Long Beach Mayor Foster Proposes Fix For Redevelopment

Let's begin by asking for your reaction to Governor Brown's proposal to end community redevelopment statewide.

It is another illustration of what I believe California is lacking right now, which is a long-term view. Much of our politics and public policy focuses on the immediate. It is easy to get caught up in the immediate because we have immediate problems. But we are doing things that are going to seriously impair the future, of which eliminating Community Redevelopment is a great example.

Redevelopment is the only tool that we have left-here in the city of Long Beach and maybe even everywhere in California-that helps, actually forces, policy makers to invest and plan for the future. It is certainly the only economic development tool that local government has. It is the only way I, as Mayor, can encourage investment in distressed parts of my city, to abate blight and economic depression. It is the only way I can give hope to people who now lack hope. It is the only method for me to attract investment to those blighted areas.

I acknowledge that redevelopment needs reform. But to remove it and say that we can do without it is a grave mistake. It will reduce tax revenues in the future, and it will contribute over time to impoverishing the state.

Two months ago, TPR interviewed John Shirey of the California Redevelopment Association, and he suggested that the passage last year of Prop 22 made redevelopment an either/or choice for the governor. Is that a fair statement?

There are things that you can do with redevelopment that won't run afoul of Prop 22 and would modify and change redevelopment. To take money away, yes, runs afoul of Prop 22. However, the city of Long Beach, with help from the building trades, have crafted a proposal that we think would attract, in a voluntary fashion, most cities in California to come into a different arrangement that we believe would save redevelopment and produce $800-900 million annually for the state.

Please Elaborate.

When we looked at the Governor's proposal, we said: what do we really need here? A lot of local governments need the extension of redevelopment areas; we also need reform; we also need to expand some of the definitions so we can go outside some of the projects areas to do things that would benefit those project areas.

We then put a proposal together that has those elements-it would be attractive to local government to come into the process voluntarily. Then we took the housing set-aside, which is 20 percent, and used that money as a revenue stream for a 30-year bond. Then we took ten percent of the tax increment and use that revenue stream for a 30-year bond. The combination would enable us to defease-allowing for existing commitments-$12.6 billion in state general obligation debt. The state would get its balance sheet in order, it would reduce debt, and it would also leave enough left over-given existing funds in the housing set-aside funds around the state and some additional money left over from the bond issue-to have a $5-7 billion fund for housing, infrastructure, and other needed projects in local government. It would do so on an application basis-a mini-stimulus for the state of California.

This plan has been confused with, and maligned as, securitization. It is not! We are not adding state debt. We found a simple and clever way of using local revenues to pay down state debt. In return for that we get extended project areas, we get an understanding that redevelopment will continue, we get reforms to the system so the abuses can be minimized or eliminated, and we get some reforms to the work itself so that we can do more with the redevelopment funds we have. It is a complicated proposal, but it is the right thing to do. It would be more certain in its operation and application than what the governor proposed.

Does your redevelopment proposal have any political support?

It has support from the building trades. It has support from a few other cities around the state. It is attractive to at least some legislators. State Senator Rod Wright (D-Inglewood) is intrigued by it. People, in an effort to malign it and dismiss it, accused it to be securitization. It is not securitization. If the state goes to the public for a tax increase, it would enable the state to legitimately claim that they did what families do: they cleaned up their balance sheet and they reduced their debt. It would increase the possibility of the public becoming favorably disposed toward increased revenue.

These are the kinds of reforms we have to do if we are going to ask people to dip into their pocket and spend more money, along with pensions and other spending reforms. They really need to be done. This would have been a very intelligent way to deal with redevelopment-not eliminate it, but change it.

I am very concerned about the future of this state. We have become a state of the immediate. We are not preparing for the future. We don't build very much. We have lost our way on economic growth. Redevelopment is the one tool we have left that fosters all of that. To say we are going to eliminate it really misunderstands the economy and what California needs for the future.

How did California evolve to the point where it is no longer an engine of economic growth?

That is a very complicated conversation. In the last 20 years, we have developed a cultural antipathy toward business. Everybody knows that there are good businesses and, sometimes, bad businesses. The fact is, as Winston Churchill said, "Business is the horse that pulls the cart." It enables us to invest. It is enables us to grow. It produces employment. The public sector does not produce employment. At best, the public sector has a multiplier that's barely positive. Sometimes it is negative. The public sector in the state of California has outstripped the capacity of the private sector to support it. We have to get back to a balanced system.

That applies to all the benefits, like pensions. We all know that pensions need to be reformed. They are far too lucrative. They don't bear any resemblance to reality any longer. We treat our businesses almost like medieval cities: something to be sacked instead of nurtured and cultivated. A lot of policy makers don't understand economics and don't understand where investment and money comes from.

The problem also has to do with some of the initiatives we have passed. We, as a public, have been foolish. There is no one cause here. There are many causes. But we have to get back to a point where we understand that economic growth is important. It has to be sensible growth. It has to be consistent with environmental requirements, making sure we have a clean environment and something to leave for our children. But we also need to leave a legacy of economic growth and of sound economy for our kids and our grandkids.

At one point while I was at Edison, we had a small unit to retain and attract business. In California today we have almost no tools for those purposes. If you ask almost any business across the country, they don't want to do business in California unless they have to. The regulation is multi-layered. It's almost unfathomable to people on the outside. Our tax structure makes no sense. We, as a culture, treat business as something to drain. It is damaging the state.

Even if the economy recovers, I will predict that our tax revenues will not come back to where they were for a long, long time because we are not fostering a robust economy. We need to get back to that because we need jobs and we need to do it for our future-to build the kind of state that we'd like to have. Without those resources, our resources are going to dwindle and we will tax more on fewer people. That is prescription for enormous problems in the future.

In closing, how do you predict this policy issue will resolve this spring?

I don't know where we are right now. We sent the proposal up there to Sacramento. I've talked to a number of people. I have offered to help whenever and however I can. I am open to that. I want to see this proposal work. I want to make it work in any way I can. I am not about casting blame or pointing fingers. Redevelopment is something that is important for the state. I am talking to the representatives for Long Beach. We have people on the outside who are intrigued with this proposak, who support it and are doing the same thing. I am hopeful we can at least get a hearing or a meeting to discuss this.

Thus far, all there has been is an attempt to ram the end of redevelopment through. I am thankful that, thus far, it has failed.