A Leap Day Funeral for Redevelopment Agencies in California
Today, I attended SPUR’s fantastic lunchtime forum on the Death of Redevelopment (agencies) in California. By way of background, last year, Governor Brown pushed through the legislature, AB 26, a bill that abolished the 400-plus redevelopment agencies in California to free up money for the state budget. Municipalities challenged AB 26 in the courts, but the State Supreme Court ruled in favor of the State, and the redevelopment agencies in California were abolished on February 1, 2012.
The panel focused on how San Francisco and Oakland had different approaches to dealing with the end of the redevelopment agencies, which provided a powerful funding tool for affordable housing and economic development projects through tax increment financing (where proceeds from property tax increases are funneled to a specific geographic area). Tiffany Bohee, the ED for the successor agency to the San Francisco Redevelopment Agency, and Fred Blackwell, the Assistant City Administrator for the City of Oakland spoke on the panel. A summary of their talk is organized below into 3 sections: 1. San Francisco’s approach, 2. Oakland’s approach, and 3. interesting bits on redevelopment in California as a whole.
After the abolition of SF’s Redevelopment Agency (SFRA), the Mayor’s Office of Housing absorbed all of the housing units in the SFRA’s purview, including the existing pipeline. All of the SFRA staff was transferred to the City Administrator’s office. San Francisco got the lone carve out to AB 26, a 7-person oversight board, where the Mayor’s office has 4 appointees, and the taxing entities have 3 appointees. This oversight board has 2 roles, a fiduciary role to oversee the wind down of the SFRA and a land-use authority role.
In terms of on-going projects, it will be more difficult to do the mid-Market revitalization, with loans to small businesses. For instance, the type of redevelopment agency loan that allowed Pearl’s Burgers to open on 6th and Market is no longer available.
Ms. Bohee was unsure what the future affordable housing mechanism would be, but commented that it would likely be decided at the ballot box. Funding options include bonds, transfer taxes, lease revenues, and certificates of preference and participation.
For economic development, multiple levels of financing are required. New market tax credits will provide $40 million in federal financing for distressed projects. Special tax districts and infrastructure financing districts, such as the ones used for Mission Bay and Transbay, were other financing options.
The structure of Oakland’s Redevelopment Agency (ORA) was radically different from the SFRA. In Oakland, there was no firewall between the ORA and the City, the ORA staff was integrated into the city staff, and Oakland used ORA money to fund part of the mayor’s salary and the police. When AB 26 passed, Oakland scrambled to reorganize the city financing structure in 2-3 weeks to make up for the lost funds.
Projects such as the Oakland Army base redevelopment project and affordable housing already in the pipeline will continue to go forward. Other development projects, such as facade improvement on commercial corridors in Oakland’s flatlands would go away, due to lack of funding.
Oakland also transferred $800 million in property from the ORA to the city during the short 2-3 week reorganization period. This led to speculation about the liabilities Oakland assumed along with this property.
The state redevelopment agency laws also provided a legislative framework for affordable housing in Oakland, and this framework is no longer in place. While San Francisco has inclusionary zoning for affordable housing, Oakland relied on the state laws that required 20% of the tax increment financing money to go towards affordable housing.
Before the abolition of the ORA, Oakland’s Community and Economic Development Agency had very little power. Now, the City Administrator’s office has the general fund and the Economic Development Agency is within its control. Mr. Blackwell stated that now that redevelopment money is no longer earmarked for poor areas, there may be more class and geographic in-fighting within Oakland for these general funds.
Miscellaneous Thoughts on Redevelopment Agencies in California:
- The moderator (whose full name I did not catch) introduced the talk by comparing the abolition of redevelopment agencies to the passage of Proposition 13 in 1978; city budgets were restructured overnight.
- Without redevelopment offices, city planning offices need to step up, but the moderator pointed out that “Planners plan, and redevelopment agencies do.” The entrepreneurial spirit of redevelopment agencies may be lost, but the Mayor’s economic development office may fill the role of the redevelopment agencies.
- With the abolition of the redevelopment agencies, an entire industry has gone away. “People didn’t just lose jobs, they’ve lost careers.”
- In the Q&A, Mr. Blackwell offered this 5 reason post-mortem for why California got rid of its redevelopment agencies:
- There were too many redevelopment agencies; over 400 in the state, and LA County alone had 70!
- Redevelopment agencies were created to eliminate “blight,” which in and of itself is a loaded and political term.
- There were some abuses within redevelopment agencies.
- This was a $2 billion fiscal issue for the state, where the state had to make up the shortfall to funding schools, when property taxes were allocated to redevelopment districts. (Personally, I believe this was the bullet that killed off the redevelopment agencies).
- We’ve never been able to answer the question, “Would redevelopment have happened without the redevelopment agency?” This is the “but for” causation question.