Future is blight?
City leaders blast Gov. Jerry Brown’s plan to shutter redevelopment agencies
Last Thursday morning (Feb.10) city officials from across the North State gathered on the steps of the old Chico Municipal Building to display solidarity in their opposition to Gov. Jerry Brown’s budget proposal to eliminate the state’s 425 redevelopment agencies.
Those agencies, created years ago following passage of the California Redevelopment Act in 1945 to help cities and counties eliminate blight and provide housing for the poor, take about 12 percent, or $6 billion, a year in state property taxes. Brown wants to redirect that money to be shared by schools, cities and counties.
In Chico, redevelopment has funded projects ranging from the downtown art benches to the cleanup of the old Humboldt Road Burn Dump. It helped developer Wayne Cook remodel the Hotel Diamond. In fact, the choice of using the old Municipal Building as a backdrop for the press conference was by design: Its remodel was paid for with Redevelopment Act funding, as was the revamped City Plaza.
Chico Mayor Ann Schwab, who served as the host for the press conference, said redevelopment projects serve to spur private development as well. The Hotel Diamond redo, she said, triggered the remodel of the adjacent Bank of America, the repainting of the nearby Waterland-Breslauer building, and even the upgrade of the building at Fourth and Main streets that holds Duffy’s Tavern.
“It is a public investment to spur private development,” she said. “We are infuriated, because once again Sacramento is attempting to balance its budget by raiding local-government funds.”
The mayor said that losing the redevelopment agency (RDA) will cost the city 150 jobs and $15 million in economic activity each year.
“We urge the governor and Legislature to abandon this proposal.”
Chico police Chief Mike Maloney said the RDA is important for public safety and pointed to the fact that the rebuilt municipal building houses a police substation. “It couldn’t have happened without the RDA funds,” he said. “We renovated the current [police] station with RDA funds, and there are plans to use RDA funds to build a new station.”
And Cook, owner of the Hotel Diamond, reminded listeners of the dilapidated condition of that old building, which was called the “pigeon palace” in reference to the feathered inhabitants who roosted there. Cook, who purchased the structure in 2000, called it the “essence of blight.”
“My decision to start that project was influenced by the fact I knew the city did agree to provide me with a million dollars of redevelopment money,” Cook said.
The city coughed up another million-dollar loan when Cook was halfway through the project but running out of money. He is paying the city back on a monthly basis, he said, and currently owes about $1.6 million. The project ended up costing $8.4 million.
Cook quite understandably supports RDAs.
“This is the kind of redevelopment that makes all the sense in the world,” he said. “That was the best business deal I’ve ever seen the city make.”
The idea behind an RDA is that the city adopts a redevelopment plan for a certain area or district that is deemed “blighted,” though the definition of the term is often stretched almost beyond recognition. Chico’s had four RDA areas, with the first created in 1980; in 1993 they were merged into one, called the Greater Chico Urban Area.
It’s a convoluted system that goes something like this: The property taxes assessed on the district in the first year become the base-year tax. As the property value increases because of the redevelopment, the tax on that property goes up and is called a tax increment. The base tax is distributed as it was before, but the tax increment or increase pays off the costs associated with the improvement projects. Those projects include low-income housing, art projects, building remodels, infrastructure, and other redevelopment activities.
The tax increase won’t fund the full scope of the project, so the agency issues a bond that is paid off over the years by some of that tax increment.
Chico’s RDA generates $31 million annually in tax revenue, $18 million of which goes to paying the debt service on the outstanding bonds. The other $13 million goes to low- and moderate-income housing projects and city capital projects.
According to city records, the city’s RDA is projected to stop incurring debt by October 2013, with projects ending by October 2034, and final tax-increment receipts and full repayment of debt accomplished by October 2044.
One RDA project the city is eyeing is the purchase of properties located at Park Avenue and 11th Street, the site of the old Taylor’s Drive-In and a former gas station, for a future low-income housing and commercial project. City Manager Dave Burkland said the deal is contingent upon whether the city receives a state grant to clean up the suspected contamination left behind by the underground gas tanks. Estimates put the cleanup at $150,000, but the grant ceiling is $1.5 million.
Hundreds of thousands of dollars in RDA money have been set aside for purchase of the properties, but money for the project itself would be gone if the RDA is eliminated.
In a note to the City Council this week, Burkland noted that losing the RDA would eliminate the city’s low- and moderate-income housing program and a large part of its art program. The elimination would go into effect next year.
Burkland said Brown’s plan would equate to the city getting about $5 million funneled to its general fund but losing about $14 million in RDA money.
Not everybody is sold on RDAs. Attending the press conference were Grace Marvin, a local activist and member of the Sierra Club, and Ken Fleming, who said he was representing the Northern California State Budget Alliance. Both declared their opposition.
“We need more transparency on how money is spent in this town and throughout the state,” said Marvin. “I understand 12 percent of property-tax money goes to redevelopment, and that often goes to the private contractors and insurers and all kinds of pet projects and not just for poor housing, which it is advertised to be.”
Fleming said the idea of the RDA had run its course.
“We see the RDA as a 50-year-old policy that is no longer a value to the people it was originally meant to assist,” he said. “We believe that this 12 percent of the state’s property tax needs to go to schools; it needs to go to counties for medical care and mental health and in-home support, not to build more houses that no one will live in.”
The Legislature is scheduled to vote on the governor’s budget proposal in March. It’s not clear how the RDAs will fare in that process as state representatives are lobbied by the city leaders in their districts.
But there is this: According to the State Controller’s Office, RDAs have in excess of $487 billion in bond and other obligations to repay by law to bond houses, bankers and developers. And that’s not going away no matter what happens to the RDAs.