Getting real about redevelopment in California

The most telling thing about the death of redevelopment in California was what Gov. Jerry Brown said about it — or, more to the point, what he didn’t say. After the California Supreme Court last month upheld a state law eliminating the state’s redevelopment agencies, Brown issued a one-sentence statement saying the decision “validates a key component of the state budget and guarantees more than a billion dollars of ongoing funding for schools and public safety.”

In responding to the death of redevelopment, Brown didn’t say anything about redevelopment.

That’s because the redevelopment fight hasn’t really been about redevelopment at all. It’s been about money. And it won’t be resolved until all parties stop fighting over cash and focus instead on what redevelopment is supposed to be about: creating successful communities and neighborhoods throughout California.

Now that the court ruling has been issued, California’s cities and their redevelopment agencies will rush back to the Legislature to try to reinstate redevelopment and get their money back. The conventional wisdom is that Brown has little reason to negotiate. Why should he, after all, when the state’s highest court has just awarded him a total victory? In his hastily called budget news conference last week, he said he would consider funding redevelopment only if there were offsetting state budget cuts.

But when he first proposed ending redevelopment a year ago, he promised a replacement tool, and many urban legislators who voted along party lines against redevelopment last year have good reasons to favor its continued existence. So Brown will have to do something.

When the governor proposed eliminating redevelopment, I was the only mayor in California who supported him. I did it because I believe redevelopment needs serious reforming. Despite decades of incremental improvements to the law, cities still find “blight” where there is none. They have used redevelopment to do anything and everything because the law has allowed them to and they have felt they had no other options. The result has been that one of every eight property tax dollars in the state has been going to redevelopment agencies through “tax-increment financing,” a system that sends any increase in property taxes after land is redeveloped back to the agency instead of to county coffers.

The system was so broken that I thought the best way to achieve reform was to blow up redevelopment and start over with a more straightforward and targeted tax-increment financing system.

The redevelopment agencies won’t go quietly. They’ll offer to tighten the definition of blight yet again, and they’ll offer to pay more reparations to the state in exchange for the right to stay in business. But that would be the lowest-common-denominator solution, and Brown should resist it. It would just guarantee continued bickering over money between the state and the cities, which will each continue to argue that “their” money is being stolen by the other.

Instead, Brown should focus on three key reforms that would lead to sustainable redevelopment programs over time. This reform agenda should have three components:

First, redevelopment should be used only for true revitalization. The short list of things redevelopment ought to be used for should be obvious: the rehabilitation of so-called brownfields — properties whose development is complicated by industrial or other contamination — and building affordable housing, transit-oriented development and inner-city retail in areas where there are few stores. Limiting redevelopment to this short list of enterprises will allow cities to focus on truly worthy revitalization goals. It will also help win long-term support for redevelopment in Sacramento because under both Arnold Schwarzenegger and Brown, the state has aggressively pursued a “smart growth” agenda that focuses on bringing more development and investment to existing urban areas, especially along transit lines.

Second, California should cap the amount of tax-increment money that redevelopment agencies in the state can collect. Currently, about 12% (or $6 billion) of the property tax collected in the state goes straight into the coffers of city-controlled redevelopment agencies. Cities can create these areas unilaterally, one of the few ways that they can gain control of more tax revenue.

The state should cap the tax-increment flow at a large but manageable number, perhaps 5% of property tax (which would still be more than $2 billion). The state would have to oversee redevelopment more aggressively and “allocate” the ability to use tax-increment funds based on how closely cities hew to redevelopment’s newly targeted purposes. Cities won’t like this, but it’s similar to the system used to allocate low-income housing tax credits, and it’s common practice in other states.

Finally, we should eliminate the requirement that to be redeveloped, an area must be officially deemed “blighted.” Over time, the state has tried to rein in redevelopment activities by constantly tightening the definition of blight. But the truth is that the blight-finding is usually a fiction, a vestige of urban-renewal days that cities regard as a procedural step they must take in order to gain access to the tax-increment flow.

Eliminating the blight requirement would make California more consistent with other states, and it would also pave the way for projects that are more consistent with public needs.

Cities would resist most of this agenda, especially narrowing the purpose and capping the increment. But the Supreme Court decision leaves them in no position to squawk.

When he was the visionary mayor of Oakland, Brown used redevelopment effectively to reinvigorate his city. Now he has a chance to go down in history as a visionary governor, by insisting on statewide reform that will lead to a sustainable political consensus about redevelopment.

William Fulton, who stepped down as mayor of Ventura in December, is a senior fellow at the Sol Price School of Public Policy at USC and a planning consultant. He blogs about redevelopment at https://www.cp-dr.com.