Saving Redevelopment One Project at a Time

By Bill Fulton on 23 October 2012

Last week, in my Insight column available to CP&DR subscribers, I suggested that there were two possible reasons Gov. Brown vetoed SB 1156 and the other redevelopment bills. First, there’s still bad blood between him and the cities. And second, he doesn’t want to do anything that would stimulate the revival of a redevelopment lobby in Sacramento.

Yesterday, at a redevelopment panel at the American Planning Association, California Chapter, annual conference — they’re calling it APACA now, not CCAPA — San Jose Planning Director Joe Horwedel reminded me of another possible reason, related to the first two: Brown does not want to bring back redevelopment unless it’s accompanied with very strict state oversight as to how tax-increment money is used.

Horwedel’s point was a good one, because — in my view — this was one of the biggest sticking points between the state and the cities. Most other states have very strict oversight of tax-increment financing; some even have a statewide cap with an allocation process, similar to low-income housing tax credits. California had one standard you had to meet — blight — and no oversight.

Had the cities been willing to accept a statewide cap and strict state oversight, redevelopment might exist today. But the leaders of the League of California Cities decided that no redevelopment at all would be better than that kind of redevelopment. And now we have no redevelopment — and strict state oversight at the Department of Finance regularly vetoes decisions made by the oversight committees in the remnant redevelopment projects.

SB 1156, the best Steinberg bill that Brown vetoed, was a pretty solid piece of legislation — taking the state general fund out of the game, making tax-increment voluntary and collaborative, and tying it to SB 375. But it still didn’t really involve any state oversight. I still think state oversight is going to have to be part of any eventual tax-increment deal, whether cities like it or not.

Yesterday’s redevelopment panel, which I was part of, contained some good ideas about how we might move forward. Mostly the ideas focused on refocusing redevelopment on projects, rather than districts, which is more typical of tax-increment arrangements in other states.

Ken Hira of Kosmont Companies in Los Angeles described several post-redevelopment deals for retail projects, which are totally doable without redevelopment because of you can still do a sales-tax sharing deal. Bill Anderson of AECOM in San Diego, the president-elect of the national APA, suggested some possible changes to the Mello-Roos law to make it easier to form urban community facilities districts. (Currently, CFDs require a two-thirds vote — of voters if there are more than 12 in the district, or of property owners if there are less.)

Anderson’s comments reminded me of the tax-increment approach I heard about a couple of weeks ago when I was doing a Smart Growth America technical assistance project in Gwinnett County, Georgia, outside of Atlanta. Georgia allows tax-increment financing districts (known as tax-allocation districts, or TADs) with the consent of school districts, which have to surrender some property tax money. In the case of the declining Gwinnett Place Mall, the school districts went along with project-level TAD because they saw that their property tax revenue would vanish unless something was done.

Of course, in California, the schools don’t care, because they’re backfilled by the state. But maybe there’s a way to persuade the bean counters at the Department of Finance that project-level tax increment can sometimes save and increase property tax revenue in a way that benefits the general fund.

Category: News