Jerry Brown’s bid to kill redevelopment agencies sets stage for fierce battle

When he unveiled his proposed budget earlier this week, Gov. Jerry Brown declared on the first page that it was time to push more authority to local governments, so decisions could be made “closer to the people.”

A lot of local officials see his actions very differently.

One of Brown’s proposals calls for eliminating municipal redevelopment agencies, which would take billions of dollars out of city coffers and send it instead to school districts, counties and the state. Brown projected that this would save the state $1.7 billion in the next fiscal year.

It would do so, however, by taking away one of the most potent tools city officials have to improve blighted areas by building housing and commercial projects. Redevelopment agencies collect billions of dollars in property tax revenue and dole out hundreds of millions annually in contracts, making them a significant source of power for the city officials who control them.

The reaction from local officials was swift and fierce, and has set the stage for a battle in the Legislature over the balance of power and money between state and city governments. Some predict that the proposal will be watered down, if it is approved at all.

Santa Monica’s head of economic development, Andy Agle, called it “shameful.” Paul Zimmerman, who heads the Southern California Assn. of Non-Profit Housing, described it as “a disaster.”

But few cities reacted as dramatically as Los Angeles. After Mayor Antonio Villaraigosa called Brown’s proposal a “nonstarter,” his redevelopment commissioners took preliminary steps Friday to hand control of $930 million for specific redevelopment projects to the city — presumably moving the money out of the state’s reach.

The governor’s office responded crisply, saying Brown hoped the Community Redevelopment Agency was not planning on “squirreling money away for the indefinite future when our schools, police and firefighters are in need of this funding.”

Added a spokesman for state Treasurer Bill Lockyer: “The governor’s proposal warrants a serious, thoughtful discussion. Let’s have that adult conversation, not needlessly provocative acts of gamesmanship.”

All week city officials around the state have been issuing grave predictions about the potential fallout, including aborted plans for parks, libraries and community centers, some scrapped in mid-construction.

Though little understood by the public, the state’s nearly 400 active redevelopment agencies run on about $5 billion each year in property taxes generated in the project areas for economic development — money that would otherwise go to schools and counties.

Supporters praise redevelopment agencies for reviving downtrodden neighborhoods across the state and creating thousands of jobs. But many of the agencies have also been criticized for mismanagement, favoritism and misplaced priorities.

The bulging coffers have been eyed hungrily by state officials desperate to close a gaping deficit, including Brown’s predecessor, Gov. Arnold Schwarzenegger, who grabbed $2 billion over the last two years from redevelopment agencies statewide just to balance the budget. The brazen move prompted Proposition 22, a city-backed measure passed in November that prohibited such raids.

No one apparently foresaw a governor seeking to abolish redevelopment agencies altogether.

It’s part of Brown’s plan to radically redefine the state’s relationship with city and county governments, to give it more flexibility as it seeks to fill a $25.4-billion hole in the budget.

“This could change local government really dramatically,” said political scientist Raphael Sonenshein.

Modesto Mayor Jim Ridenour, president of the League of California Cities, put it bluntly: “This ain’t giving us power,” he said. “All that is is switching” who is stuck asking taxpayers for more money.

Some members of the Legislature appeared unmoved. “What is the alternative here?” asked state Sen. Lois Wolk (D-Davis), who heads a new Senate committee charged with restructuring the relationship between state and local government, alluding to the state’s dire financial condition.

Still, she acknowledged that the proposals were leading policymakers into a “complex and difficult area” — attempting to unwind the byzantine, Rube Goldberg funding mechanisms and laws that officials adopted to pay for government services after voters approved Proposition 13, the 1978 measure that capped property taxes.

The Legislature authorized redevelopment agencies more than half a century ago as a mechanism to help cities clean up slums in neglected urban cores. But the number of agencies exploded after Proposition 13 limited city officials’ ability to raise money.

Forming a redevelopment agency was a relatively easy way for cities to get their hands on cash, especially compared with persuading two-thirds of voters to raise taxes. It involved declaring certain areas blighted and selling bonds to be repaid with increased tax revenues from rising property values.

Proponents of redevelopment, including John Shirey, head of the state redevelopment association, credit it with reviving hundreds of otherwise moribund parts of the state, bringing in new business, creating jobs and building tens of thousands of units of affordable housing. They point to successes including Old Pasadena, San Diego’s Gaslamp Quarter and large areas of Oakland, where Jerry Brown was mayor from 1999 to 2007.

State officials concluded in a 2008 report that “redevelopment has literally changed the way California looks, mostly for the better.”

Still, some have criticized redevelopment because it siphons off money from their own budgets. And there have been abuses. Some cities have declared acres of empty farmland blighted so they could hold on to any property tax increases from future development. Others have used redevelopment money to prop up their general fund — not always legal, but they could often get away with it for a while.

A Times investigation last fall found corruption and incompetence in agencies around the state. More than 120 cities, for example, spent more than $700 million of their affordable housing funds between 2000 and 2008 without building a single new unit, according to state data. Other agencies, particularly small ones, were riven by conflicts of interest, such as when the Bay Area city of Hercules paid hundreds of thousands of dollars to a company run by the city manager’s daughter.

Los Angeles’ agency has also had its fair share of controversy. Some point to the failed effort at Marlton Square in South Los Angeles, where despite millions of dollars spent and years of planning, the area is mostly a fenced lot.

Statewide, redevelopment has been largely unregulated, with little to ensure that money is properly spent. This week, the nonpartisan state Legislative Analyst’s Office, which provides financial advice to lawmakers of both parties, said Brown’s plan “makes sense,” citing “no reliable evidence” that redevelopment betters the state’s overall economy.

Still, abolishing redevelopment may not be simple. First Brown has to get the votes in the Legislature, with cities already lining up opposition. And if the Legislature goes forward, there are likely to be court challenges. Redevelopment was originally authorized by the Legislature but was expanded by a constitutional amendment approved by voters in 1952. Many proponents believe that Proposition 22 protects it.

Though a supporter of redevelopment, Los Angeles City Council President Eric Garcetti said he could understand why Brown has redevelopment in his sights.

It is not a core city service, like police or fire departments, and not high on the public’s agenda. Even when it is done well, its benefits are hard to quantify. Garcetti pointed to Hollywood, where he said he is convinced that the city redevelopment agency’s $50-million investment in the last decade has spurred $2 billion in private investment and resulted in the creation of countless jobs.

But no one can prove that wouldn’t have happened anyway, he noted.

“This is an easy target. It’s low-hanging fruit.”

jessica.garrison@latimes.com

Times staff writer David Zahniser contributed to this report.