A bill that would revive redevelopment as a tool for local governments passed the state Legislature in the final days of the summer session on party-line votes.

Now the question is whether a so-far noncommittal Gov. Gavin Newsom will accept the claims that Senate Bill 5 by Sen. Jim Beall, D-San Jose, has enough safeguards to prevent redevelopment from going as astray as the version that Gov. Jerry Brown and the Legislature killed in 2011.

That version allowed local redevelopment agencies to divert a slice of property taxes to use on projects meant to spur the economies of “blighted” neighborhoods. If the projects boosted property tax revenue, the additional increment would go to the agencies for new projects. In 2010, some 400 redevelopment agencies diverted 12 percent of all California property taxes for their use.

‘Scams providing windfalls to cronies’

But by 2011, many investigations had found that redevelopment funds were routinely diverted to pay for City Hall salaries and that many of the projects that did get funding were those pitched by politically connected developers. Then-state Controller John Chiang said many redevelopment projects were “scams providing windfalls to political cronies.”

Many healthy businesses with prime locations had been declared “blighted” so cities could use eminent domain to seize them and hand them over to car dealerships or big-box stores which would generate the sales taxes that are a key source of revenue for city coffers.

And on top of these issues, the Legislative Analyst’s Office said there was “no reliable evidence” that redevelopment helped the economy. Instead, it attracted businesses that would have opened elsewhere without subsidies offered by local government – shuffling economic activity around, not spurring it.

New version would emphasize housing

In interviews and committee meetings, Beall has argued that a much-more focused version of redevelopment that gives at least half of diverted funds to subsidized low-income housing – up from the previous 20 percent – can help California with its housing shortage. The new program would also fund transit-oriented projects and play its old role of helping poor neighborhoods boost their economies. 

To prevent past problems with cronyism, a state oversight group would have to certify projects met basic standards before funding could be diverted.

The bill would initially allow $200 million in property taxes to be diverted annually with a phased-in upper limit of $2 billion a year. About $5 billion a year was being diverted when redevelopment was shelved by the state in 2011.

While running for governor in 2018, Newsom was supportive of reviving some form of redevelopment. But he included no funds for a new program in his initial state budget and has told reporters that his budget already includes record funding for affordable housing.

Meanwhile, while it didn’t get as many headlines as some other problems did, redevelopment’s record with creating affordable housing in California was also poor to mixed.

Old version often generated no new units

In 2010, the Los Angeles Times reported that, “At least 120 municipalities – nearly one in three with active redevelopment agencies – spent a combined $700 million in housing funds from 2000 to 2008 without constructing a single new unit … .  Nor did most of them add to the housing stock by rehabilitating existing units.”

Where did the money go? The Times cited many examples of redevelopment agencies buying property that was never subsequently developed.

It also found that “nearly three dozen cities, including Monterey Park and Pismo Beach, reported spending most of their affordable housing money over the decade on ‘planning and administration’ – but never built a single unit.”

Beall’s bill passed the Senate 29-9 and the Assembly 55-19.

Should government get into the business of judging people on the “efficiency” of their property?  SB 1 would grant government that capacity — along with the power to take that property if officials decide it’s being “inefficiently” used. SB 1 is by Senate President Pro Tem Darrell Steinberg, D-Sacramento.

Two years ago Gov. Jerry Brown and the Legislature abolished redevelopment in California to transfer from local governments $1.5 billion to the state budget. Redevelopment allowed local governments to declare anything, even nice homes and businesses, as “blight,” seize the property and give it to big-box retailers.

SB 1 would reintroduce property redevelopment. But this time, it only would apply to property that would comply with the “sustainable communities strategy” of SB 375, another Steinberg bill that became law in 2008 when signed by Gov. Arnold Schwarzenegger. SB 375, among other things, mandated Plan Bay Area and other regional transportation, housing and land use plans throughout the 18 regions of the state.

SB 1 is really the financing and zoning vehicle for creating the new high-density, Plan Bay Area/sustainable communities lifestyle.  SB 1’s projects, paid with the new redevelopment money, would have to be high-density and restrict parking.

The SB 1 buildings also would have to be located within one-half mile of  public transit, be “walkable communities” or be green energy manufacturing sites.  Other styles of redevelopment are not included in this bill, as they are not the way we are supposed to live under the sustainable communities vision.

New bureaucracies

SB 1 would allow counties and cities to create Sustainable Community Investment Authorities, which would be new government agencies separate from the governments that created them. The SCIAs would be established without citizen concurrence and would be beyond direct citizen control. And the SCIAs would wield the authority of eminent domain, taxing and bond issuance for building such projects within a specified geography.   Such projects would have other specifications, including construction under prevailing (union) wages, and large funding for subsidized housing.

In order to acquire property for high density development, the bill expands the definition of blight to include a new concept of “inefficient use.” Under SB 1, suddenly inefficiency has become the big problem.  Or, the big excuse.  A host of societal ills are blamed on it, such as a poor economy, high housing prices, pollution and more.

‘Inefficiency’

What is inefficiency?  It is not defined in the bill, nor are its alleged ill effects substantiated in any way. But because inefficiency is suddenly deemed so problematic, it is given powerful status for determining blight.

Normally, slums and damaged property can be determined to be blighted, which enables them to be acquired under eminent domain and rebuilt.  Eminent domain is also used to acquire property for public use, such as for new roads.  There is an extensive body of case law that has clarified what is blighted, so property owners are safe from abusive governmental takings.  This would be superseded by the new inefficiency doctrine.

Since the workings of the free economy are deemed inadequate for creating efficiency, under SB 1 the government must use bureaucratic force to create it.  Conveniently, SCIAs could rely on this new legislative definition of inefficiency to acquire property under eminent domain, without a formal process of finding slum-like blight conditions.  So, depending upon how an SCIA grades what a person is doing with their property, the owner’s ability to keep it comes at the grace of the SCIA.  Since the lifestyle the government wants is high-density-urban, anything rural, neighborhood, single family, small commercial, small farm or suburban seems perpetually vulnerable to the inefficiency charge.

In Plan Bay Area, resident surveys told the regional planning bodies that they didn’t want regional planning by unelected bureaucrats.  Further, the Plan itself concluded that “stack and pack housing” (i.e., sustainable communities/transit oriented development) did not reduce greenhouse gas emissions, which was the whole point of the Plan. Yet, the Plan was approved. SB 1 would allow the Plan to be imposed despite citizen objections.

SB 1 recently was amended and will be heard Aug. 30 in the Assembly Appropriations Committee.

By Katy Grimes

This unnatural and inexplicable push by Sacramento city officials for a downtown arena is suspicious. Without any explanation, all discussion of the proposed arena at the adjacent old rail yard stopped. Then the local media shifted right along with the city, and never asked why. Instead they started repeating the new mantra for a downtown arena.

The city of Sacramento is the biggest slumlord downtown, through years and years of downtown eminent domain and lowball building purchases. This new downtown arena would serve to conveniently improve the property values of the Sacramento Housing and Redevelopment Agency-owned properties downtown.

Not only did the local newspaper, television and radio media never ask why the city changed its push for the downtown location instead of the present location outside of the city or the rail yard, now city officials have the local media talking about how much the property value would improve. It’s just gross.

I am not opposed to a sports arena in downtown Sacramento. But I am opposed to the nearly 75 percent public subsidy by the taxpayers of Sacramento. If the developers involved in the arena deal can make a go of a new arena in Sacramento, they should. But it appears this deal can’t stand up to any financial scrutiny without the city of Sacramento bringing the bulk of the money to the table.

What kind of “development” is that? It’s a scam.

“The mayor, himself a former NBA All-Star, has scrambled to assemble a group to buy the team, convince commissioner David Stern to consider a counter offer, and get approval for the financial deal that would build a $448 million arena on the site of a shopping mall — a development many say will revitalize a problem area in its bustling city core,” ESPN said.

The problem area in downtown Sacramento is entirely the fault of the city and their lousy property management. The city is responsible for driving the downtown K Street Mall area from a once-bustling pedestrian mall filled with independently owned shops and department stores, to a crime laden, blighted area replete with abandoned buildings and crazy homeless people. It sounds ripe for another publicly-funded re-do.

“How do you transfer $250 million from taxpayers to billionaires?” my friend Stephen Frank recently commented on one of my arena stories on his website. “How do you become a billionaire?  One way is to have others pay for your play toys.  Is it the role of government to pay for arenas, in Stockton they paid for a parking lot for a movie theater, LA and San Fran have the Coliseum and Cow palace—while all of California is being inundated with criminals and fewer cops.”

Frank is so right.

“Arenas are nothing more that fields of schemes, and the joke is on taxpayers. And Sacramento is hardly a bastion of economic splendor,” I wrote in March in Sacramento arena: ‘Field of Schemes.’

“Despite some of the highest unemployment in the country, escalating business closures, widespread home foreclosures and short sales, and declining tax revenue, arena talks are all the rage in Sacramento.”

According to Eye on Sacramento, a Sacramento-based public policy watchdog group, Sacramento’s “city staff has grossly understated the total public contribution to the arena. Instead of contributing $258 million, EOS estimates that city taxpayers will be contributing $334 million to the project, representing not 58 percent of the project cost, as claimed by staff, but 75 percent of the project’s cost (not counting subsidies provided by county government or future undetermined traffic infrastructure costs.)”