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Roundtable: City Could Lose $70 Million in Redevelopment Funds

Aired 7/8/11 on KPBS Midday Edition.

The dust is still settling after the California budget passed last week. And one of the questions on a lot of peoples' minds is how redevelopment projects will be affected.
Redevelopment money - the property tax increment that local governments can keep for building projects in their own communities - has been a major driver of economic growth.

The dust is still settling after the California budget passed last week. And one of the questions on a lot of peoples' minds is how redevelopment projects will be affected. Redevelopment money - the property tax increment that local governments can keep for building projects in their own communities - has been a major driver of economic growth.

GUESTS: Tom Fudge, reporter, KPBS News and author of the KPBS blog "Off Ramp"

Roger Showley, writer, growth and development, San Diego Union Tribune

Jose Luis Jimenez, social media editor, Fronteras, KPBS News

Read Transcript

This is a rush transcript created by a contractor for KPBS to improve accessibility for the deaf and hard-of-hearing. Please refer to the media file as the formal record of this interview. Opinions expressed by guests during interviews reflect the guest’s individual views and do not necessarily represent those of KPBS staff, members or its sponsors.

ST. JOHN: The dust is still settling after the California building passed last week, and a question on a lot of people's mind system how redevelopment projects will be affected. Redevelopment money, that's property tax increment that local governments can keep for building projects in our own communities has been a major driver of economic growth. How will the new laws affect what we can build? Is this the best way to raise money for schools? Do you think? 1-888-895-5727. Roger, tell us about the bills in the California state legislature that passed at the governor's urging. How did they affect redevelopment funding here.

SHIRLEY: As part of the budget deal that came at the very last minute at the end of June, there were two bills that the legislature passed and the governor signed. The first one, and they had to do with redevelopment, the first one said no matter redevelopment agency, you're out of business, and your money will go back to schools, cities, counties, and special districts. But the alternative, if you want to stay in business, you have to give the state some of your money, and a lot of money this year, and some money from now on every year. What's going on now is all the redevelopment agencies in the state, about 400 of them now have to figure out, are we going to stay in business? And if we are, how are we going to pay for the state -- some people call it a ransom. And the second question is, are they going to litigate this to death and it take years for us to know whether the money is going to go there or not. So it's very complicated, and it isn't as fun or interesting as our two previous topics but it does have a big impact on our daily lives and neighborhoods because redevelopment in San Diego County has been one of the few ways to fund neighborhood improvements. Because the money goes instead of school districts and so on, it goes into fixing sidewalks, building parks, and fixes up downtown, and doing all the wonderful things they have done for 30 years. So the question is where's the money coming from? In San Diego City, and there are other 14 cities in the county that have redevelopment, they're looking at $70 million less in redevelopment or about 40% of what they get every year this coming year. And the year after that, about 16 million. It's 40%, this year 10% or so from now on. And it doesn't sound like it's going to shut them down. CCDC that runs the downtown program says they're going to lose about $47 million. But they can handle it. And that's really one of the secrets and unknown factors about this whole business, and that is that redevelopment unlike cities do a very good job of squirrelling away their money for multiyear projects. The budget for CCDC lists a hundred and $98 million in carry over funds in the current year, which is three times or so what they owe the state. They could fund the entire City of San Diego payment to the state and still have money left over.

ST. JOHN: So that is -- in the case of CCDC which is San Diego's, it's one of the better funded agencies, a lot of power, a lot of money. But some of the other axe agencies are smaller and might be knocked out of the running all together.

SHIRLEY: An example, an organization that runs neighborhoods in southeast of downtown, and they only get five million a year, and they're gonna lose maybe half of it this coming year. And as they point out, they're way behind CCDC in getting their neighborhoods fixed up. They don't have the wherewithal, the income to do that. So whatever you take from them, they just have less to work with. The other side of the argument, does the money really belong to neighborhood revitalization?

ST. JOHN: Let's throw the ball to Tom here. What is your take on what wee got a tight bottom, how much of the redevelopment projects a priority? Is it time for the change in the way we allocate those dollars?

FUDGE: I think all you have to do is did to downtown San Diego and look at what has been done over the past 10, 15 years, and you realize that redevelopment dollars can do very dramatic things in a positive way to certain neighborhoods. But one question that I have, and maybe my comment is less a comment than a question for Roger, is I've been following this whole discussion about redevelopment agencies and Governor Brown wanting to get rid of them. The question that has come up in my mind is what is this redevelopment money, and is this money that, say, the City of San Diego otherwise would not get? Or are we simply capturing that tax increment financing and putting it into redevelopment, whereas maybe we should be putting it into schools?

ST. JOHN: Which is what this new bill would require them to do.

FUDGE: Or putting it into something else. And I guess my question to you Roger is by creating redevelopment districts are we stealing money from ourselves or stealing money from the state? Which would be better. If we're doing that, it's okay with me.

ST. JOHN: I think it's the other way around, isn't it Roger? The state is now stealing money from --

SHIRLEY: It's the same dollar running around in a train circle, and it comes back to us with some payoff to the state, I guess. But the theory of redevelopment is that without redevelopment improving the neighborhoods, you wouldn't have more taxes to begin with. Critics argue that's not, true, and the state legislative analyst issued a report some months ago saying we can't prove redevelopment creates more jobs. At the local level, it probably isn't true. Since 1974, or 72, you wouldn't necessarily have all the development you speak of. Today, it's a good argument, because there is no development, there is no tax increment growing, property tacks are flat, then there's the question, is the money distribution fair? And that's sort of the governor's point of view, saying we have higher priorities at the moment than we do very redevelopment, and the redevelopment people say, well, this is the best time to be investing because we are job generators and we'll generate more income.

ST. JOHN: 1-888-895-5727 is the number to join the Roundtable here on KPBS. And maybe you have some thoughts about whether redevelopment agencies should typeset. Do you think they need to be reformed? You got any ideas about how money for big projects should be generated? 1-888-895-5727. So Jose, what do you think about what the legislature just did? Is it stealing from the local districts?

JIMENEZ: I find it fascinating. Sacramento politics is fascinating. And I love how they set up this false choice, basically A, a ransom like you said to maintain Alive, and maybe some other agencies are in a better position to survive, others. And B, essentially commit suicide, and the state comes in and raids those funds anyway. If anything, it makes it easier for Sacramento to raid those funds. It's like a false choice that has been set up for these redevelopment agencies. And in that pretense, it seems to me there's a lawsuit coming down the road.

ST. JOHN: Roger?

SHIRLEY: There is a curious line in the legislation which I don't understand, it says if you sue and you lose, you can't have redevelopment. So obviously somebody -- I'm sure that will be in the litigation. The problem is that they did this before to syphon money off to schools. And the redevelopment people sued the state, and the lawsuit still hasn't been settled. It's like 4 or 5 years later. This thing could go on for a decade before we be what the answer is.

ST. JOHN: And the city has decided not to join the lawsuit, I understand, because of that very --

SHIRLEY: I don't know if they decided. I'm sure there are ways around it saying they could pay money to the league of California cities, then they fund it, and you can't see the city as funding it.

ST. JOHN: We have a very basic question from Van in Point Loma. Go ahead.

NEW SPEAKER: I was really baffled to hear how much money the City of San Diego, I think you said CCDC has sitting around, a hundred and none million dollars. Number one, what is the source of the funding outside the money that comes from the state? And why do they have so much money sitting around for future use? I'm going to take my answer off the air. I'm just curious about that subject.

ST. JOHN: Okay, Van. Roger?

SHIRLEY: Their basic source is property taxes generated from downtown. It's about 20 million a year for downtown projects. 20% of that has to be set aside for affordable housing. They set aside whatever that is, 25 million a year, they don't necessarily spend 25 million a year, but they use it to issue bonds to pay for projects. They build up money over several years as a multiyear budget. That's where the 198 million represents, is what they call the carryover funds.

ST. JOHN: Which is what Donna Frye used to say. But those dollars are earmarked.

SHIRLEY: Not really. They're in a programmed budget. They're not really promised or legally bound to spend them necessarily. But the trouble is, if you take 50 million out of that, then in 2014 you won't have 50 million to spend on the second phase of the north embarcadero.

ST. JOHN: They're always talking about the future.

SHIRLEY: It's too bad that people are dumping on redevelopment because they are organizing and planning properly for the future, whereas cities plan for next month. And they don't think ahead. The city spends nothing, really, on general infrastructure that doesn't come from transportation taxes or redevelopment. And that is the problem here.

ST. JOHN: Jose?

JIMENEZ: So Roger, speaking of the future, there's some bid projects proposed for downtown based on redevelopment money that will significantly alter the look of downtown. The expansion of the Convention Center and the new challengers stadium. Where do we stand with those.

SHIRLEY: The Convention Center, financing is supposed to be coming from hotels and restaurants and so on. Now the question is whether the hotel people will agree to raise their fees to pay for their share. The stadium is one of those projects people keep talking about, but as the redevelopment people say, the Chargers haven't presented a real plan to anybody. They just talk about it. They have Bart Fabiani, their front man or point man on this saying we need the stadium. But they haven't received a plan.

FUDGE: I seem to recall an article by your colleague, Tim Sullivan quoting Fabiani as staying if San Diego can't do redevelopment districts and doesn't have redevelopment money there can be no deal with the chargers. I'll just throw that out. I'm not asking you to comment on that.

ST. JOHN: The same question applies to Escondido too.

SHIRLEY: He's come up with a dozen plans for stadiums all over the county. And every couple of years, he comes up with a new one. If the Chargers want a stadium bad enough, they'll find a way to get it.

ST. JOHN: Trevor, I'm afraid we don't have enough time to take your call, but you're saying that redevelopment agencies are the only government entity capable of following through with the goal. Which is following up on your point, Roger. You're saying that these agencies are more effective than cities. But when you look at what cities provide in terms of other services, do you think that at this time of tight budgets, these dollars might be better spend somewhere else.

SHIRLEY: You can always justify spending money on eye librarian than you can on a library book. That's the trouble with the way we budget in the public realm. They do services, they're don't do infrastructure. If you let infrastructure fall by the wayside, eventually the services will worsen. It's a balancing act. I agree with him. Redevelopment is efficient, it's single purpose, it's focused. The question is, that's not -- they don't look at the big picture, the City Council and the state legislature look at the big picture, and it's up to them to set the priorities.

ST. JOHN: Thank you very much. A very good discussion. Tom Fudge, KPBS reporter and author of the KPBS blog on-ramp. Check it out on the KPBS website. Roger Shirley, who writes for growth and development and had say Jimenez, the social media editor for fronteras and KPBS news.

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