Community Redevelopment Targeted; Governor's Options Limited by Prop. 22

The Planning Report does an interview almost every year with you about the threat to local redevelopment funds presented by the state's budget shortfalls. This year, the "taking" threat appears quite real. What is the significance of Governor Brown's current call to close down local community redevelopment agencies?

The governor's proposal is not merely a proposal to take funding from redevelopment. It's a proposal to end redevelopment in California. It's true that we seem to face threats every year, but this is like no other threat before because this is annihilation. This is a draconian proposal that would put an end to redevelopment and all the good things that it does, like supporting jobs, providing affordable housing, and building infrastructure-those things that our California economy and local economies need to recover from a bad recession.

A pitched and prolonged battle in the Capitol over redevelopment has begun. Some, in defense of CRAs, have argued: "Amend it, don't end it." But rarely do these advocates propose any reforms. What, if anything, is on the table regarding reforming Community Redevelopment?

Many legislators don't want to support the governor's proposal. They see it as giving up too many good things that redevelopment does. They're looking for options or alternatives. That inevitably leads to a discussion about how we can make reforms, but the sticking point is the money. The governor's budget proposal counts on $1.7 billion from ending redevelopment to use for MediCal and trial court funding for the next fiscal year. We can always talk about reforms. In fact, CRA has made suggestions along those lines in the last several weeks. But our reforms don't include giving the state a truckload of money. We just gave up $1.7 billion to the state this last May, we passed Proposition 22 in November, and giving the state any more money would violate the constitution. Yes, we're happy to talk about reforms, but we're not willing to turn over more money to the state to use for non-redevelopment purposes.

Given that $1.7 billion in redevelopment funding is being sought by the Governor, share with our readers the significance of the passing of Prop 22 last November.

Prop 22, which was passed overwhelmingly by the voters in last November's election, would prohibit the state from taking redevelopment funds and other local government monies, such as transportation funds. The proposal made by the governor to abolish redevelopment is, in the opinion of our legal experts, unconstitutional, because it's a way of getting around Proposition 22. It's a way of getting at those local property tax dollars, which now support redevelopment activities, and instead use those funds for balancing the state budget. That's exactly what the voters said they didn't want to happen, and that's why they voted for Proposition 22 by a margin of 61 to 39. In effect, voters said in that election that the state needs to find a way to balance its budget using its own resources or making cuts, and local funds should stay local.

You are a former city manager; are you at all sympathetic with the governor's almost impossible quest to balance the state's budget? How big a challenge does the governor face if he is unable to draw upon the $1.7 billion-probably the largest sum he's going after-in redevelopment funding to address the state's budget shortfall?

I'm not sure about that, but in any case, the $1.7 billion is disproportionate to any other programmatic cut because, in our case, it means total elimination. In most other budget proposals, it means reductions, sometimes drastic reductions, but nevertheless, those proposals are not calling for abolishing a whole program, such as the case with redevelopment.

The governor faces a formidable task in two respects. One, he and the Department of Finance have greatly underestimated the complexity of ending redevelopment. I don't think they understand the long-term commitments-legal commitments-agencies have that can't just simply end by passing a law. They face considerable political opposition because local officials are hopping mad about this, and they're going to oppose this proposal with everything they have. The governor has misjudged the opposition, and they're not going to be very enthusiastic about supporting the tax extensions that he wants to place on the June ballot if they're looking at abolishing a program which they find key to providing local community improvements and other kinds of benefits for cities and counties.

What role are school districts and counties playing in this tug of war in Sacramento about transferring redevelopment funds to other state and local obligations?

Counties are divided on the issue because not all counties have redevelopment agencies. There are so many other aspects of the budget that affect county finances that they have to worry about other parts of their programs, not just their redevelopment programs. With respect to schools, a supporter of this proposal is the California Teacher's Association (CTA), which is not the same as schools. Obviously, they're very much in support of eliminating redevelopment because they think the governor's proposal provides windfall money to schools and, in fact, it does.

A number of redevelopment agencies and cities have begun to quickly spend their monies on urban projects, and public improvements to avoid transferring funds. Are such efforts legal, or good, public policies?

Many agencies have taken actions to try to tie up funds now and in the future. While CRA is not recommending that, we understand why local officials want to do that. They are naturally doing everything they can to protect local funds against this proposal by the governor to end redevelopment. They're receiving some criticism for that in the press, but agencies wouldn't be taking these actions if the state weren't threatening to end them. It needs to be understood that these are actions that are driven by the threat from the governor.

Given that the state has no economic development agency or strategic economic plan, are local redevelopment agencies the last remaining public agencies organized to foster economic growth, in your opinion?

I have said many times that redevelopment agencies of California are the state's economic development program because, as you point out, the state doesn't have an economic development program. One of the more troubling things about this proposal is that there seems to be a feeling that there is no role for state government in economic development. I made a comment the other day that when the governor proposed eliminating redevelopment agencies in California, there were likely cheers in the capitols of Nevada, Arizona, Utah, Texas, and so on, all of which see an important role for state government in economic development, and who regularly make poaching business from California a sport. The state government in California needs to understand that there has to be an economic development component to their program because we have to grow the economy so that tax revenues are ample enough to support core services. Redevelopment is an important economic development program. It supports jobs, it supports activity in the economy, but even I would say it shouldn't be the sole focus in the state. But right now, state government is not focusing on economic development.

To better appreciate the politics of the state versus community redevelopment, would you address the politics of this funding controversy? Is the governor's action to do away with redevelopment simply a logical reaction by state officials to the passage of Prop 22-meaning the governor has no choice; it's either all or nothing regarding CRAs?

We don't know that. The governor, when he was running for office, refused to take a position on Proposition 22, despite the fact that we asked him many times to come out in favor of it. We know that many state officials resent the passage of Proposition 22. They feel it ties their hands. We also know that surrounding the governor are staff people from the Department of Finance and the Legislative Analyst's Office who don't like redevelopment. They are strongly biased against it. We also know that they opposed Proposition 22 as well. We can't help but feel there's an element of retaliation in this proposal.

What is your view on the governor and State Legislature's proposal to realign state and local funding by devolving more state funds to the local level? If realignment were to be approved by the Governor and Legislature, and redevelopment agencies were no longer in existence, what would be the result for on-going local community reinvestment and development?

The proposal to eliminate redevelopment shouldn't somehow be tied up or confused with the realignment proposals, which mostly affect counties and not so much cities. The governor obviously is looking for ways to shed state responsibilities for services and thus the costs of those services. Nevertheless, just sending those services to other levels of government doesn't mean that there's automatically a funding source to pay for them. To the extent that redevelopment funds could be used to pay for those services, that is part of the governor's proposal.

However, the largest part of funding that would be freed up goes to schools. That's where this proposal makes no sense. The governor is trying to free up money for schools, but then it is not counted towards the Proposition 98 minimum guarantee of funding for schools.

The bottom line is, past the first year, the governor's proposal to end redevelopment does not help the state balance its budget. It provides no savings in the out years.

We thought this whole exercise was about balancing the state budget, but the details of the governor's proposal show that this proposal to end redevelopment doesn't help balance the state budget past one year.