Brown calls for end of redevelopment agencies

A key source of funds for local parks, housing and economic growth would be diverted to state coffers under a proposal Gov. Jerry Brown unveiled Monday as part of his effort to slash a $28-billion state deficit.

Brown’s budget calls for the Glendale Redevelopment Agency and nearly 400 like it throughout the state to be dissolved, with most of the $5 billion they create going to the 2011-12 state budget. In Glendale last year, the two redevelopment zones raised about $39 million, officials said.

In future years, Brown would give cities a new tool to raise money for economic development by allowing them to pass new bond measures or tax increases with approval from 55% of voters.

“The state’s investment in local economic development and redevelopment agencies is less critical than other activities,” the governor’s budget states.

Local officials disagreed.

“When the governor talks about other priorities that are higher than economic development and jobs, I’m not sure what he is talking about,” City Manager Jim Starbird said.

Cities create redevelopment zones in blighted areas to encourage economic renewal. The agencies issue bonds to be paid back over 30 or 40 years, and gain authority to keep a higher percentage of property taxes than would otherwise be the case. They then invest in affordable housing, parks and new construction to revitalize moribund areas and raise property tax values and revenues.

Glendale has two such zones, the central district — in which the city used redevelopment money and power to pave the way for the Americana at Brand — and the San Fernando Corridor. The city keeps the majority of all property tax revenues raised in the central district, compared with 13 cents of every dollar in parts of the city not zoned for redevelopment.

The two redevelopment zones raised about $39 million last year for the city, according to Philip Lanzafame, the city’s chief assistant director of community development.

But Brown’s administration contends that redevelopment agencies siphon revenue from counties and schools, and that they do not result in net growth in the state’s economic activity.

“There is little evidence that redevelopment projects attract business to the state,” the budget states.

The governor’s budget calls for cities to dissolve the redevelopment agencies by July 1, with cities turning over most of the funds and using the rest to retire remaining bond debt.

But before that would happen, Starbird said Brown would have to overcome major obstacles. In November, voters protected local revenue sources from state raids with the passage of Proposition 22. Voters would also have to agree to lower the threshold for future local tax increases from a two-thirds supermajority to 55%.

“He’s got some significant legal hurdles to get over,” Starbird said.

Deep budget cuts at the state level had already put pressure on basic city services, Lanzafame said.

“To take away something that is designed to help local economies and job growth would be a double whammy,” Lanzafame said.

Assemblyman Mike Gatto (D-Silver Lake) said redevelopment funds are an important revenue source for cities, adding that the governor’s proposal is a “difficult choice.”

“But the state is grappling with many difficult choices,” he said.

State Sen. Carol Liu (D- La Cañada Flintridge) acknowledged the obstacles, but said it was important for the governor to “lay this issue on the table,” and that the new tax proposal would give residents a voice.

“It’s part of his effort to let local folks decide whether they want to have community redevelopment in their areas,” she said.