Hunter Storm LLC,
    Guinn Construction,
    South Bay Construction,
    Webcore,
    Arcadia Development,
    Trumark Companies,
    Bradenburg Staedler and Moore (Real Estate Investors),
    Shapell Homes. 
    And lets not forget about SUNPOWER who contributed $5000.00 to his cause AND just received $500,000.00 from the RDA for their kind gift.

    Furthermore, let us not forget that the SJRDA has given McEnery’s company (Urban Markets LLC) more than $6 million for his projects.  Who does McEnery hire to build his projects……Barry Swenson.  JUST FOLLOW THE MONEY.

    Can someone tell me what the angle is for the Del Grande Dealer Group and Robert Kieve (KLIV CEO)?  What are their kick backs?

    http://www.bayareanewsgroup.com/multimedia/mn/news/sanpedro_complaint_120908.pdf
    http://www.barryswensonbuilder.com/san-pedro-urban-market/

    • I appreciate your insight. IMHO, the RDA simply ran its course of the legal requirement it complete its program in 30 years. The economy certainly expedited the eventual sunset. It was becoming more difficult to find a market for the bonds that were the RDA’s lifeblood with the problems surrounding the municipal bond market. The vision that brought the downtown back from the dead departed San Jose a long time ago, leaving bumbling bureaucrats in its wake. It’s now apparent City Hall used the RDA to plug many holes including mayor and council salaries and the made-up overhead and other charges that will exacerbate their current year budget shortfall. City Hall was just as hooked on RDA funds as developers and political cronies were. Now they will all feel the sting that employee “unions” and others have endured these past few years.

      • RDA Reject:

        I cannot deny that the SJRDA, the council and the big company cronies ran (run) this boondoggle in the confines of the law.  However, morally they are guilty and corrupt.  Just like PLO stealing signs…he might justify it legally but morally he is guilty.  IMHO of course.

        Your views are well stated. 

        You say:  “council salaries and the made-up overhead and other charges that will exacerbate their current year budget shortfall.”

        Is this your opinion or can you shed more light on that statement?

        • I agree, just because it’s legal doesn’t mean it’s morally correct.

          The council salaries, made-up overhead and other charges were all addressed by Councilmember Liccardo during a recent RDA Board meeting.

          His comments were associated with an additional $9 million+ shortfall the RDA was warning the council about for the next budget year. His questions were on an exhibit put forth by agency and city staff that detailed agency obligations. He ascertained this nine million dollar shortfall is not part of the   100+ million budget deficit the city budget director has identified. Councilmember Herrera followed this up with her comment of feeling ‘sick’. No other councilmember discussed it leading me to believe they are still in the dark with regard to the peril the RDA is the city services.  The city’s budget director took some heat at the following week’s budget discussion for not including it in her 100+ million dollar shortfall. Why she hasn’t is a mystery to me. Maybe city staff doesn’t think it’s real? Or they plan on sweeping whatever RDA money is left on 6/30 to the city side?  I think that $9+ million shortfall is real to the city’s GF.  Another thought that comes to mind is city staff could be eyeing the $20 million the agency has set aside to buy ballpark land even though everyone knows how badly the elected officials want the ballpark. Internal strife? That, I don’t have an opinion on or knowledge of.

  5. RDA was a nice tool.  Not always, or even frequently used as originally intended (helping poor and blighted areas).  I think its more honest to sunset the whole thing and find some new tools.

    Does government ever shrink or close down non-performing areas?  Sadly, no.  Inertia seems to suggest that bad legislation and administration begets more bad legislation and programs.  I’d rather shut down a dumb agency and legislative program and start fresh than keep trying to fix problems in ways that won’t offend anyone (and inevitably doesn’t help anyone either.)

    RDA had a nice run.  I like the MLK library, a couple of the towers downtown and the Arena.  I’ve never been a fan of the convention center, pavilion or transit malls.  Could care less about baseball, football or neighborhood street-scape improvement districts or whatever. I don’t really know if the RDA slush fund went into City Hall, but I love the location but am underwhelmed by the final product (woulda bought the Sobrato tower and made that into the City Hall instead for 1/10th of the cost.)

    Don’t like the corruption both explicit and implicit in such large deals done just outside of public scrutiny.  Feels like public goods and private profit are being intermingled using these 30 year bond deals in weird ways that don’t feel right.

    Money = power = friends.  At lot of “friends” won’t come around if there aren’t big money deals for them, but maybe we don’t need friends like that anymore.  And maybe they weren’t really our friends.

    • ”  Feels like public goods and private profit are being intermingled using these 30 year bond deals in weird ways that don’t feel right.”

      I don’t think that could happen (30 year bond deals) could happen without the IRS getting involved. These are tax exempt bonds after all.

  6. RDAs are an invitation to misuse of public funds. Our elected officials need less discretion, not more, regarding how to spend tax dollars.
    The role of government needs to be limited and clearly defined, not subject to the ‘creative interpretation’ of ambitious, pandering politicians.
    Economic development does not need the help of the government. It only needs people who are willing to work hard and put their OWN money where their mouth is.

  7. > And lets not forget about SUNPOWER who contributed $5000.00 to his cause AND just received $500,000.00 from the RDA for their kind gift.

    Grrrrr.

    This has to qualify as an over the shoulder, behind the back, left handed corruption triple bank shot of some sort.

    One political juice operation sucking off of another juice operation, masquerading under the feel good theatrics of pollution fighting, oil company bashing, foreign dictator independent “solar energy”.

    Fleecing the ignorant, mouth-breathing, drooling taxpayers is just TOO, TOO EASY!

  8. The RDA has pushed for many policies over the years that benefits the RDA but hurts the City’s General Fund.  The RDA kept shopping, restaurants and full service hotels out of North San Jose to ‘protect’ downtown, but all they did was help Milpitas develop the highly successful McCarthy Ranch shopping center, and Santa Clara develop the Rivermark shopping center.  So, instead of workers in North San Jose having quality places in North San Jose to shop and eat out, they are forced to spend their sales tax dollars in neighboring cities.  We are finally starting to see some change with the recent @First development with the new Target on First Street, but San Jose has lost tens of millions of General Fund dollars because of the misguided actions of the RDA.

  9. Yes! No matter an RDA’s good intentions, you can’t put this kind of money in the hands of politicians, who turn it over to developers. That’s especially true in a city like San Jose, which is in its adolescence and generally drives while DUI. I’m interested in what other kind of “tools” Brown has in mind. Is anybody checking?