Brown's Redevelopment Firestorm

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Lost in the back-and-forth over Governor Jerry Brown's plan to shut down hundreds of local redevelopment agencies and funnel their property tax dollars elsewhere are a couple of pretty important questions: will the plan actually work? And is it driven by reform, or revenue?

My look at the broader implications of the governor's push to abolish redevelopment agencies aired this morning (listen above) on The California Report. The goal was to lay out a fundamental question for voters: with all of the pressures on government services (and we highlighted schools), is the use of property tax dollars to fund economic development projects a necessity or a luxury?

It's no surprise that there's some strong disagreement out there on how to answer that. The fate of the governor's plan (PDF), to place a stop on the funding (and therefore the existence) of almost 400 city and county RDAs, is still very much in doubt. It's also very much a work in progress… and all sides lament that Brown's team has yet to actually lay out specific language, language that would spell out just how RDAs would be shut down; which commitments made by the agencies would be honored and how that would be put in place; and exactly how the property tax revenues thus freed up would be distributed to schools and local governments.

The redevelopment proposal is actually a much smaller portion of the governor’s $26 billion deficit solution than the bitter sniping lets on. Yes, he's counting on $1.7 billion from the RDA shutdown, but that's similar in size to the combined hit on higher education and likely less impactful than his planned deep cuts in social services or even the extension of income, sales, and vehicle taxes.

And here's where the first question comes in: will eliminating redevelopment agencies actually work? Brown's plan often gets mischaracterized as a simple 'raid' on local money by the state. But in truth, it's a two-step dance. Step one is, in fact, a local-to-state transfer to help close a two year budget gap of about $26 billion. But step two is where things get a lot murkier. The governor's proposal would free the property taxes in each city and county now sequestered for redevelopment, thus sending those dollars back into the bank accounts of schools, cities, counties, and special districts.

But again, no one knows exactly how that transfer will happen… who will oversee it... and no one seems to have definitive data on what the benefit will be to the services mentioned above. Our radio story traveled to the college town of Davis for a look at both the challenges for schools (which the Guv’s supporters say would ease) and the world of redevelopment.

It's important to note that redevelopment has undergone a pretty dramatic morph over the decades in California. Eradicating visible blight was its first goal; then came mandates on affordable housing; then required assistance to local governments (known as "pass-through" agreements); and more recently the broad goal of economic development. Davis' redevelopment agency, like many others across the state, sees its mission in pretty broad terms – going after, in the words of a city PowerPoint presentation, both "physical (visible) blight" and "economic blight." City councilmember Rochelle Swanson admits that the former is hard to find in picturesque Davis. But she says the city's RDA has put aside a lot of money for affordable housing, and has -- in her view -- made wise decisions in helping restaurants, theaters, and shops.

"Those turn around and generate tax dollars over time," she says, "That's an investment."

And here’s really where the fight comes down to, at this point, competing world views: just what is the best investment of existing tax dollars? When California voters approved a fairly wonky ballot measure in 1952 that sequestered all property tax growth in redevelopment districts, government financing was a much different animal than it is in 2011. That's especially true for public schools, which Governor Brown has put front and center in his argument for abolishing redevelopment agencies. Brown and his supporters say schools will benefit from the extra property tax dollars now being used by RDAs.

"Maybe in a better time and a better world, you could spend for priorities that are lower," said state Treasurer Bill Lockyer at a recent legislative hearing.

Like so many communities, school budget woes are a hot topic in Davis. In May, the city's voters will be asked to approve a new parcel tax estimated to bring in about $3 million a year for the Davis Joint Unified School District – money that won't even undo the cuts made in recent years.

"That parcel tax passing," says superintendent Winfred Roberson, "will help us to maintain current staffing levels."

So will Davis schools get a big boost in a few years if legislators and Brown ax the city’s redevelopment agency? Probably not. City officials provided detailed data showing how the current RDA slice of property tax dollars -- totaling $10.4 million -- are being spent. A large chunk of that money goes to pay either bonded debt, is already sent to Yolo County as the "pass through" payment, or is committed to affordable housing projects. And while the raw amount that could go to Davis' schools may be as much as $680,000, interim city manager Paul Navazio said in an email that even school officials believe that the final benefit to schools could be less than $250,000.

Nonetheless, the Brown administration argues that the annual statewide benefit to schools and local governments would be about $1.9 billion. And while that may not include much in Davis, anecdotal evidence suggests some agencies are sitting on more unencumbered cash; several, in fact, are now accelerating their action in hopes of getting ahead of any cash cutoff approved at the state Capitol.

Some ideas are circulating out there about a possible middle ground – some way of rejiggering the property tax dollars now given to redevelopment agencies. But most of the rhetoric remains focused on what government should, or should not, be subsidizing… and what priorities the public has for existing tax dollars.

The real trouble with the fight, especially for reporters, is that hard evidence of redevelopment agency success or failure is elusive. While an extensive report in 1998 found little demonstrable economic benefit, no such study has been done since. In fact, one of the most heated exchanges in recent weeks has been between the PR campaign in support of redevelopment agencies and the nonpartisan Legislative Analyst's Office. After the California Redevelopment Association promoted a report that links large job and economic activity to keeping RDAs, the LAO dismissed the report's methodology… which sparked a counter attack from the CRA coalition, and then another response from the LAO.

Governor Brown has promised that if his RDA abolishment plan passes, he'll offer up a replacement plan for local economic development: a constitutional amendment removing the supermajority threshold for any local tax specifically targeting economic development. However, that proposal is only theory at this point. It also would have to overcome opposition by defenders of Proposition 13, the mandate for supermajority votes on tax hikes.

Speaking of money, it's unclear whether Brown’s plan makes financial sense for the state. The governor promised to end the "smoke and mirrors" of Sacramento budgeting, but is relying on 2008-2009 RDA data, the most recent statewide report, when promising $1.7 billion in projected help for this year's state budget mess. Is all of that cash still out there?

Even more intriguing: the governor does not intend to reduce state spending from the long-term shift of property tax dollars away from redevelopment. Again, consider K-12 schools. The way the system works, every dollar short a school district comes up in local property taxes, the state hands over in other tax revenues. So you'd assume that the governor's plan, which promises more local property taxes for schools, would mean less state budget spending, right? Wrong.

The governor's budget advisers confirm that Brown sees the RDA dollars as a supplement to current school funding, not a replacement for dollars from the depleted state budget. That means that… after the first year… there's no identified savings to state government from the elimination of redevelopment agencies.

KQED/John Myers

The governor's plan is being backed by an unusual alliance of both liberal and conservatives, groups with either vested interests in services that would get the extra money (education groups, public employees) or an aversion to how some redevelopment agencies have operated their economic development projects and exercised the power of eminent domain. On the other side are mayors and city councilmembers in dozens of California cities, who argue that Brown (himself a former mayor) is advocating a 'penny wise, pound foolish' strategy. They also argue that the first year of his plan – the part where the state budget is helped – is illegal under last November's Proposition 22.

In the end, the hardest part to sort out about protecting, amending, or ending California's redevelopment laws is… as with so many things in 2011… the calendar.

The governor is asking state and local officials to compromise and accept a plan, in just a matter of weeks, that seeks to undo decades of government operations. And so far, the diehard warriors and their PR operations are the only ones who see this fight as clear cut, black and white kind of thing. Others object to the 'zero sum' nature of the debate, and would like a more thorough examination of how tax dollars are spent on services and investments… an examination which isn’t likely to be complete by the time the clock runs out next month.

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About John Myers

John Myers is senior editor of KQED's new California Politics & Government Desk. He has covered California politics for most of the past two decades, serving previously as Sacramento bureau chief for KQED News and most recently as political editor for KXTV News10 (ABC) in Sacramento. In 2014, he was named one of the nation's top statehouse reporters by The Washington Post. Follow him on Twitter @johnmyers.
  • hillary_b

    Life isn’t the same without the podcast- bring it back!!

  • Marilyn

    John, What has happened to the podcast?

  • http://www.kqed.org/weblog/capitalnotes/blog.jsp John Myers

    Sorry about the CN podcast absence. The reality is that you’ve got two Capitol reporters with very busy, and sometimes incongruous, schedules… and the last two weeks, we just couldn’t align the planets. But we’re committed to getting back on track this week.

    Thanks for your patience. The podcast started out as a bit of an experiment, and it’s nice to see so many folks have picked it up!

    —JM