Posted by: macjohns | March 30, 2011

The Continuing Fight for Redevelopment: Understanding the Stakes

On Thursday, March 24th, I attended “A Conference on Redevelopment” that was sponsored by the UC Center and Capitol Weekly Newspaper. The event was composed of two panels and a keynote address at the end. The first panel was called “Follow the Politics” and the second was called “Follow the Money”. Both panels were designed to give participants the various perspectives on the political and economic effects of eliminating the state’s 425 redevelopment agencies as Governor Brown has proposed to do.

The “Follow the Politics” panel consisted of: Assemblymember Chris Norby (R-Fullerton); Julie Spezia, Executive Director of Housing California; Mike Madrid, editor and publisher of California City News; and a representative from California State Senate President Pro Tempore, Darrell Steinberg’s office. The composition of the panel provoked some very heated debate as some members were for the elimination of redevelopment agencies and others were against.

Chris Norby, as the only Republican to vote in favor of eliminating redevelopment agencies, challenged both Mike Madrid and Julie Spezia for their pro-redevelopment views. More specifically, Norby’s views are truly neoliberal and he takes issue with taxpayer money being given to corporations in the form of government subsidies. Norby also sees a certain futility in providing a form of corporate welfare to businesses that can simply relocate if another city lures them with a more lucrative deal. Norby reinforced his points by citing that no credible studies have demonstrated that funding redevelopment actually produces a net economic gain. If they do provide economic benefits, he challenges them to return some of the property tax revenue that they have seemingly created. Finally he called the fact that roughly 12% of property taxes go to redevelopment, “unsustainable” and believes that the financial crisis exposed this fact. Since cities are heavily reliant on sales tax revenue because of Proposition 13; Norby believes that the term “economic development”, as used in the present context and as promoted by redevelopment agencies, is just a code word for “more sales tax”.

Julie Spezia and Mike Madrid sat on the other side of the ideological spectrum. Spezia insisted that the elimination of redevelopment agencies would mean that building affordable housing in urban areas would prove impractical. She believes that without direct subsidies for affordable housing development, the housing crisis will get worse; with a growing percentage of the “new homeless” being composed of families. Her determination to keep redevelopment agencies open has to do with the fact that homelessness has grown 17% in Sacramento alone in the past few years; even necessitating the establishment of the nation’s first “tent city” in modern history. Spezia also mentioned that redevelopment funding for housing creates 13,000 jobs annually in the state (this was refuted by the Legislative Analyst’s Office, however). Mike Madrid’s take on the matter had a lot to do with accountability to voters. Madrid was indignant that the Governor proposed to eliminate and “steal” redevelopment funding although voters have expressly sought to “firewall” local funds through the initiative process in recent years. To make his point he mentioned Proposition 22; which prohibits the state from borrowing or taking funds used for redevelopment, transportation, or local government projects even during fiscal hardship. Madrid adamantly believes that the voters do not trust government at the state level and added that cuts to redevelopment agencies will only mean greater hardship for California residents at the local level. Madrid’s is a Keynesian approach whereby the projects generated through redevelopment become even more critical in mitigating the effects of this “Great Recession”.

Finally, Darrell Steinberg’s representative chimed in at the end of the political bickering to acknowledge that the Governor’s proposal will most likely pass; despite challenges brought on by the passage of Proposition 22. Steinberg’s office insists that redevelopment plans in the future, however they take shape, must take into account our goals with regard to: climate change, transportation efficiency, affordable housing, as well as the population growth that we expect in the coming decades. Steinberg’s office agreed with Julie Spezia that public funding is needed to make infill development more economically viable- as opposed to letting development continue, unfettered, in the hinterlands. Steinberg encouraged a regional approach to this problem and his office assumes the end of redevelopment as we know it but wants to be a part of preserving the successes of redevelopment while eliminating those excesses outlined by Norby.

The second panel “Follow the Money” consisted of: Ron Loveridge, Mayor of Riverside, President of the National League of Cities, and professor of Political Science at UC Riverside; Chris McKenzie, E.D. of the League of California Cities; Brian Wilson (for Terry Brennand, Senior Government Relations Advocate for SEIU California); and Marianne O’Malley, Director of General Government for the office of the Legislative Analyst.

In the beginning of the panel, Mayor Loveridge immediately attacked the notion that redevelopment agencies should be eliminated. He cited his own experience as well as the experiences of several mayors who have used redevelopment to improve parts of their city that have been given over to crime and other forms of vice. He adamantly disagreed with Norby from the last panel and sees redevelopment funds as a flexible pot of money in an era where mayors have decreasing amounts of money that they can leverage. He sees the primary job of the city to be economically prosperous and, therefore, sees redevelopment as a tool to accomplish that aim. Chris McKenzie agreed with Mayor Loveridge and Mike Madrid wholeheartedly on the issue and reinforced the idea that Proposition 22 was a referendum against the state’s practice of raiding local government coffers to address its budget shortfalls. McKenzie added that past raids on gas taxes and other funds instigated the need to put such a measure on the ballot and that the spirit of Proposition 22 should be honored in order to change the relationship between the state and local government from a “command relationship” to a “collaborative relationship”. If Mayor Loveridge and Chris McKenzie propose any changes it is to standardize state paperwork for redevelopment agencies in order to standardize the form and practices of those agencies. So too, they would consolidate some of the 425 agencies as this sheer number implies severe governmental fragmentation.

Brian Wilson, a last minute invitee for the panel, disagreed with both Loveridge and McKenzie. Wilson is a representative of the Firefighter’s Union and his disagreement with both men had to do with the fact that redevelopment agencies regularly take money from the general fund that is almost never returned. His second disagreement was a conceptual one; he does not believe that the city’s primary function is to be economically prosperous but, instead, to guarantee the social welfare of its inhabitants. He was outnumbered 2:1. With this dynamic, the argument over which should come first: economic prosperity or social welfare, ensued for several minutes.

At the end of this emotionally intense exchange, Marianne O’Malley weighed in on the Legislative Analyst’s Office’s perspective on the matter. The LAO, as a bipartisan, objective, research-oriented body agreed more with: Brian Wilson, Chris Norby, and Darrell Steinberg. Their research has indicated, according to O’Malley, that 12% of all property taxes have been going to redevelopment agencies in recent years and that this percent has been climbing as more and more properties come under the jurisdiction of redevelopment agencies. This translates into $5.2 billion annually. In looking at the research, the LAO disputes the numbers of jobs that proponents have claimed that redevelopment  creates, and they dispute the $2 billion per year in tax money generated from these projects, based on a CSU Chico study, on methodological grounds. In short, they do not agree that redevelopment is a job-creator nor an economic engine for the state. The LAO maintains that investments in human capital (education, vocational training and the like) and basic infrastructure are more lucrative for cities in the long-term than any spatially located investments. Being above the political and ideological fray, O’Malley met with no opposition from other members of the panel.  At the end of her address to the panel and audience, O’Malley then explained how elimination of the agencies would work and how funds would be freed up for local government. Of the $5.2 billion that redevelopment agencies receive, $2 billion will be needed to pay off incurred debts. Additionally, “pass-through agreements” (deals with schools, counties, or special districts to offset property tax gaps) will total $1.3 billion annually and what’s left is $1.9 billion annually. The governor proposes to take $1.7 billion of that this year to fill holes in Medi-Cal and trial court funding. In subsequent years, the entire $1.9 billion would be given to local government entities.

At the end of the panel, I asked both Mayor Loveridge and Chris McKenzie (as President and Executive Director, respectively, of the National League of Cities and League of California Cities) about lobbying efforts at the Federal level to secure more funding for the State of California. McKenzie answered most eloquently by stating that even though Federal support to both states and municipalities has been plummeting for over three decades, efforts at that level primarily involve playing defense against future cuts to Community Development Block Grant funding. It seems the political economy is one that is increasingly favoring “small government”, which in the local context means “fend for yourselves”. In this context, the Governor’s proposal is just a frantic and contentious response to empty state coffers that used to be replenished by the Federal Government. However, local governments have no funds to raid and will inevitably have to make do with one less economic development tool (or crutch depending on who you ask) at their disposal.

 

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