The Future Of Redevelopment In San Diego

Along with a new state budget, late last week Governor Jerry Brown signed two bills drastically changing redevelopment agencies in California. These bills end the agencies as we've known them and require future agencies to use less property tax, with more going to local school districts. The change puts in question some major redevelopment projects in San Diego, along with making a serious impact on affordable housing.

Guests

Susan Tinsky, Executive Director of the San Diego Housing Federation

Derek Danziger, Vice President of Marketing and Communications for the Centre City Development Corporation

Read Transcript

CAVANAUGH: I'm Maureen Cavanaugh. Along with the new state budget late last week, governor brown signed two bills drastically changing redevelopment agencies in California. The two combined end the agencies as we've seen them, and require future agencies to use less property tax with more going to local cool districts. The change puts in question some major redevelopment projects in San Diego, including the expansion of the convention center, and a possible downtown chargers stadium. Joining me are Derrick danzinger, marketing and communication director for the Center City Development Corporation. Derrick, hello.

DANZINGER: Hi. How are you?

CAVANAUGH: Great. Thank you for coming in. And Susan Tinsky is with me. She's executive director of the San Diego Housing Federation. Hello, Susan.

TINKSY: Good afternoon.

CAVANAUGH: Tell us what you can about the extent of the impact of the end of redevelopment as we know it on projects in San Diego. What's gonna be hurt?

DANZINGER: The impacts are gonna be pretty far reaching. From our estimation here in San Diego, it's roughly a $70†million impact to us this year. Then it's about -- for downtown at least, that's about $47†million in one fiscal year, $11†million a year 31 after. This is things like parks and public infrastructure and fire stations and all of the things that we're counting on to make critical investments in our community future, they're gonna be affected by this.

CAVANAUGH: What are some of the bigger projects? Was i right about the convention center, the possible chargers stadium? How about the embarcadero project.

DANZINGER: There's two bills that were passed by the governor. One is ab26, and 1 is ab27. Ab26 effectively eliminates redevelopment entirely and reconstitutes it where a successor agency would be put into place, and the state could effectively go back and challenge obligations that were entered into after January. Things like you're talking about, the convention center and other things were the debts were incurring be looked at again. Then there's ab 27, which is this option for cities to opt into redevelopment, that's effectively where they have to pay this large sum of money. Then you have to look for it in terms of an impact on your budget.

CAVANAUGH: Let's step back for a moment, and as a corrector of marketing communications for CCDC, give us an over view of what you think redevelopment as done for downtown San Diego.

DANZINGER: I think redevelopment has been a tremendous success for downtown San Diego. If you remember what our downtown used to be and what it is today, it's a completely different place. Redevelopment is not all about buildings. It's about building a community, it's about providing affordable housing, neighborhood infrastructure. Just in terms of numbers, we've invested over 36†years about $1.7†billion of public money into downtown. That's been matched by $12†billion of private investment. That private investment is what generates tax revenues in the names of property tax, sales tax, and hotel tax that our city can use to do things throughout the entire San Diego area. So redevelopment as a tool, though, we're expected to grow in downtown to 90,000 residents. We're at 36,000 now, up to 90, redevelopment is the tool enabling us to build all the infrastructure in the downtown area. And affordable housing goes, that's one of the main thing our city talks about all the time. We built more than 3600 homes in downtown that are affordable. 4400 if you include those outside of the downtown community.

CAVANAUGH: Critics say there may once have been a rein for property taxes to be used for redevelopment. And the blossoming of downtown San Diego could be one of those results. But they say you don't need this taxpayer money anymore. Our schools need it more. What do you say to that argument?

DANZINGER: I think nobody would disagree that schools are vitally important. And one of the things that people may not know as part of redevelopment is that we already do have tax sharing agreement with a number of different entities. When growth and property tax, we also make hay commitment to share in the property tax revenues with the San Diego unified school district, the community college district, the county office of education and the county. So it's 30†percent of the tax increment revenues that fro to those different areas. Again, nobody disputes the fact that schools are penitentiary. But also neighborhood infrastructure, when we're dealing with the challenges that our city budget is dealing with now, and we have one of the few tools left to keep local property taxes here and reinvest those in things like parks and sidewalks and streetlights and fire stations, a state that is struggling to create jobs. Redevelopment over the course of 36†years downtown has created more than 62,000 construction jobs, more than 20,000 permanent jobs, and affect, i believe, state wide more than 300,000 jobs that are affected by redevelopment.

CAVANAUGH: Would you agree that there have been excesses in redevelopment? It's supposed to be for blighted areas, and the money is supposed to be used correctly.

DANZINGER: I would say there's no doubt that have been cases that you can look at and say, did this really fit into the definition of what redevelopment should be? You about i think here in San Diego, i think we've been a model of what redevelopment is all about. Ir think what's unfortunate is that some of the challenging situations are getting lumped into the entire thing, and rather than looking at reforming those that are not working it's the throw the baby out with the bath water syndrome.

CAVANAUGH: Susan, that sort of gets lost sometimes when we talk about redevelopment. Can you talk to us about the link between affordable housing and redevelopment?

TINSKY: Absolutely. Redevelopment is actually the second largest source of funding for affordable housing in the state, second to the federal government, had you had and other source that come from the federal government. It's no secret to anyone that San Diego is one of the most expensive markets in the nation. And i listened with interest to your prior segment on the real estate market. And we tend to really focus a lot on home ownership. But nearly 50†percent of our residents are renters. And the impact of what's going on with the economic crisis and the foreclosure crisis is that it's putting more pressure on the rental housing market. That really affects our low income residents and households. And really, we have to be cognizant that much of our laborer force in San Diego is really lower wage jobs. Our economic base is hospitality, the service sector, employment studies that say that by 2030, 150,000 new jobs are going to be created, and of those, 50 to 95% are going to be in the hospitality or service sector. Those are minimum wage jobs. To the extent this we continue to grow those segments of our economy, we need to insure that we're housing those folks. And redevelopment becomes a really significant too long for doing that, both from the perspective of the financial aspect, creating revenue to do that. But also creating a mandate for cities to include affordable housing among their housing stock.

CAVANAUGH: A lot of people would say there is no affordable housing in downtown San Diego, at least not anything that they can find. And I'm wondering if you could explain to us the link between a redevelopment project and the building of affordable housing.

TINSKY: Well -- and it's -- in terms of the law itself, a fundamental purpose of redevelopment law is the creation of affordable housing. If all of the moneys that are generated within a redevelopment project area, 20% of those are required by law to be dedicated to the construction of affordable housing. Over all, the stock of housing that's created and of any of that, 15% of that housing stock has to be affordable at some defined level. Why it's critical within the project areas is what redevelopment as a tool does is it helps to reinvest and encourage reinvestment in neighborhoods that have typically been blighted. The offshoot of that, of course, is that as you see reinvestment, the ideal is the property values go up, that's how you generate the new revenues, the tax increment. But the unfortunate thing is as values go up, the rents and home prices also go up. The affordable housing component really acts as a tool to assure that we don't gentrify the neighborhoods. And the ask folks that have been living in those communities for many years under bad circumstances can continue to live there.

CAVANAUGH: If the redevelopment agencies go away or change drastically, where would money come from for affordable housing in San Diego?

TINSKY: Well, that's a great question. And i think there's a lot of uncertainty right now. We have been -- prior to the proposal of the governor to eliminate redevelopment, affordable housing advocates were looking for other sources of affordable housing revenues at the state level. We have, over the last decade, been subsisting on two bond measures, prop 46 and 1c. Those funds are all but extended at this point. We were actively looking for other development sources. To the extent that because we're losing all of our state moneys that come from the state bond proceeds as well as redevelopment. We're gonna have to be more reliant upon capital markets, tax credits, HUD funding, and then we'll have to figure out what our next game plan is.

CAVANAUGH: I say if redevelopment goes away, even though governor brown has signed those two bills, because i know that the redevelopment agencies -- i think the leading -- we're gonna lead it here in San Diego, are intending to file suit to stop this legislation. Has a lawsuit been filed?

DANZINGER: There's two entities. The league of California cities as well ass the California Redevelopment association that are the two leading entities potentially filing litigation against this, looking at the constitutionality and the constitutional protections of redevelopment as well as proposition 22 which was passed overwhelmingly we voters last November which basically said the state cannot borrow local funds to fix its budgetary issues. That's one of the main complaints. The city of San Diego is watching these types of things. I don't know that the city is going to be -- I'm not a lawyer. I don't know that the city is going to be a necessary party to the lawsuits. There are some feelings that some of the provisions in this legislation are such that those cities that opt into the lawsuits would have no option to continue redevelopment if the state ended up prevailing in that as well. So there's a lot of discussions going on the legal side of things, and I'll leave that to our city attorneys and all of the others to assess that. Needless to say, there is litigation pends, and it will wind up in the courts for a while.

CAVANAUGH: One more legal question that i don't know if you'll feel comfortable answering, but when that lawsuit is filed if they do ask for an injunction to stop this law from taking effect, will it stop the law from going into effect and will you proceed as usual?

DANZINGER: Our hope is that if they issue a stay, we would be able to at least continue our efforts going forward. But that remains to be seen because some of the provisions within these -- 8027 is one of the options, we're looking at that and evaluating right now. In order to continue that, you need to make some decisions ooze to whether you're going to opt into ab 27 as well.

CAVANAUGH: Mayor sander's reaction to some of these bills was dramatic. He said today's reaction to redevelopment is nothing more than an extortion attempt by sacramento politicians that enables them to avoid dealing with systemic financial problems for yet another year. What kind of a rep cushion does this show you what kind of rep cushion doing away with redevelopment agencies might have on San Diego?

DANZINGER: I think absolutely. I think it's a devastating potential impact to our community to do a lot of these important projects we've been planning. There are very few cities across California that would likely be able to meet the payment threshold in order to steak around. You're talking about 400 redevelopment agencies across the state, not just the job impacts to them but the cumulative job impacts to all of those things. Here in San Diego, again, the impact for us downtown is about 45 million dollars this coming fiscal year, and about 11 million going forward after that. Our next step is in the next couple of weeks, we're going to our board of directors with a recommendation to them about how this would impact us, what types of capital projects are on our to do list, could or couldn't be affected, whether we'd be able to issue bonds out as we collect more tax increment. That will go from the board to the San Diego city council. And it's ultimately their decision whether or not to opt into the ab 27 option.

CAVANAUGH: Have you been thinking about different ways to make that payment threshold in indeed you have to divert away these property taxes.

DANZINGER: That's one of the things our staff is having to look at now, how you're going to come up with $47†million, and how do you make that impact not hurt everything you're trying to accomplish from affordable housing to the parks and everything we've been talking about.

CAVANAUGH: Both of you are in effect trying to figure out what life is like after redevelopment agencies; is that right?

TINSKY: That's correct.

DANZINGER: True.

CAVANAUGH: Okay. Well, as you consider this, how long a process do you think this is going to take, Susan, to try to find out where affordable housing goes for San Diego without a redevelopment agency?

TINSKY: As i understand it, both the California redevelopment association and league of cities have said that they are going to file this suit immediately within the supreme court, with the intent of having it resolve more quickly. And it'll really be up to the court as to when that will be resolved. There's some other measures that have been promised on the senate floor in terms of some reforms and amendments to the existing language, and we'll be watching that closely. But i knowledge for the foreseeable future everything is in flux.

CAVANAUGH: I want to thank Susan Tinski with the San Diego housing federation, and derrick Danzinger with CCDC. Thank you so much for coming in and talking about this.

TINSKY: Thank you Maureen.

DANZINGER: Thanks for having us.