Redevelopment giveaway for Oakley?

AUG. 31, 2010


A small Contra Costa city appears to have an unusual amount of pull in the Capitol. A bill working through the Legislature would designate property tax revenues from a proposed power plant in the small city of Oakley, to specifically benefit the city’s redevelopment agency.

With barely more than 33,250 people and only 10,523 households in Oakley, using state legislation to create a financing stream for the city’s redevelopment agency has many questioning the bill.

Authored by Sen. Mark DeSaulnier, D-Concord, SB1398 is a “district specific” bill that the bill summary says “will provide greater financial benefits to the Oakley Redevelopment Agency to host a power generating facility. Communities that are willing to host these facilities should be provided adequate resources to address any and all impacts that may arise and to provide additional benefits to the community.”

DeSaulnier said that under existing property tax laws, any tax allocation the agency would normally receive from a new power plant is too small and insignificant. This bill revises property tax allocation formulas to allow property tax revenues from a new public utility power plant proposed to be built in Oakley, to be allocated to the Oakley Redevelopment Agency.

But recent legislative analysis is not favorable: “The bill redirects about $2.7 million of property taxes within the county, and reduces funds that would otherwise be available for low-income housing.  Of this total, $500,000 would be from the City of Oakley (where the RDA is located) and $2.2 million from various water, sanitary, park, hospital, and other special districts within Contra Costa County.”

One analysis stated, “The Committee may wish to ask the author why additional compensation is needed by the redevelopment agency when no new services are being provided to residents by the redevelopment agency.”

Based upon the 2006 bill SB1317 (Torlakson), which created the current incentive for cities and counties to approve new power plants by allocating additional property tax revenues to the community in which the plant is built, DeSaulnier’s bill specifies the Oakley Redevelopment agency to financially benefit from property taxes. The bill is even sponsored by the agency, and has support from the county’s building and construction labor union coalition.

The California Public Utilities Commission denied PG&E ‘s original application to build the Oakley power plant because of “falling energy demands in this poor economy.” The Contra Costa Times reported that PG&E had several other power plant projects already under way, including one in Antioch, and said the utilities commission singled out the Oakley plant for rejection because of environmental concerns and the need to reduce capacity. While the first application was denied, the PUC gave PG&E permission to resubmit the Oakley project at a later date.

The Contra Costa Times reported in July, “The proposed natural gas-fired Oakley plant would have occupied 22 acres near the Oakley-Antioch border with a generating capacity of 624 megawatts, and had been contracted by PG&E to Danville-based Radback Energy Inc.”

There are many things wrong with the bill according to David Wolfe, Legislative Director for the Howard Jarvis Taxpayers Association. According to Wolfe, SB 1398 provides that the additional property tax revenues that will go to the Oakley Redevelopment Agency will not count as “tax increment.” Tax increment is the primary income source that redevelopment agencies receive and use on redevelopment projects.

By not counting as “tax increment,” the additional property tax revenues will go entirely to the Redevelopment Agency. Rather than focusing on actual projects that eradicate blight as redevelopment agencies are charged with, under SB 1398, the additional revenues will be used for the redevelopment agency operations, according to Wolfe.

According to Senate analysis, the bill will allow that the additional property tax revenues do not have to be used according to existing law. The law requires that 20% of the tax increment is set aside for low and moderate-income housing. Redevelopment Agencies usually can only receive tax increment to be specifically used for the “eradication of blight” and “the creation of low and moderate-income housing.”

Wolfe said opponents of the bill are greatly concerned that SB 1398 could be precedence setting legislation, because it will make a huge shift in the funding for redevelopment agencies, and would allow the Oakley agency to utilize these additional funds for any purpose, since the funds would be deemed property tax revenue and not tax increment.

Senate analysis stated, “The Committee may wish to consider whether it is prudent to make such a fundamental shift in policy concerning redevelopment law.”

“This bill creates winners and losers,” Senate analysis states. “The Oakley Redevelopment Agency would receive increased revenues under the bill’s provisions; however, several special districts in the area would lose revenue.  The Committee may wish to consider whether it is prudent to get in the middle of a local issue by taking sides, thus picking winners and losers.”

DeSaulnier posted a fact sheet on his Web site for the bill, which says, “This bill will help the Oakley Redevelopment Agency, which is currently planning to host a new, state of the art, air cooled, 600 megawatt power generation facility, the Oakley Generating Station (OGS).”

The bill’s sponsors include the Oakley Redevelopment Agency, Contra Costa Building and Construction Trades Council, Diablo Water District, Ironhouse Sanitary District, and Oakley Chamber of Commerce.

Opposition includes the California Special Districts Association, and anti-tax group, the Howard Jarvis Taxpayers Association.

Officials for the city of Oakley have noted “that while the power plant would provide jobs during the construction phase of the facility, it will not necessarily provide significant annual revenues to the hosting jurisdiction if SB 1398 does not pass,” meaning that the city of Oakley would not benefit financially without DeSaulnier’s bill targeting the power plant property tax revenue.

This bill requires a two-thirds vote of the membership of each house of the Legislature (Proposition 1A, 2004).

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