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Development Agencies Shift Assets
POSTED: 12:51 pm PST November 16, 2011
UPDATED: 10:05 am PST November 19, 2011
SACRAMENTO -- The Legislature's push this year to eliminate more than 400 community redevelopment agencies throughout California has led to a furious financial shell game in which cities have transferred properties and shifted hundreds of millions of dollars between accounts to preserve development tax dollars. A survey of actions taken by dozens of the agencies by The Associated Press, in cooperation with several of its newspaper members, found that many redevelopment agencies are not accepting their fate quietly after Gov. Jerry Brown signed the budget bill this summer. The legislation would do away with the agencies unless they dedicate more of their tax money to schools, public safety and other local services. Brown estimates that will save $1.7 billion in the current state budget, in part, by having redevelopment agencies make larger payments to local agencies, but cities and the redevelopment agencies call it an unlawful raid. They have sued to overturn the two redevelopment laws enacted this year, putting them in limbo. The state Supreme Court heard arguments in the case Nov. 10 and will issue a decision by mid-January.
In the meantime, the examination by the AP in collaboration with its member newspapers shows the transfers of money and property between redevelopment agencies and the cities and counties that oversee them have occurred in all parts of California. The shift began soon after the Democratic governor broached the idea in January. Cities and counties say they are spending money on projects already in the works, but in some cases they are opting to spend redevelopment money even when projects are not fully planned. Some examples: -- The city of Los Angeles pledged in January to spend more than $900 million on hundreds of redevelopment projects, including infrastructure, affordable housing and cultural facilities that had been identified in redevelopment zones. Its city council voted in August on an urgency basis to transfer about $97 million in redevelopment funds to Los Angeles County as a safeguard against potential elimination of the agency. -- The Ventura County Star reported in March that the Oxnard City Council transferred assets to prevent the state from tapping an estimated $411 million in local taxes over the next 15 years. -- The Desert Sun of Palm Springs reported in March that Indian Wells voted unanimously to use affordable housing money to buy 13 acres in an effort to protect the money from transfer to the state. -- In Bakersfield, the local redevelopment agency rushed to allocate all its money for the previous fiscal year so none of it would end up with the state. According to The Bakersfield Californian, actions included increasing the agency's share of debt payments for the Rabobank Arena and Convention Center and allocating $530,000 to help finish a garden and a 19th century-style "mill house" in a local park. "The (state's) predatory view of coming and taking away local money is horrendous," City Manager Alan Tandy said when the agency took the actions last February. "Anything we can do to protect local money ... is prudent." The Legislature authorized cities and counties to establish special districts for redevelopment after World War II to combat blight. The agencies use their authority to acquire property by eminent domain and sell, lease or develop land. Growth in property taxes in those areas can be used to finance redevelopment projects, known as tax-increment financing. The governor and other critics have said redevelopment agencies have slowly shifted property taxes away from schools, community colleges, cities and counties to a point where schools and public safety are being impaired. While Californians pay more than $45 billion in property taxes a year, the nonpartisan Legislative Analyst's Office found that redevelopment's share of all property taxes has grown from 2 percent to 12 percent over the last 35 years. The state passed legislation last summer to dissolve community redevelopment agencies and require those that remain to funnel more of their tax money to public services. In addition to the reports from AP member newspapers, the AP emailed surveys to each of the 423 redevelopment agencies in the state as a way to gauge how many were transferring property and spending money after Brown announced his intention at the beginning of the year. The survey, taken earlier this year, also asked what actions, if any, they had taken. Less than 20 percent of the agencies responded. Yet the picture that emerged from the survey responses and the reporting by newspapers in markets throughout California showed that cities reacted quickly by transferring property and money out of redevelopment agencies in an attempt to keep it away from the state. The money that was left in the agencies was allocated to as many local projects as possible, even when those that were not fully ripened. "Whatever the fate of the governor's plan, we had to ensure those projects and their benefits to our city would become reality," Jim Dantona, chief deputy to the chief executive of the Los Angeles redevelopment agency, said in an interview. Some agency officials responding to the AP's survey said Brown's proposal started slowing down projects even before it was signed into law this summer. "Literally, things are night and day," wrote John Donlevy Jr., city manager of Winters, an agriculturally dependent town about 30 miles west of Sacramento. "The draconian proposal to eliminate redevelopment and the process to close everything out has paralyzed our operations." Rod Butler, manager of the rural town of Patterson in Stanislaus County, said one of his top priorities since taking office in February has been to use redevelopment money more effectively. He also serves as executive director of the city's redevelopment agency. Butler said the governor's strategy forced Patterson, which prides itself as the apricot capital of the world, to move quickly to allocate money for downtown projects worth $1.1 million. Like other redevelopment advocates, he said the agencies were crucial to promote local jobs and give older cities a modern makeover. "In my 20 years in local government management in California, I have seen dozens of successful redevelopment projects that have served as catalysts for the elimination of blight and the revitalization of economically distressed areas," Butler wrote in response to the AP survey. Redevelopment agencies were established by the Legislature after World War II as a way to encourage urban revitalization. Until this year, that revenue was funneled back into the agencies to create pots of cash for promoting future development. Under the contested state law to eliminate them, the agencies that remain are required to make contributions to local school districts, police and fire agencies, transit districts and other local services. After the first year, the agencies would be required to contribute about $400 million a year collectively if they wanted to keep running. Critics say redevelopment agencies are spending tax revenue that otherwise would flow to local services. Carroll Wills, a spokeswoman for the California Professional Firefighters union, criticized cities and their redevelopment agencies for rushing to spend money this year as a way of keeping it from other uses. "They're so intent on protecting these dollars they've squired away on development projects that they're shoveling money out the door," she told the Press Democrat of Santa Rosa in January. The union represents 30,000 local, state and federal firefighters. The newspaper reported in January that Sonoma County approved the use of more than $20 million for construction of a public square at an old Albertsons shopping center in Santa Rosa and highway improvements in Sonoma Valley. The city of Cloverdale was moving forward with plans to build a new police station. And Sonoma city officials were trying to find a new owner to take over an old fire station one block from the town's popular main plaza. In the Central Valley, redevelopment agencies in Tulare, Visalia and Hanford zeroed out their bank accounts to keep the state from getting the cash, according to The Fresno Bee. The Tulare City Council moved $4 million from the agency to the city and transferred $7 million worth of property to the city. The Hanford City Council voted unanimously to move $6.3 million back to city coffers. And Visalia voted unanimously to use $14 million to repay bank loans and return $3 million to the city. Brown, lawmakers from both parties and other critics of redevelopment say the agencies have strayed from their original mission. They argue that the agencies have become a way for private developers to tap free money for a wide array of projects, many of which have little if anything to do with fixing urban blight. Redevelopment's supporters say the agencies have generated tens of thousands of jobs statewide. Officials in smaller cities say they rely on redevelopment agencies as a way to pay for infrastructure they could not otherwise afford. Residents want economic development because they know safer communities and better schools follow prosperity and jobs, said Chris McKenzie, executive director of the League of California Cities. He said mayors and city council members believe redevelopment is the most important job-creating program in the state. Redevelopment spending is not limited to retail centers, McKenzie said. He said agencies also invest in infrastructure to build water and sewer lines, fire stations, senior centers, sidewalks and schools. "Most mayors and council members feel they have a significant responsibility to help economic growth in their community because they know it is the cornerstone for everything else," McKenzie said. "You can't have government safety if you don't have revenue. The demand for health and human services will be much higher if people aren't employed."
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