Redevelopment Is Redistribution

JAN. 31, 2011

The future of the state is surely bleak when the mayors of its largest cities actually think that jobs are created by the government, and economic stimulus originates in redevelopment agencies.

Nine of California’s big-city mayors met last week with Gov. Jerry Brown, in an attempt to talk him out of eliminating redevelopment agencies as part of his budget-balancing proposal.

The mayors told Brown that they supported keeping redevelopment departments in tact because, it is through redevelopment that cities create jobs. Several of the mayors even said at the press conference, “Without redevelopment agencies, private investment would not get involved in community improvement activities.”

Local government officials have been critical of Brown’s budget proposal, and defend redevelopment agencies as their primary tool for construction projects and job creation.

The state controller’s office reported that in 2008-09, California redevelopment agencies collected $5.7 billion in taxes, but only funneled $1.2 billion to schools and local agencies. RDAs are funded by increases in property tax revenues from the blighted areas they supposedly improve.

Redevelopment has come under increasing scrutiny from legislators as the state’s budget problems worsen.

Leading to much criticism and requests of audits, in 2010 one Senate committee found that some affordable-housing programs within the redevelopment agencies spent more on salaries than the cost to build affordable and low-income housing.

Mayors and local city officials attacked Brown’s budget idea, insisting that the elimination of the more than 400 redevelopment agencies in the state would end their efforts to create jobs, as well as opportunities to revitalize blighted neighborhoods and downtowns in this difficult economy.

For more than 40 years, Sacramento’s elected officials have pushed for the redevelopment of Sacramento’s downtown K Street Mall. And for more than 40 years, the outdoor mall and street has been a financial sinkhole, plagued with blight, vacancies, vagrants, homeless and mentally-ill populations, and crime.

But the city keeps investing funds into the blighted area. Most of the vacant buildings on K Street were acquired by the agency through eminent domain, or purchased them only to board them up, making Sacramento the city’s preeminent slumlord.

Property owners in downtown Sacramento pay more than $30 million in property taxes every year, but only a small portion of that goes to fund local government and schools.

$26 million in property taxes is funneled to the city’s redevelopment agency, which then uses the money to subsidize large development projects, and claims to “revitalize blighted areas of the city, build affordable housing, manage neighborhood stabilization programs, and even homelessness prevention.”

But results are sorely lacking. The 14 designated “redevelopment areas” in downtown Sacramento and surrounding areas are still filled with actual blight, despite the decades of redevelopment money spent.

The city’s redevelopment agency has recently completed three new projects in the heart of one of the worst section of K Street. Development of a “mermaid bar,” a gourmet pizza restaurant, and a high-end dance club are the latest “revitalization” of one of the ugliest sections of downtown. And while these hip new night spots may be all the rage right now, many still ask why the city is involved at all in subsidizing night clubs and entertainment venues.

This latest redevelopment project funneled nearly $6 million to a very successful local developer – the recipient of many redevelopment project awards – who then purchased the K Street properties from the agency.

The city’s subsidy for the properties rightfully angers other bar and restaurant owners in the city who have complained that the city is picking winners and losers in choosing which businesses to subsidize, instead of allowing the free market to work without government interference.

Several midtown business owners I spoke with expressed outrage at the subsidies provided to the newest bars, and say that the city is undermining existing small business.

Sacramento’s redevelopment agency reported that more than $3 million went toward “shell and core improvements” for the two buildings that house the three new bars, and more than $2 million will go to future tenants on that stretch of K Street for tenant improvements.

Every city in the state has projects just like this, with some subsidizing fast food franchises, big box stores and strip mall developments, competing directly with other businesses.

So, it was not entirely surprising that each of the mayors at Wednesday’s press conference touted redevelopment, almost verbatim.

San Francisco Mayor Ed Lee said that redevelopment was the way to do “smart development.”

Oakland Mayor Jean Quan echoed Lee’s sentiment and added, “We all use the redevelopment money – sometimes it’s the only money we have.” Quan said that for many years, Oakland has developed many low-income and affordable housing projects, which would be halted if Brown’s proposal to eliminate the state’s redevelopment agencies is realized.

Why is Oakland or any city in the business of building affordable, low-income housing?

“It would be a bad idea to eliminate redevelopment agencies – they are some of the most important tools we have,” said San Jose Mayor Chuck Reed.

“All good things in our cities have been touched by redevelopment,” said Miguel Pulido, Santa Ana mayor. Pulido said that the mayors told Brown that elimination of the agencies would be a financial setback.

Not one of the nine mayors spoke out against redevelopment or against the redistribution of taxpayer money that ends up going to private developers and, or against the waste, fraud and abuse inside of the agencies.

Reports recently filed with the state controller’s office failed to show actual achievements by redevelopment agencies, while the agencies collected billions of dollars’ worth of property tax revenue that otherwise would have gone to schools, cities and counties, the Press-Enterprise reported recently.

The redevelopment agency in Fontana received $466.1 million in property-tax revenue last year, but reported just 7,000 square feet of building rehabilitation and no new jobs.

The La Quinta redevelopment agency did not to list one new job or any new or rehabilitated square footage from July 2004 through June 2009, but received $362.7 million in tax revenue during that time.

It’s clear why the governor would see the RDAs as a good place to budget cut.

Brown said recently that redevelopment-funded improvements are not as “life-necessary” as schools, firefighters and other government services. “An economist would be hard-pressed to show me that continuing redevelopment and laying off the equivalent of $1.7 billion worth of employees is not an equal job loss,” said Brown.

Controller John Chiang just announced this past week that his office will audit 18 of the redevelopment agencies, including those in Los Angeles, Sacramento and Riverside, with an eye on how well agencies are actually combating urban blight, how much tax money they are sending to school districts, and the compensation levels of their executives.

It will be interesting to see which side of the political fence the audit leaves Chiang and Brown.

–Katy Grimes