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.

In February 2014, Gov. Jerry Brown’s administration unveiled an Economic Development Initiative to replace an enterprise zone program that had fallen out of favor after nearly three decades. Enterprise zones offered tax incentives to promote the starting of businesses in areas with high unemployment, but many analyses concluded they didn’t have a substantial positive effect. Now a centerpiece of Brown’s replacement initiative is offering up similar mixed-to-poor results.

The California Competes program was initially billed as providing $180 million through the end of fiscal 2014-15 for tax credits to lure businesses to the Golden State or to keep them from leaving. As the Sacramento Bee reported at the time, emergency regulations were hastened into place to get the program up and running.

Panorea Avdis, the chief deputy director of the Governor’s Office of Business and Economic Development, justified the move in a memo obtained by the Bee: “This program must go into effect immediately to help minimize the migration of business to other states and to encourage growth and expansion in this state.”

Four and a half years later, the sense of urgency among Brown aides about getting California Competes started is hard to square with its disappointing results. A recent Legislative Analyst’s Office report offered many criticisms:

     – Slightly more than a third of awarded credits – 35 percent – went to companies that primarily competed with other California businesses, meaning the credits create no additional economic activity, lead to an unfair competitive advantage for firms getting the credits and consume state resources that could have been use for constructive purposes.

     – There were no metrics to judge the effectiveness of the remaining 65 percent of credits, which went to companies that sold goods or services both in California and out.

     – The size of the hiring and investment commitments the companies made per $100,000 of tax credits has declined steadily in recent years, reflecting a lack of enthusiasm about the value of the credits.

     – The interest in the program had waned among small businesses, which had 25 percent of available annual tax credits set aside for their use. The LAO noted that in the last fiscal year – 2016-17 – only 49 percent of the credits were awarded, or about $30 million.

LAO says close program, but role in Amazon bid may provide cover

“The executive branch has made a good-faith effort to implement California Competes, but the problems described above are largely unavoidable,” the LAO wrote. “We recommend that the Legislature end California Competes. In general, broad‑based tax relief – for all businesses – is preferable to targeted tax incentives.”

Because the program loses its authority to grant tax credits at the end of fiscal 2017-18, the LAO report may shape the Legislature’s and the Brown administration’s decision on what to do about California Competes. The LAO says if the program is retained, its eligibility rules should be tightened up and other provisions should be revised to make it more likely the credits go to companies facing competition from rival firms in other states.

But at least until Amazon makes its decision on where to locate its second North American headquarters, the LAO’s call to shut down California Competes is unlikely to be heeded. In October, some $200 million over five years in California Competes funding was listed as the single biggest incentive to get Amazon to build its second home in California – topping the long list of tax and regulatory incentives that the Brown administration offered Amazon as enticements.

If California Competes is eventually shuttered, some state politicians are likely to strengthen their calls for the full revival of another economic development program shut down at Gov. Brown’s behest – redevelopment. In theory, redevelopment takes a portion of incoming local government revenue and directs it to projects with the promise to improve the local economy or to provide needed facilities.

Critics of redevelopment say it has a long history of being used for crony capitalism in California and that the diverted revenue often goes to cover routine City Hall expenses. But former Los Angeles Mayor Antonio Villaraigosa has made reviving redevelopment a key focus of his 2018 gubernatorial campaign, arguing that it is essential to building more affordable housing and responding to California’s housing crisis.

Redevelopment nearing return?

Good morning. Happy Monday. Gov. Jerry Brown has finished deciding the fate of all the bills passed this last legislative session.

And so if up until now you felt like there was an overdose of election coverage, well, it’s about to get worse. So enjoy our first story about the possible return of redevelopment. 

Five years ago, when state courts upheld Gov. Jerry Brown’s and the Legislature’s move to shut down redevelopment in California and seize $1.7 billion in redevelopment funds from local agencies around the state, Brown’s crusade won cheers around the state.

Many saw the diversion of some property tax revenues to well-connected developers in the name of improving “blighted” areas as akin to crony capitalism, and many also didn’t like the frequent use of eminent domain to seize land for redevelopment projects.

But Brown never really made clear if he shared this critique — or if he just thought that during a budget crisis, the $1.7 billion he could take could be put to better use. 

Now it is clear that Brown was driven by fiscal pressures. Last year, he signed Assembly Bill 2, which allows local governments to expand and better fund entities called a “Community Revitalization and Investment Authorities.”

Last week, he signed AB2492, a companion bill that defines circumstances in which local taxes can be diverted for which projects — and it appears to encourage the same sort of mischievous declarations of blight that drove critics mad in redevelopment’s previous California incarnation. 

CalWatchdog has more. 

In other news:

• “For the first time in its 148-year history, The San Diego Union-Tribune endorsed a Democrat for president — Hillary Clinton.” CalWatchdog has more. 

• “As the worst smog season in years winds down, new doubts appear to cloud a costly strategy broached three months ago by Southern California’s regional air quality agency to bring air pollution levels down to healthful levels,” reports the Los Angeles Daily News.

• “Rarely the subject of entertainment industry buzz, Gov. Jerry Brown sparked outrage and confusion among First Amendment advocates by a new law intended to protect actors’ privacy online,” CalWatchdog has more. 

• The Los Angeles Times explains “Why opponents of increasing the tobacco tax aren’t talking about tobacco.” 

• ICYMI: “CalPERS poised to cut retiree pensions in small Sierra town,” from The Sacramento Bee.

Legislature: 

• Gone ’til December.

Gov. Brown:

• No public events scheduled.

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Redevelopment is back in California.

Four years after Governor Jerry Brown led the effort to eliminate redevelopment agencies, the governor has changed his mind, signing legislation to restore the controversial institutions and their power to use eminent domain.

Earlier this month, Gov. Brown signed into law Assembly Bill 2, which grants local governments the power to create new entities to stimulate economically-depressed and crime-ridden areas. Beginning January 1, community revitalization authorities will have broad powers to issue bonds for the purpose of investing tax funds in infrastructure, affordable housing and economic revitalization projects. These new government entities formed by cities, counties and special districts will also have the power to use eminent domain and could resurrect the abuses made possible by the Supreme Court’s controversial Kelo decision.

In addition to reviving redevelopment agencies, Brown signed into law Senate Bill 107, which amends the dissolution process for the old redevelopment entities.

“These important new measures enacted today will help boost economic development in some of our most disadvantaged and deserving communities,” Governor Brown said in a press release. “California owes a debt of gratitude to Speaker Toni Atkins for her leadership on these issues over the years. Without her tireless efforts, these bills would never have passed.”

Property rights advocates disappointed with Brown’s decision

Property rights advocates, who had hoped for a veto, expressed their disappointment with Brown’s decision.

“Unfortunately, the powerful have prevailed over the vulnerable,” the California Alliance to Protect Private Property Rights posted on its Facebook page. “As in the past, the combination of eminent domain and the potential for profit will only lead to abuse, wasteful spending and public corruption.”

Under the new law, local governments can create community revitalization investment authorities in areas where the annual median household income is less than 80 percent of the statewide median. Additionally, three of the following four conditions must be met:

• Unemployment that is at least 3 percent higher than the statewide median unemployment rate;
• A crime rate that is 5 percent higher than the statewide median crime rate;
• Deteriorated or inadequate infrastructure such as streets, sidewalks, water supply, sewer treatment or processing, and parks;
• Deteriorated commercial or residential structures.

The California Alliance to Protect Private Property Rights warns that this criteria is ripe for abuse by big developers.

“Community Revitalization Investment Authorities introduce the worst form of corporate welfare,” the group said. “They allow taxpayer dollars to be used to forcibly seize private property from unwilling sellers to make way for private development. Today was a major setback for private property rights in California.”

Bipartisan support for Redevelopment 2.0

The measure to revive redevelopment agencies received bipartisan support in both houses of the state Legislature. AB2 passed the State Assembly on a 58-15 vote with the support of a half-dozen Republicans, including outgoing Asssembly GOP leader Kristin Olsen.

“Today, we celebrate a major victory for our state’s most disadvantaged communities with the governor’s signature of Assembly Bill 2,” said Assemblyman Luis Alejo, D-Salinas, the bill’s author. “For three years I have worked diligently with the governor’s office and Assembly leadership to create policy that will serve as a new effective tool to help and uplift disadvantaged communities throughout the state. I want to thank the governor for his leadership and thoughtful consideration on redevelopment. This is the right thing for jobs, economic development and affordable housing in California.”

The bill passed the state Senate on a 29-10 vote — with the support of four Republican Senators: Tom Berryhill of Twain Harte, Bob Huff of Diamond Bar, Sharon Runner of Antelope Valley, and Anthony Cannella of Ceres.

Only one senator, Republican Jim Nielsen, R-Gerber, spoke in opposition to the bill.

“This is the resurrection of the redevelopment agencies – the failed redevelopment agencies,” he said. “They absolutely exploited and will continue to exploit – under the provisions of this bill – the seizure of private property under eminent domain.”

Eminent domain mentioned 21 times

Eminent domain is mentioned in the bill 21 times. The Legislative Counsel’s bill digest explicitly states, “The bill would authorize an authority to acquire interests in real property and exercise the power of eminent domain.”

Although the bill subjects private property to eminent domain, government agencies will receive a special carve-out from the practice.

“Property already devoted to a public use may be acquired by the agency through eminent domain, but property of a public body shall not be acquired without its consent,” the bill states.

In 2005, the U.S. Supreme Court ruled in Kelo v. New London that government agencies have the power to seize property for economic development. The decision was widely criticized across the political spectrum and inspired states to pass tougher laws limiting governments’ eminent domain powers. Here in California, the momentum for property rights reached its zenith in 2011, when Gov. Jerry Brown pushed through a plan to end redevelopment as part of his plan to balance the state budget.

California has moved one step closer to the return of redevelopment and the controversial power to seize private property through eminent domain.

The state Senate approved legislation Wednesday that would give local governments the power to create new entities, known as community revitalization authorities, to stimulate economically-depressed or crime-ridden areas. Assembly Bill 2 would grant these new government agencies broad powers to issue bonds for the purpose of investing tax funds in infrastructure, affordable housing and economic revitalization projects.

“Redevelopment was a multi-purpose tool that focused over $6 billion per year toward repairing and redeveloping urban cores, and building affordable housing, especially in those areas most economically and physically disadvantaged,” argues the bill’s author, Assemblyman Luis Alejo, D-Salinas, according to a legislative analysis. “Since the dissolution of redevelopment agencies, communities across California are seeking an economic development tool to use.”

However, property rights advocates warn that the bill’s language contains no restrictions on eminent domain and could resurrect the abuses made possible by the Supreme Court’s controversial Kelo decision.

“Today, the state Senate passed a land grab bill that will make it easier for government to seize homes, businesses and places of worship by eminent domain!” the California Alliance to Protect Private Property Rights, an opponent of the bill, posted on its Facebook page.

4 GOP Senators Join Democrats to Pass AB2

Republican Senator Anthony Cannella of Ceres, who introduced the bill on the Senate floor, argued that AB2 will provide economic stimulus to disadvantaged communities.

“This will grow jobs, reduce crime, repair deteriorating and inadequate infrastructure, clean up brownfields and promote affordable housing,” he said.

With Cannella’s support, the bill passed on a 29-10 vote — with the support of all but one Democrat and four Republicans, including Sen. Tom Berryhill of Twain Harte, Sen. Bob Huff of Diamond Bar and Sen. Sharon Runner of Antelope Valley.

Under the bill, a Community Revitalization Investment Authority could be created by a city, county or special district if certain conditions are met. The first requirement is that the area have an annual median household income that is less than 80 percent of the statewide median. Additionally, three of the following four conditions must be met:

• Unemployment that is at least 3 percent higher than the statewide median unemployment rate;
• A crime rate that is 5 percent higher than the statewide median crime rate;
• Deteriorated or inadequate infrastructure such as streets, sidewalks, water supply, sewer treatment or processing, and parks;
• Deteriorated commercial or residential structures.

Private Property Rights Threatened

Only one senator, Republican Jim Nielsen, R-Gerber, spoke in opposition to the bill.

“This is the resurrection of the redevelopment agencies – the failed redevelopment agencies,” he said. “They absolutely exploited and will continue to exploit – under the provisions of this bill – the seizure of private property under eminent domain.”

Eminent domain is mentioned in the bill 21 times. The Legislative Counsel’s bill digest explicitly states, “The bill would authorize an authority to acquire interests in real property and exercise the power of eminent domain.”

Although the bill subjects private property to eminent domain, government agencies would receive a special carve-out from the practice.

“Property already devoted to a public use may be acquired by the agency through eminent domain, but property of a public body shall not be acquired without its consent,” the bill states.

Sen. Bob Huff: “We led the charge to save redevelopment”

In 2005, the U.S. Supreme Court ruled in Kelo v. New London that government agencies have the power to seize property for economic development. The decision was widely criticized across the political spectrum and inspired states to pass tougher laws limiting governments’ eminent domain powers. Here in California, the momentum for property rights reached its zenith in 2011, when Gov. Jerry Brown pushed through a plan to end redevelopment as part of his plan to balance the state budget.

Huff, who until recently served as Senate GOP leader, downplayed the “scare stories” of eminent domain abuse by private property advocates and reminded his colleagues of his past work with Sen. Rod Wright to save redevelopment agencies.

“We led the charge to protect redevelopment because it was one of the few economic developments that cities had,” Huff said on the Senate floor in support of AB2. “It was also one of the few ways to generate revenue for our affordable housing.”

With the Senate’s approval, the bill returns to the State Assembly for concurrence, where it is expected to pass with widespread support.

In May, AB2 passed by a 63-13 vote – without a single member – Republican or Democrat – voicing opposition. A dozen Assembly Republican lawmakers, including Assembly GOP leader Kristin Olsen, joined the Democratic majority in backing the bill.

Assembly Bill 2, authored by Assemblyman Luis Alejo, D-Salinas, would give local governments the power to create new entities that would have the same legal authority as redevelopment agencies. These new Community Revitalization Investment Authorities would have the power to issue bonds, award sweetheart deals to businesses and “acquire and transfer property subject to eminent domain,” according to the legislative analysis of the bill.

Property rights advocates warn that the bill’s language contains no restrictions on eminent domain and could resurrect the abuses made possible by the Supreme Court’s controversial Kelo decision.

“It brings back the right of governments to exercise eminent domain against some private parties in order to resell their property to other private parties,” cautioned Howard Ahmanson, Jr., a property rights advocate and founder of Fieldstead and Company. “Only new and wealthy suburbs would be potentially spared from ‘redevelopment,’ the lower middle class and poor would not.”

12 Assembly Republicans back redevelopment, unrestricted eminent domain

In 2005, the U.S. Supreme Court ruled in Kelo v. New London that government agencies have the power to seize property for economic development. The decision was widely criticized across the political spectrum and inspired states to pass tougher laws limiting governments’ eminent domain powers. Here in California, the momentum for property rights reached its zenith in 2011, when Gov. Jerry Brown pushed through a plan to end redevelopment as part of his plan to balance the state budget.

Now a decade since Kelo, the horror stories of small businesses being seized to make way for strip malls and condo complexes have faded from public memory. During the state Assembly’s floor debate on the bill, not a single member – Republican or Democrat – spoke in opposition to the bill, which passed by a 63-13 vote.

Surprisingly, a dozen Assembly Republican lawmakers, including Assembly GOP leader Kristin Olsen, joined the Democratic majority in backing the bill. Olsen’s office refused to comment on the bill or explain how the bill fit with the Republican Caucus’ position on property rights. One GOP lawmaker defended her vote by arguing that redevelopment agencies are an important tool for economic development.

“I ran for Assembly to help create jobs,” said Assemblywoman Young Kim, R-Fullerton. “RDAs give us another tool to do just that while turning around poor and disadvantaged areas.”

Redevelopment focused in areas with high unemployment, crime

Under the bill, a Community Revitalization Investment Authority could be created by a city, county or special district if certain conditions are met. The first requirement is that the area have an annual median household income that is less than 80 percent of the statewide median. Additionally, three of the following four conditions must be met:

• Unemployment that is at least 3 percent higher than the statewide median unemployment rate;
• A crime rate that is 5 percet higher than the statewide median crime rate;
• Deteriorated or inadequate infrastructure such as streets, sidewalks, water supply, sewer treatment or processing, and parks;
• Deteriorated commercial or residential structures.

“It’s redevelopment with a kinder, gentler twist,” explains Steven Greenhut, the state’s foremost expert on eminent domain and author of the book, Abuse of Power: How the Government Misuses Eminent Domain. “If AB2 passes, agencies will take property by eminent domain and use public dollars to fund private projects. Localities will run up debt without a vote of the public. As always, the plans of residents will give way to the edicts of the planners.”

There’s overwhelming evidence that redevelopment agencies harm small businesses, while failing in their mission to stimulate economies. That’s most evident in the landmark Kelo case, where a Connecticut town offered a corporate welfare package to the pharmaceutical giant Pfizer, Inc.

“While Ms. Kelo and her neighbors lost their homes, the city and the state spent some $78 million to bulldoze private property for high-end condos and other ‘desirable’ elements,” the Wall Street Journal observed in 2009. “Instead, the wrecked and condemned neighborhood still stands vacant, without any of the touted tax benefits or job creation.”

Those abuses extended to California’s application of redevelopment, property rights advocates say.

“California has rightly earned the reputation as one of the nation’s largest abusers of eminent domain, given that Redevelopment Agencies routinely abused their power of eminent domain to seize homes, small businesses and places of worship for private development,” wrote the California Alliance to Protect Private Property Rights, the state’s leading property rights group. “Time and time again, these obscure agencies diverted taxpayer dollars from core government programs to finance professional sports arenas, luxury hotels, golf courses and strip malls.”

Alejo: Bill needed to help disadvantaged communities

Nevertheless, supporters of AB2 say that blighted areas are a problem that demand government action.

“There are many areas in the state where the streets are broken and old water and sewer pipes lurk below,” Alejo said of his legislation. “In these areas, businesses do not open up shop. This leads to high unemployment, high crime rates and a hopeless community. This bill will work to tackle issues facing our state’s most disadvantaged communities.”

Several GOP lawmakers that opposed the bill dispute Alejo’s arguments.

“Private property rights are a foundational principle declared by our founding fathers,” said Asm. Scott Wilk, R-Santa Clarita, who opposed the bill. “Eminent domain is used by the government to trample on private property rights and as an individual property owner, there are legal protections in place to prevent government encroachment.”

Assemblywoman Melissa Melendez, R-Lake Elsinore, one of only 13 members to oppose the bill, said that she understands her colleagues interest in redevelopment, but can’t back legislation that undermines property rights.

“Stripping away property rights in the name of economic development isn’t the answer,” said Melendez, a former member of the Lake Elsinore City Council. “I think it has become more fashionable to allow the government to take over instead of allowing the free market to do so.”

Property rights advocates opposed the trio of  bills as bringing back eminent domain abuses and taxpayer-funded corporate handouts.

“Since redevelopment’s abolishment in 2011, the Redevelopment Lobby has been advocating for a replacement that would bring politically connected developers back to the public money trough,” said Nick Mirman, a grassroots activist with the California Alliance to Protect Private Property Rights, an influential property rights group that recently released a radio ad campaign against the measures. “If signed, these redevelopment bills will invite a return to the era of rampant eminent domain abuse and corporate welfare.”

2011: Brown abolished redevelopment

Brown’s signatures reversed his 2011 decision to abolish the state’s redevelopment agencies. At that time, Brown gained $1.5 billion in redevelopment funds to close the state’s budget gap. And he said the state needed to move away from redevelopment agencies.

“Some of this redevelopment has been going on for 20, 30, even 40 years,” Brown said, according to the LA Times. “We’ve got a lot of the redevelopment thrust, and now we’re going to have to move away from it or we’re going to have to cut more deeply.”

And just two years ago, City Journal reported, Brown vetoed “a slate of six bills that would have revived, in one form or another, California’s redevelopment agencies.”

AB229: Infrastructure and Revitalization Financing Districts

AB229, authored by Assemblyman John A. Perez, D-Los Angeles, would allow local governments to create Infrastructure and Revitalization Financing Districts to revive old military bases. According to the Legislative Counsel’s digest, these districts could issue 30 years of debt with the approval of two-thirds of voters in the district.

The California Alliance to Protect Private Property Rights contended, “IRFDs will have all the unchecked powers granted to Redevelopment Agencies, including the unrestricted power of eminent domain to forcibly seize homes and small businesses on behalf of politically connected developers.”

That position is supported by the California Taxpayers Association.

SB628: Redevelopment 2.0

Earlier this year, UT San Diego columnist Steven Greenhut warned the issue was “back with a vengeance.” He is the author of a book on redevelopment, “Abuse of Power: How the Government Misuses Eminent Domain.”

“Redevelopment offered wide latitude to publicly fund private development projects — and this bill could make it even wider,” he wrote. “Redevelopment revivalists have promoted the use of Infrastructure Financing Districts as a partial replacement for the defunct agencies. This bill that puts those districts on steroids.”

SB628, authored by state Sen. Jim Beall, D-San Jose, would revive redevelopment agencies under a new name, “Enhanced Infrastructure Financing Districts.” These districts would be allowed to “finance public capital facilities or other specified projects of community-wide significance” with the approval of 55 percent of voters in the district, according to the legislative summary.

The influential Howard Jarvis Taxpayers Association called the proposal “Redevelopment 2.0 without any protections whatsoever.”

AB2280: Community Revitalization and Investment Authority

The only bill vetoed by Brown was Assembly Bill 2280, by Assemblyman Luis Alejo, D-Salinas. The legislation would have allowed local governments to create a “Community Revitalization and Investment Authority in a disadvantaged community to fund specified activities.”

According to the California Planning and Development Report, “AB 2280 would revive redevelopment-style tax-increment financing in narrowly chosen urban areas, with 25% affordable housing set-asides. Those provisions are more reassuring to housing and local-government advocates but more likely to trigger the governor’s opposition to former redevelopment mechanisms and his skepticism toward housing affordability restrictions.”

In his veto message, Brown said the bill went too far. “I applaud the author’s efforts to create an economic development program, with voter approval, that focuses on disadvantaged communities and communities with high unemployment,” he wrote. “The bill, however, unnecessarily vests this new program in redevelopment law. I look forward to working with the author to craft an appropriate legislative solution.”

Redevelopment: History of abuses

Redevelopment agencies, which promise to revive blighted areas, have a long history of abusing property rights and granting sweetheart deals to developers. In the landmark case, Kelo v. City of New London, the U.S. Supreme Court allowed the city to seize the homes and property of Susette Kelo and her neighbors in Connecticut in order to provide a corporate welfare package to the pharmaceutical giant Pfizer, Inc.

“While Ms. Kelo and her neighbors lost their homes, the city and the state spent some $78 million to bulldoze private property for high-end condos and other ‘desirable’ elements,” the Wall Street Journal observed in 2009. “Instead, the wrecked and condemned neighborhood still stands vacant, without any of the touted tax benefits or job creation.”

Before they were abolished in 2011, California’s redevelopment agencies were no better than those in New London.

“California’s redevelopment agencies are some of the worst perpetrators of eminent domain abuse in the nation,” said Christina Walsh of the Institute for Justice in 2011 as redevelopment was being abolished; the institute represented Kelo. “Until state legislators abolish these agencies, no private property owner in California is safe.”

Now redevelopment is back.

“Let’s get more people working, let’s not assault RDAs,” Donnelly said in his 2011 floor speech against Gov. Jerry Brown’s plan to end redevelopment agencies, which the Legislature quickly enacted. “I don’t think we should put 300,000 private sector jobs at risk when we have 2.5 million Californians out of work.”

After searching the archives, CalWatchdog.com has uncovered more evidence of Donnelly’s strong support for redevelopment agencies, which earned him a “public thank you” from local government officials. It also included support for a late-session, gut-and-amend bill to grant one Southern California city a special exemption from the state’s end to redevelopment.

Donnelly’s campaign and legislative office did not respond to multiple requests for comment on the issue.

Cities send public thank-you message to Donnelly

The issue of redevelopment commonly pits city officials, looking to revitalize depressed areas, against private property rights advocates who argue that such projects waste billions of dollars of taxpayer funds, while abusing the eminent domain process.

In August 2011, city officials from Monrovia publicly praised Donnelly for joining their side in the redevelopment fight.

“As local mayors and city council members, we want to send a public thank-you message to state Sen. Bob Huff and Assembly members Anthony Portantino and Tim Donnelly,” Monrovia Mayor Mary Ann Lutz wrote in an August 2011 letter to the editor, published in the San Gabriel Valley Tribune.

In 2011, Donnelly voted against Senate Bill 77 and later ABX1 26, the ultimate death sentence for redevelopment that was supported by the California Republican Assembly and the California Alliance to Protect Private Property Rights. The controversial votes put him at odds with the nation’s leading property rights advocates.

Monrovia wasn’t alone in highlighting Donnelly’s defense of redevelopment agencies. The letter was issued on behalf of Anaheim, La Verne, Bradbury, Monrovia, City of Industry, Pasadena, Claremont, Placentia, Diamond Bar, San Dimas, Duarte, Sierra Madre, Glendora, South Pasadena, Highland, Temple City, La Canada Flintridge and Walnut.

“As mayors and council members, we find it hard to believe that Gov. Brown and the Legislature actually voted to eliminate redevelopment agencies from the California in spite of clear facts that redevelopment abates blighting influences and brings positive economic development benefits to our cities and the state,” Lutz wrote on behalf of local government officials.

Donnelly’s vote also caught the eye of the City of Arcadia, which debated whether the council should join in the chorus of local government “thank yous” to Donnelly “for supporting local Redevelopment Agencies.”

Donnelly backed special exemption

Now, Donnelly says that he is opposed to redevelopment and only voted to deny Brown a victory.

“I haven’t changed my position on redevelopment,” Donnelly recently said of his past vote. “I was voting to deny Jerry Brown a victory that would lead to the further destruction of our state. … I remember it very distinctly in my mind.”

That doesn’t explain why Donnelly voted later in the year to grant the City of Whittier a special exemption from the state’s elimination of redevelopment. At the close of the 2011 legislative session, the city sought a special exemption from the state law to move forward with development of the closed Fred C. Nelles Youth Correctional Facility.

Assembly Bill 31X, authored by Assemblyman Charles Calderon, D-Industry, was necessary, local officials said, “to provide assistance to Costa Mesa-based Brookfield Homes, which bid $42.5 million to purchase the 73.8-acre property from the state.”

Democrats blocked “special carve out”

But something strange happened during the floor debate. Democratic legislator after Democratic legislator rose in opposition to the gut-and-amend bill because it granted a special exemption to one redevelopment project.

“This goes outside the process that we put in place at the expense of other cities and other agencies,” said Assemblywoman Toni Atkins, D- San Diego, now the Speaker of the Assembly.

The bill also spurred opposition from then-Assemblywoman Norma Torres, D-Pomona, who noted that the bill never went through the typical committee process. According to the Whittier Daily News, “In many instances, gut and amend is used to pass special-interest bills that might otherwise die under careful analysis and public scrutiny.” ABX1 31 avoided the Assembly Housing and Community Development Committee, which was chaired by Torres.

“What it looks like to me is a special carve out, a $70 million carve out, for one city,” Torres, now a State Senator, said of the bill. “If it’s good enough for the City of Whittier, it ought to be good enough for the City of Pomona, for the City of Chino, for the City of Montclaire, and for the City of Ontario.”

Ultimately, the bill failed in a 30-27 bipartisan vote.

“DOWNTOWN SAN DIEGO — The city of San Diego’s minimum wage would increase to $13.09 an hour during the next three years under a proposal unveiled Wednesday by City Council President Todd Gloria.

“The proposed hikes, which would make San Diego’s minimum wage among the highest in the nation, would be part of a measure that Gloria and other supporters plan to place on the November ballot. …

“Gloria described Wednesday’s proposal, which was the first time he’s attached specific numbers to his campaign for a higher minimum wage, as a starting point for debate about the details of the possible ballot measure. …

“The proposal would put San Diego’s minimum wage significantly above what the state requires, which is $8 an hour but will rise to $9 on July 1 and $10 in 2016.”

Relocation costs worry businesses — but not payroll?!

I went to the news conference at San Diego City Hall where Gloria announced and took questions on his plan.

The council leader is much better-liked by Republicans, conservatives and libertarians than most San Diego Democrats. A big reason for this is that he abandoned the Dem-union push to nullify through obstruction a voter-endorsed 2006 initiative that calls for some city services to be subject to bidding that pits private companies and groups of government workers.

But the candor and pragmatism Gloria displayed in standing up to unions on that issue just wasn’t in evidence Wednesday. Here’s some of the editorial I wrote for U-T San Diego about his defense of his proposal:

“… the council leader was asked if much higher minimum wages were so good for the economy — as he contended — why didn’t businesses clamor for them? He responded by noting that many companies already pay more than $13.09 an hour. But that’s a decision they made — not one forced on them by local government.

“Gloria also said having much higher minimum wages was widely supported by the business community. That’s just not so. If his proposal is adopted, it ‘puts San Diego at a competitive and economic disadvantage,’ said Chamber of Commerce President Jerry Sanders.

“Gloria was asked if he worried about companies relocating to cities with lower minimum wages. But he said they wouldn’t because of relocation costs.

“So according to Gloria, businesses aren’t troubled by the prospect their payrolls may permanently get much bigger — but they are daunted by relocation costs. Really?”

How to help the CA middle-class: Revive redevelopment?!

Then Gloria really drove me around the bend with his economic rX for the Golden State:

“After saying there were economic policies he couldn’t influence because they were ‘above my pay grade,’ Gloria was asked what he thought Sacramento policymakers should do to create middle-class jobs.

“His response was strikingly government-centric: The council president didn’t say the state should try to change a business climate that U.S. CEOs have long called the most hostile in the nation. Instead, he said the state should revive redevelopment, in which public funds are used to attempt to revive blighted areas.”

With a handful of exceptions, some of them arguable, redevelopment was an ongoing fiasco in California for decades before Jerry Brown killed it. Doing so was the best decision Brown has made in his second turn as governor. Redevelopment sounds peachy keen, but in practice — both in California and around the U.S. — it has a lengthy history of allowing politically connected developers to use government eminent-domain powers to grab the land of existing, successful businesses without clout or fund-raising prowess.

So fear for the future, Californians. If this sort of policy prescription is the best we can hope for from one of the more reasonable members of the state’s dominant political party, we’re doomed.

If it were a movie, it might be called “Revenge of the JEDI: the Redevelopment Empire Strikes Back.” It’s the California Jobs and Education Development Initiative (JEDI), which would enable the revival of the 425 redevelopment agencies eliminated in 2011 by Gov. Jerry Brown and the California Legislature.

The initiative liberalizes the definition of “blight” to include areas where the unemployment rate exceeds the national or statewide rate. That could result in 85 percent of California’s counties being declared blighted and eligible for redevelopment.

The initiative is spearheaded by Californians for Jobs and Economic Development. The group incorporated a year ago, according to corporationwiki, but it does not have a website.

Its president is Santa Ana’s mayor for the past 20 years, Miguel Pulido. He also happens to be under investigation by the state Fair Political Practices Commission for allegedly profiting $197,000 from a real estate transaction in exchange for giving an auto parts store an exclusive city contract, according to the Los Angeles Times.

Cities donate $110,000

Several California cities donated a combined $110,000 to research the initiative. They include Ontario ($50,000), San Jose ($25,000), Anaheim ($25,000) and Pittsburg ($10,000), according to public records compiled by The California Alliance to Protect Private Property Rights, which is opposed to the initiative.

Some of the contributions never appeared on a city council or redevelopment successor agency agenda, said Nick Mirman, CAPPPR grassroots coordinator.

“Californians will be shocked to learn that taxpayer dollars that would otherwise go to public safety, parks and roads are being used to qualify a statewide initiative,” he said. “What’s more, the initiative is designed to make it easier for government to seize homes and small businesses by eminent domain so that it can be given to politically connected developers on the cheap … to build luxury hotels, golf courses and strip malls.”

Pittsburg Assistant City Manager Garrett Evans said that the city’s donation was not agendized because the city manager has the discretion to spend more than that amount, and that a council subcommittee had approved it.

Redevelopment ‘an incredible tool’

“Redevelopment was an incredible tool for Pittsburg,” said Evans. “Our community used redevelopment to build school facilities, fire stations, library improvements, parks, renovate historic structures, rebuild roads and infrastructure, and build affordable housing. Pittsburg’s crime rate is at its lowest point in 50 years because redevelopment was used to eliminate blight and unsafe buildings.

“Through redevelopment, the City worked with industrial corporations to locate and expand in our community, meaning our job base and wages increased. Our downtown was vacant and empty when I began working here 17 years ago. Now it is vibrant and full with pedestrians and restaurants. Redevelopment is a local, community-based program. Local residents decide what they want to accomplish in their neighborhood through a public process and a redevelopment plan.”

Cash cows

Redevelopment agencies had been cash cows for cities, giving them an extra $5 billion from the $50 billion that Californians pay in property taxes annually, according to an LAO analysis of the initiative. Much of the $5 billion would have gone to other governmental agencies, including fire departments, libraries and schools.

Passage of the redevelopment initiative would result in “increased resources for local redevelopment activities, growing to several billion dollars more per year, resulting in decreased resources for state and other local government activities of the same amount,” the LAO study concludes.

California’s unemployment rate has dropped to 8.5 percent from the 11.3 percent it was at when redevelopment agencies began to be dissolved in February 2012. Despite that, the initiative touts job creation as one of redevelopment’s main benefits.

Initiative findings

The initiative makes the following assumptions:

• “California has one of the highest unemployment rates in the nation and is struggling to recover from the Great Recession.
• “High unemployment is the new blight, which quickly becomes the old blight – poverty, neighborhood deterioration and crime.
• “High unemployment reduces tax revenue to state and local governments and negatively impacts funding for our cash-strapped schools.
• “Tax-increment financing [provided through redevelopment agencies] allows local governments to use locally generated property tax revenues to create jobs, build affordable housing and rebuild neighborhoods.
• “Tax-increment financing originated in California more than 50 years ago, and most other states have since adopted this powerful tool for creating jobs and rebuilding neighborhoods.
• “In 2012, California eliminated tax-increment financing for local housing and development projects, resulting in the considerable loss of 300,000 jobs, including 170,000 construction jobs, and more than $41 billion in economic activity.
• “JEDI will allow cities throughout California to use locally generated property tax revenues to create jobs, building affordable housing, rebuild neighborhoods and fund public schools.
• “JEDI will put thousands of Californians back to work and generate billions of dollars in new tax revenue for public schools without raising taxes or increasing state debt.”

Jobs claim in dispute

A study commissioned by the California Redevelopment Association concluded that redevelopment was responsible for the creation of about 304,000 jobs in 2006-07.

The LAO disputed that claim in a 2011 study titled, “Should California End Redevelopment Agencies?” (The LAO’s answer was “yes.”)

“While redevelopment leads to economic development within project areas, there is no reliable evidence that it attracts businesses to the state or increases overall regional economic development,” the study found. “[R]edevelopment may cause some geographic shifts in economic development, but does not increase the overall amount of economic activity in a region.

“The independent research we reviewed found little evidence that redevelopment increases jobs. Studies in Illinois and Texas, for example, found that their redevelopment programs did little more than displace commercial activity that would have occurred elsewhere in the region.”

The LAO said that the CRA study “vastly overstates the employment effects of redevelopment areas” due to three flaws:

• “It assumes that redevelopment agencies participate in all project area construction – even if the redevelopment agency was not a participant. “We find implausible the report’s implicit assumption that no construction with solely private financing would have occurred within a redevelopment area in the absence of the redevelopment agency.”
• “It assumes that private and public entities participating in redevelopment agency projects would not invest in other projects. Most redevelopment agency projects include significant financing from private investors or other public agencies. The CRA implicitly assumes that these private and public partners would not invest in other economic activities in the state.
• “It assumes other local agencies’ use of property tax revenues would not yield economic benefits. The property tax revenues that currently support redevelopment would flow over time to schools and other local agencies in the county. The CRA implicitly assumes that these other local agencies’ use of property tax revenues would not result in any economic activity.”

Time Structures, the research firm that performed the CRA study, wrote a point-by-point rebuttal to the LAO’s contentions:

• “The construction expenditures included in the impact analysis were limited to those that involved agency participation. The study actually includes 32 percent of the total construction activity that occurred within the project areas during the 2006-07 fiscal year. Had the LAO exercised due diligence prior to offering their conclusion on this point, they would have been obligated to take a very different position.
• “Redevelopment projects do leverage a significant amount of private capital – in our study we found that for each public dollar invested in a project, six private dollars are invested. The LAO seems to imply that this private capital is just sitting there awaiting a project; however, construction involves a good deal of borrowed capital. Construction loans are difficult to get for what are perceived as risky projects in blighted areas.
• “The economic benefits estimated in the study were limited to those arising from the redevelopment-assisted construction activity only. No benefits were calculated for the direct employment and income of agency employees or the multiplier effect arising from that income. We make no assumptions about any economic activity of other local agencies since we didn’t study such a transfer.”

Effect on education

There is also a debate on whether the Jobs and Education Development Initiative would help education.

The LAO analysis of the initiative states that there would be no effect on schools in the short term because the schools’ funding deficit due to shifting fund back to redevelopment would be made up from the state general fund. “Therefore, the measure likely would increase state education costs by around $1 billion per year, but would have little or no net effect on nonbasic aid districts,” according to the LAO.

Over the long term, funding for some school and community college districts “could be reduced potentially by a few hundred million dollars to a few billion dollars per year,” the LAO states.

Responded the initiative’s campaign spokesman, Stu Mollrich, “We believe that the initiative will increase funding for education by stimulating job creation, which increases revenues for the state’s general fund.”

The League of California Cities has not taken a position on the initiative, according to Executive Director Chris McKenzie. But if it passed, few organizations would be happier.

“We were big supporters of the former redevelopment program, which studies showed provided 300,000 private sector jobs and $2 billion in state and local tax revenue each year,” McKenzie said. “But it no longer exists, and most cities have had to devote countless hours and resources to the unfortunate dissolution process.”

‘Significant expansion of government power’

The Institute for Justice, a pro-property rights law firm, released an analysis that called the redevelopment initiative “one of the most significant expansions of government power in decades.”

“Redevelopment in California had nothing to do with creating jobs or improving education,” said IJ attorney Bill Maurer in a statement. “Resurrecting it would endanger private property and undermine the state’s fiscal stability. … It would divert money from schools and community colleges and give it to unelected governmental agencies and their politically connected business allies. The governor and the state legislature were right to end this system in 2011.”

State Sen. Jim Nielsen, R-Gerber, agreed. “California property owners were finally able to rest easy once the governor did away with redevelopment agencies in 2011,” he said. “Reviving this system again exposes homes, small businesses and places of worship to eminent domain abuse.”

“Prior to being dissolved in 2011, redevelopment agencies turned California into one of the worst states in the nation for eminent domain abuse,” according to the IJ. “Tens of thousands of acres of property were declared blighted and subject to condemnation. Those displaced were often poor minorities and the elderly.”

The initiative needs 504,760 valid signatures to qualify for the ballot. Supporters have until July 21, 2014 to collect the signatures.