The genius of the state’s late and not-very-much-lamented community redevelopment agencies was that they built projects that raised property values and then kept for themselves the higher tax receipts that resulted. Normally, taxes are divvied up among the city, the county, the school districts and the state, but in a California-style CRA project area, any tax receipts beyond what the parcel already had been generating would stay with the agency to pay off bonds and invest in new projects.
The self-financing nature of these agencies worked fine when the goal was to make over “blighted” areas in postwar urban cores and to build affordable housing. But after voters adopted Proposition 13 property tax limits in 1978, cities and their redevelopment agencies became increasingly aggressive in establishing project areas and discovering “blight.” What better way, after all, to cling to scarcer tax dollars than by setting up a mechanism that kept more of those dollars at home instead of in Sacramento?
There followed, over the years, a series of budget bills and ballot measures that constantly rejiggered the shares of property tax money that went to municipalities, schools and the state, and with each step the incentive grew for cities (and sometimes counties) and their supposedly independent redevelopment agencies to declare more areas blighted, to build more commercial projects and to require the bare minimum of affordable housing. CRAs pumped public money into private development plans to build car dealerships, entertainment complexes and other projects that demonstrated little public value beyond the increased property tax revenues — which didn’t even help pay for schools or police but stayed with the agencies for the next project and the one after that.
Throw in the occasional forced sale of private property to an agency under eminent domain powers, and CRAs became government overreach at its worst. Taking into account increasingly goofy definitions of blight, it’s fair to say that some redevelopment projects caused more blight than they erased.
But the primary reason Gov. Jerry Brown snuffed out redevelopment agencies in 2011 was a continuing diversion of Sacramento’s share of property tax dollars. The state had for years directly backfilled the budgets of schools and other agencies that had their property tax receipts capped under Proposition 13 and diverted under redevelopment, and then ordered cities, counties, schools and special districts to backfill one another in a government version of three-card monte. But by the time Brown returned to the governor’s office, the state was itself so broke that it finally needed its own share of the redevelopment property tax “increment” back.
That was fine for Sacramento and the state budget. And no tears need be shed for cities or the agencies they set up to award projects to private developers who built commercial complexes of dubious public value.
Many cities, though, had been more responsible with their redevelopment programs, and without them, they had lost one of their few tools to provide affordable housing, promote hiring and living-wage jobs, and stimulate the local economy.
Lawmakers proposed replacements last year, but it was too early to start over. This year, it should have been a different story. SB 1 by Senate President Pro Tem Darrell Steinberg (D-Sacramento), which would have created Sustainable Community Investment Authorities to succeed the CRAs, almost made it to Brown’s desk — almost. At the last minute, Steinberg held the bill back for fear of a veto, but he should put it near the top of his agenda when the Legislature reconvenes in January. And Brown should sign it.
In one sense the legislation is a step backward — it would foist on California that cumbersome four-word title — but otherwise the proposal is a good one. SCIAs — seriously, even the acronym needs work — would foster a new kind of redevelopment based on cooperation, instead of competition, among governments trying to share tax dollars to spark economic development.
Instead of a city creating an agency and a county suing it to keep its share of the tax increment, as was the case with some high-profile debacles in Los Angeles, a city and a county would have to first talk through the plan. No agreement, no redevelopment.
As the project’s completion boosts property tax, the state would continue to get its share rather than lose it to old-style diversion. Brown should have no problem with that.
Importantly, schools too would continue to get their share. The only diversion of increment would come from the coffers of cities and counties that had agreed to it.
Project areas would be restricted to the vicinity of transit stops, clean development zones or small walkable communities, in keeping with 21st century priorities, as opposed to the postwar era’s emphasis on urban decay.
The authorities’ boards would be appointed by the government participants, and would serve four-year terms and be bound by state ethics, open-meeting and public records laws. The authorities would be subject to financial and performance audits, with penalties for failure to comply.
Mandatory investments in below-market-rate housing — one of the original purposes of redevelopment — would be increased from the 20% required under old-school CRAs to 25%. That’s important, given the dire need in California for affordable homes.
Of course, affordable housing advocates want more, but everyone wants more. Steinberg’s bill is the result of months of talks among cities, counties, housing advocates, developers and others who crafted legislation that eliminates the pitfalls of old-style redevelopment and returns to cities and counties the ability to spur the kinds of investments they need.