CRA/Community Redevelopment 101: Infill Housing, Brownfields, State & Local Funding

Steve, there are a series of conversations taking place throughout the state re: how to incentivize infill development and curb sprawl. Why don't we begin by first looking at why this debate is happening at the state level? Why is this conversation more than merely a municipal issue?

There are a wide range of state laws influencing how municipal governments address certain issues. Redevelopment of blighted areas is one of those issues. And while it happens at the local level, the state in significant ways sets the legal and financial context for how municipal governments can perform.

A perfect example of that paradigm is the issue of brownfield redevelopment. By redirecting development inward toward the urban core, local governments and redevelopment agencies can expose themselves to financial and legal liability. That exposure can limit the amount of success a redevelopment agency can have in a particular area to facilitate new private investment.

But aren't these discussions taking place in part because redevelopment agencies are increasingly unable to redirect development? What is undermining redevelopment agencies re: these challenges? And what are the consequences of CRA failures?

If one looks to the original legislative findings regarding redevelopment in this state, it was clear that extraordinary public tools and financing mechanisms were necessary and required to remove blight. And those mechanisms would have been profoundly more valuable in the last 25 years had the general level of tax resources not been reduced by Prop. 13. The reduced effectiveness of the state's redevelopment agencies is one of the lingering effects of Prop. 13's impact on the financial resources of the public sector.

Upon closer inspection of cities around the state, it becomes very clear what the consequences of that lack of funding has been-too much vacant and underutilized land surrounded by viable streets, highways, freeways, utility systems and residential neighborhoods full of people who need the jobs and services that land used to provide.

How do we address that disconnect?

If the current barriers to revitalization of our inner-cities remain intact and it becomes increasingly difficult to redevelop our blighted areas, the chances of accomplishing a Smart Growth paradigm for the state is virtually impossible. What must be done to incentivize infill development, prioritize Smart Growth and revitalize our urban cores lies in the linking of the redevelopment and Smart Growth conversations. New public strategies to support revitalization of our urban cores should be a linch pin of an effective state Smart Growth policy.

And what are your thoughts on how best to set in motion such strategies?

The current discussions, as I understand them, include a variety of initiatives encouraging local governments to plan smarter. That's excellent. But unless there's a political commitment at the local level to implement such strategies, those initiatives will be useless. There are simply too many obstacles and uncertainties in the marketplace, including the CEQA process, that prevent people from attempting to reclaim areas long since abandoned. An enormous incentive would be developed to aid refocusing investment back to the state's cores if it was acknowledged that infill projects-in areas where it is clear that development has been accommodated in the past-not be required to start the CEQA process from scratch.

What are the inherent challenges in renewing a blighted urban infill site?

Because urban areas have already been developed and subdivided, there lies an initial difficulty in that the basic underlying legal form of the land does not accommodate current development patterns.

Second, in reconfiguring the land and accommodating new uses, there's oftentimes a certain amount of relocation necessary to fairly deal with current property owners and tenants.

Third, in many cases the sites are contaminated and brownfield issues must be resolved.

Combine all of those factors under an uncertain regulatory framework and urban areas carry a great penalty in cost, time, regulatory and financial uncertainty.

And how does that differ from investing in the greenfields of California?

Life seems to be very easy for an individual project if you don't have to deal the aforementioned issues of reconfiguring legal ownership, demolishing existing buildings, resolving and cleaning up contaminated land and relocating existing users.

However, when one looks to the future growth predictions and evaluates the cost of spreading out this growth across the landscape you can easily see the huge additional public investments that will be required-at both the local and state levels. Individual street systems, major inter-urban transportation systems, sewer systems and utility systems are all in place in more urbanized areas. Those services must all be duplicated when one develops in outlying areas.

So it's pay now or pay later. And your assertion is that the costs of paying later are greater?

The cost is substantially greater. Let's face it, a huge amount of public investment has already been made in urbanized areas over the last 100 years. To reinvest in the same infrastructure, to burden taxpayers with additional bonds to finance additional improvements as opposed to more efficiently using urban land, creates a substantially greater financial burden on state taxpayers over the long-term.

You've eloquently articulated a convincing argument. Why has the same argument utterly failed in the public policy arena? And what are the odds of the current reform proposals elevating the discussion to create a more thoughtful framework?

Part of the issue is that individual municipal governments can only effectively deal with land in their own jurisdiction. To go outside those boundaries leads to: 1) Broader discussions of regional planning mechanisms that, up until now, have not been particularly effective; and 2) State programs that, again up until now, have not been particularly thoughtful.

Despite that history, I am encouraged by the fact that people seem to be more willing to devote time and energy to this conversation. Clearly it will take a substantial increase in state leadership to appropriately think through and implement the kinds of policies at the state level that would incentivize local governments and reinforce the requirements for Smart Growth policies.

And how do you think those incentives and reinforcements should be crafted?

First, I would create incentives, or even requirements, that municipal governments address Smart Growth issues in their planning processes. Every city must have a housing element. Why not encourage local governments to go through some kind of process that addresses Smart Growth? It may finally be time to address smarter growth as part of a local government's planning process.

Second, there must be some understanding and financial support at the state level for these initiatives. There has to be some broader based financial support for these kinds of issues so that they do not compete with the priorities local governments must fund. The state could create a loan or grant fund that would encourage local governments to begin to address the tougher issues of planning and apply local creativity to Smart Growth issues in their own environments.

Third, we clearly need to assign additional public resources to better prepare urban core areas for market investments. Our Administrator, Jerry Scharlin, has often talked about the need for an urban investment fund that would support Smart Growth strategies. We all acknowledge that without the willingness of the private sector to reinvest in blighted areas, there will never be the level of community revitalization our residents expect and deserve. Additional public investments in this effort would pay huge dividends by reducing the long-term public costs of investing in urban sprawl.

And fourth, we must devise more creative ways of leveraging bond resources. The public has recently been willing to support bond funding, but most of these bond issues are extremely targeted and one-dimensional. It would be beneficial to create a portion of each bond that encourages linkages and good planning throughout the state.

Your last point hearkens back to the core funding mechanism of redevelopment agencies-the effective utilization of tax increment finance to fund the revitalization efforts in blighted areas. There are a number of quality discussions taking place about the use of tax increment financing for joint-use, transit oriented development, etc. How does that discussion play into your suggestions?

As our state's population increases, finding ways to accommodate greater density within our urban areas and transit corridors should be a key policy goal at both the local and state levels. Urban land is simply too expensive for most housing projects, for example, to be financially viable without some form of local or state subsidy. If we expect to obtain the benefit of having additional housing surrounding our transit stations and corridors, then there has to be additional financial resources available.

However, I would caution that there must be an acknowledgement that since Prop. 13 and later state actions regarding property taxes, local governments have fewer resources available to deal with the wide range of public needs expressed in their own cities. And any time funds are dedicated to a specific issue or activity, local government becomes more constrained in dealing with the broader issues that taxes must support. Caution must be taken to make sure that directing funding toward specific uses does not balkanize the budget or severely compromise local flexibility.

In light of that last statement, what then is the best role of redevelopment agencies? What's the role you see them playing in the years to come?

At its heart, the difficulty both redevelopment agencies and our municipal partners face is the same-a lack of the financial capacity necessary to overcome the barriers associated with positioning urban land to be competitive in the private marketplace.

Because of that, redevelopment agencies in California have a particularly difficult mission. We are asked under state law and local ordinance to address the most intractable issues within our urban environment. Redevelopment agencies are assigned the most difficult "blighted" areas of the city where normal market forces-from new investors to existing landlords and tenants-have simply ceased to work effectively. We may have a variety of powerful tools to address those issues, but the needs far outstrip our resources.

The conundrum we all face is this: while we have urban land that remains blighted, vacant or underutilized, it generates little or no economic wealth for its own community or the state. If we can appropriately invest in that land, the economic growth that will be generated can go a long way toward creating a more healthy environment in our communities. That is where our mission overlaps with the concepts of Smart Growth. And because of that, redevelopment agencies must be key players in implementing any kind of Smart Growth policies. We already have the tools, we just need to find ways of extending our resources to do the job. One way of doing that is using the instruments we've talked about here-increased leverage of bond funds, better local planning, etc., in concert with out own tools-to become better partners with other entities trying to accomplish the goals of urban revitalization and Smart Growth.