REDEVELOPMENT: Court decision just the first step
SACRAMENTO — California redevelopment agencies have started the dissolution process after their disastrous legal defeat last month, even as supporters mount a last-ditch effort to maintain the community-improvement program in some form.
Auditors soon will begin compiling an accounting of the billions of dollars in debts and assets for the state’s more than 400 agencies. As of June 2010, that included $101 billion in total indebtedness — almost a fourth of which is held by agencies in Riverside and San Bernardino counties.
California Supreme Court’s decision Dec. 29 upheld the 2011 law dissolving the agencies and voided a measure creating a substitute program. But that was just the start: Shutting down the 60-year-old program is a logistical and financial thicket that could span decades and spark a new round of legal fights.
“No one knew what the wind-down period was going to look like” before the court’s ruling, said La Quinta Councilwoman Terry Henderson. The city’s redevelopment agency is among the most active in the state.
‘CHALLENGING AT BEST’
“I’m not sure a whole lot of people know what it looks like now. It’s going to be challenging at best, very difficult at worst,” she said.
Redevelopment works by collecting a share of the growth in property tax revenue in redevelopment areas. That money finances borrowing to pay for projects ranging from new sewer systems and downtown revitalizations to fire stations and multifamily housing.
Supporters view the program as a crucial source of money for business development, affordable housing and jobs during a down economy, without raising taxes. Inland Southern California has among the most active agencies in the state. In 2009-10, 45 redevelopment agencies in Riverside and San Bernardino counties spent almost $1.9 billion, almost 20 percent of all spending reported by the state’s 399 active agencies.
But Gov. Jerry Brown and other critics said the agencies subsidize wealthy developers at the expense of the state budget. The diversion of local property taxes to redevelopment forces the state to make up the difference to schools.
Brown proposed eliminating the agencies in his January 2011 budget. Lawmakers ultimately approved the two-bill package, over the angry objections of the League of California Cities and California Redevelopment Association, who sued.
Local government officials and other redevelopment supporters now are scrambling to salvage the program, yet with little political leverage after their unsuccessful legal fight.
“We don’t believe it was ever the intention of the Legislature to abolish redevelopment, but it definitely wants to change it,” said Jim Kennedy, interim executive director of the California Redevelopment Association. He said a revamped program could provide money to build affordable housing and help cities reduce greenhouse gas emissions through better land use and transportation planning.
Brown, however, seemed unwilling last week to extend a lifeline to redevelopment agencies.
Speaking to county supervisors last Thursday, the governor savored his legal victory. City officials, he predicted, will spend the coming months “pawing over the remains of redevelopment.”
He later told reporters that his administration has had very preliminary talks with redevelopment officials since the court ruling.
“Right now, it’s hand-wringing and then we’ll move on from there,” Brown said. “I have a willing ear to the Legislature, and I’m going to listen to them. But the court has been pretty decisive here.”
The turn of events has some redevelopment supporters blaming each other.
Last week, Tom Freeman of the Riverside County Economic Development Agency blamed cities and the redevelopment association for political and legal missteps that “brought this Armageddon on us.”
Riverside County Supervisor John Tavaglione said he thinks Brown might be open to working to restructure redevelopment, but only for county-sponsored agencies. Brown has worked closely with counties on shifting public-safety duties and seeks counties’ support for his planned ballot measure to increase taxes.
“He’s not real pleased with the league right now,” Tavaglione said, referring to the League of California Cities. “I think he has an interest in working with us to find another mechanism to make redevelopment work.”
State officials say the court’s decision will save the state about $1 billion in 2012-13, and increasing amounts in subsequent years.
As part of their review, auditors and agencies’ oversight boards will decide how much of the agencies’ property-tax revenue should go to paying off debt and how much should be redirected to schools and local governments.
“In no way, shape or form do we want to make these agencies break contracts or not pay their lenders,” Department of Finance spokesman H.D. Palmer said.
Inland Southern California agencies have some of the largest debts in the state. For every $1 in revenue Fontana’s redevelopment agency collected in 2009-10, for example, it had about $25 of total indebtedness. That compared with a statewide average of about $1 for every $18 of total indebtedness.
Some agencies went on a borrowing binge last year to get projects on the books before Brown could carry out his plan to phase out redevelopment. The law dissolving the agencies, AB 1x 26, gives officials the power to challenge those transactions.
Throughout California, the agencies’ total indebtedness includes $31 billion in tax-allocation bond debt, according to 2009-10 data filed with the state controller’s office. It also showed $9 billion owed to sponsoring cities and counties.
But the law dissolving the agencies did not include such debts as enforceable obligations. That reflected suspicions by some state officials that redevelopment agencies and their sponsoring entity would swap money in sham loans to avoid losing it.
Kennedy said the vast majority of those loans were in good faith to help redevelopment projects get off the ground.
“We know that there are a fairly large number of agencies where the host community may have decades ago loaned money for …something that AB 1x 26 simply says cannot be recognized as an enforceable obligation,” he said.
That could be another budget hit for cities and counties, Kennedy said. “They may have been relying on that money in the future to fulfill some other obligation.”
Some Early Reader Comments:
Gee the GTGadflies arent alone... after all.
6:16 PM on 1/9/2012
Private property owners have been abused and taken advantage of by RDA's.
Certain RDA / CC members have unfairly, arbitrarily controlled zoning, making property owners grovel.
Instead of working with residents & property owners, they are on a power trip.
They are unethical, biased, and have used RDA funds as their own personal slush funds.
Instead of using RDA funds for designated blighted areas, they are using funds for their own personal agendas and projects.
Time to reduce the pay for City Manager, make staff pay for part of their benefits -- instead of using taxpayer money.
Shameful, disgusting, and enough of the scam.
12:12 PM on 1/9/2012
Let's hope Brown sticks to his decision, and doesn't just recreate a substitute program with the same lack of oversight and corruption.
The RDA agencies here in the Inland Empire offer us many prime examples of misused funds, outrageous developer profits, and questionable relationships. We can no longer afford to support these programs in any form with our taxpayers' money.
The public and the state have no trust in the RDA agencies, and that's their own falt. Too many shady deals have been exposed and we know we've been royally riped off for decades.
5:37 AM on 1/9/2012
The RDA scam makes Bernie Madoff look like a rank amateur. Let's make it simple. The local politicians and their developer handlers made off with the loot. The taxpayers are stuck with massive debt.
Check and check.
5:33 AM on 1/9/2012
"For every $1 in revenue Fontana's redevelopment agency collected in 2009-10, for example, it had about $25 of total indebtedness." LOL!!! And they want this nonsense to keep going! Stupid!
This Taxpayer Ponzi scheme should have been shut long ago.
11:53 PM on 1/8/2012
Sorry Jim, they gave you wrong numbers, look at the
EOPS schedule on the development page on the city website. Try close to 2 billion.
11:19 PM on 1/8/2012
like transferring 149 properties from Riverside RDA to the City of Riverside!!!