Play Live Radio
Next Up:
0:00
0:00
Available On Air Stations
KPBS Midday Edition

Calif. High Court Rules State Can Abolish Redevelopment Agencies

Redevelopment decision from California's Supreme Court
GUESTSTodd Gloria, San Diego City Councilmember, District 3 Elizabeth Hull, partner, Best, Best and Kreiger, chair Redevelopment & Housing practice group.

ST. JOHN: Is this KPBS Midday Edition. It's Thursday, December 29th. I'm Alison St. John in for Maureen Cavanaugh. The end of 2011 already. Well, it's a subject we've been talking about all year. Ever since California governor, Jerry Brown, suggested dissolving redevelopment agencies to help fund schools. There's been a battle Royale has local governments fought the plan, saying it was illegal, hoping to preserve millions of dollars in property taxes they use for big projects and afford housing. Our guests are Todd Gloria, who represents district three, including golden heights, and Hillcrest. We should mention the mayor is unavailable today, but we're very glad to have you councilman Gloria. GLORIA: My pleasure ST. JOHN: Also Elizabeth hull, an attorney who serves as special council to redevelopment agencies throughout Southern California. Thank you for joining us. HULL: Thanks for having us. ST. JOHN: And if you have any questions or reactions to this pretty important ruling, 1-888-895-5727 is our number. So councilman Gloria, what was your gut reaction when you heard the ruling this morning? GLORIA: Well, I was profoundly disappointed and actually quite angry. This was the worst-case scenario for San Diego, and its poorer neighborhoods that have redevelopment. I'm thinking specifically of neighborhoods like City Heights who have utilized redevelopment to turn that neighborhood around, bring in certainly services like a police substation, a library, the first super market, that would not have been possible without redevelopment, and it's unsure how we'll continue to be able to do it without it. ST. JOHN: And for people who may not quite get why this is so important, it's not just about whether there'll be money for a new stadium, is it? GLORIA: Not at all. It's not about a stadium in my view. And people in Northpark and City Heights who have used redevelopment, this is about affordable housing, building new infrastructure, and creating jobs. And those are the things that are really on the chopping block because of today's decision. One of our primary sources of funds to create affordable housing is redevelopment. One out of every $5 from redevelopment funds going to affordable housing. Those dollars are now done. And for the 30,000 families that are on our waiting list today in the City of San Diego, their hope for suitable, affordable housing is further away today because of the Supreme Court's decision. ST. JOHN: So you're angry and surprised or not surprised? GLORIA: Well, I am surprised to the extent that in 2010, voters approved proposition 22 bite over 60% of the vote. And what that was supposed to do was safeguard those funds to really tell Sacramento that you cannot continue to balance your budget by raiding local funds. We believe this to be a way to preserve redevelopment and other tools we got from Sacramento. Naturally, the disagreed. They have the prerogative to do that. But we question what happened to the will of the voters who said we don't want anymore of this? We want Sacramento to solve its own problems. The not continual he lean on the cities to try to paper over what is the structure 58 budget deficit. ST. JOHN: And the Supreme Court's ruling is on the websites on the Midday Edition web page, on the KPBS website at KPBS.org, if you're wanting to get a bit of understanding about the background to this. It's a very good ruling 67 it's quite interesting to read. So you can catch it there if you would like. Elizabeth, there were two state laws being challenged hereof. The first basically eliminated redevelopment agencies, and the second said local government could keep property tax money for their projects if they sort of paid a ransom to school districts. Explain what the state Supreme Court ruled on the suit challenging the first law. HULL: Sure. AB 26, the first law, which is the dissolution bill said that redevelopment agencies were frozen, that they couldn't do anything, couldn't incur new debt, couldn't extend anymore funds, and then solved redevelopment agencies going forward. So you couldn't create a new redevelopment agency unless certain things had occurred, and you couldn't extend anymore funds. There was a successor entity that would take over redevelopment activities, and sort of wind down and close up your redevelopment agencies. It would pay off your debts to yard line bondholders and people like that, but you couldn't incur any new debts. And the state Supreme Court upheld 26 almost in its entirety. There were a few provisions it said were inapplicable because of their ruling. But it basically said that you can't -- that although prop 22 there is there and prop one A, and other provisions to protect local funds, those provisions did not eliminate the legislature's ability to dissolve a redevelopment agency ST. JOHN: And the second one, which a lot of cities thought would be a compromise measure where you would pay millions of closet, actually toward school, but you could still keep your property taxes or some of them for redevelopment projects. Why did that not fly? HULL: AB 27 was designed to allow agencies to pay to continue to operate. Of the state Supreme Court found that this violated prop 22. Prop 22, the measure that councilman Gloria referred to was passed to stop the diversion of agency funds to the state. The Supreme Court found that the language in prop 22 prohibited the state legislature from requiring us to make these payments. The state had taken the position that the payments weren't required. They were voluntary. But the Supreme Court found that the sanction of no longer being in existence made it not optional but required. If you want to have a redevelopment agency, you are required to make this payment, not just this year but in every year going forward. And they found that to violate will prop 22. ST. JOHN: So it's kind offinic, isn't it, councilman Gloria, that prop 22 that seemed like it would protect local government funding, according to this ruling turns out to eliminate one of the possible ways around it. GLORIA: That's right. And it's one of the unfortunate outcomes of that. But I think it under scores the fact that Sacramento will do whatever it takes to avoid its day of reckoning and to really continue to try to not -- not make difficult decisions like the City of San Diego has to make to resolve our structural budget deficit. For those who may be proud or happy about today's decision. I would caution them. Because we know this does not solve the state's budget problem, and they will be back here again next year looking for something else to paper over their billions of dollars in the deficit. We'll be back here again, it'll just be a different program. And perhaps the program that is near and dear to your heart, if redevelopment is not important to you. ST. JOHN: 1-888-895-5727 is the number to call if you do have a position on this. And there are different positions on this issue, for sure. It's a big one. Elisabeth. I wanted to ask you is this the end of the legal battle? Is there any place you can appeal it? HULL: There really isn't any place for us to appeal. Most redevelopment agencies are hopeful that the legislature will step in and solve this problem. CRA, the redevelopment association did not believe that the legislature really intended to dissolve redevelopment agencies. The records from the hearings indicate that many of the members who spoke agreed that changes needed to be made, but total elimination of redevelopment agency probably wasn't in the best interest. But the way the law was written, and the way the Court interpreted it, that's what has occurred. So I think CRA, the California redevelopment association, and local agencies are hopeful that the legislature will step in, and solve this problem and allow us to continue to operate in some form or fashion. ST. JOHN: Interesting. Okay. Let's take a call here. Michael from Pacific Beach is on the line. Thanks for calling us. Go ahead. NEW SPEAKER: I just wanted to remind you guys that money for redevelopment was completely wasted. It went right into the hands of developers and if you look -- read through the voice of San Diego on affordable housing units that cost $500,000 a piece. And when you look at, like, the downtown library or the expansion on the Convention Center, or the new stadium, all that money was just put into the hands of the wealthy land developers. Now it's going to go to a real cost, for the kids in the the schools that have been so devastated by the problems that those developers caused ST. JOHN: OKAY, Michael. Thank you for your call because I think you're expressing the opinion of many people who do feel like schools are more deserving of their property tax dollars. But councilman Gloria, do you have a response to that? GLORIA: Well, I certainly have heard Michael's point of view from many people, including my constituents but I have to disagree strongly. The fact of the matter is, although there have been excesses; everyone acknowledged that reform was necessary. Will Tony Young created a redevelopment committee that I chair to look at ways that we can make redevelopment look better. The idea was never to end redevelopment but reform it and make it work better for everywhere. While there are examples that have been in the press, I would say look at Northpark. We have the Northpark theatre that for as long as I can remember recall, when I was growing up, it was boarded up. Redevelopment funds reopened that theatre, created an economic engine for that neighborhood, which has created helps of new small businesses up and down the avenue. New jobs, new economic. All that going back to the city's coffers. There are more stories like Northpark than there are of the ones that Michael was pointing out. All the more reason to reform it and not to end it. ST. JOHN: And as you point out, it was a big job creator. GLORIA: Look at our skyline today in downtown. Where the project, the cranes are, whether it's the world trade center, creating our homeless services center, our central library, where I understand there's about a thousand people at work today, where there is economic activity, there are redevelopment dollars there. Those are jobs that is economic activity. And we need so desperately in our city right now. ST. JOHN: 1-888-895-5727. We're talking about the decision that came down from the California Supreme Court just two hours ago about redevelopment agencies. They have been eliminated. Serena from San Diego, you've got the big question of the day. Go ahead. NEW SPEAKER: Thank you very much for taking my call. Yes, my question is regarding the late-night plan that was put together by Nathan Fletcher, Jerry Sanders, and was signed by governor Schwarzenegger as he was leaving last December 31st to continue redevelopment for San Diego, and that was all coddled together under the dark of night. And so how does this impact on that? I think mayor Sanders wanted that money for the new football stadium. And I'll listen off the air. Thank you. ST. JOHN: Thank you, Serena. Councilman Gloria? Why don't you catch that one? GLORIA: Well, I'll try. That certainly, I think raised redevelopment on the radar screen. And as the new governor came into office, struggling upon ways to balance the state budget, redevelopment, you know, has already -- a somewhat bad reputation. But at the end of the day, this is about reforming it, not ending it. The committee I chaired has looked at how is it we have had such amazing success in downtown, and how can we replicate that in neighborhoods like San Ysidro, Barrio Logan, City Heights where we have yet to see all the economic activity that we hope for? The question has now been answered by the Supreme Court, and unfortunately all those neighborhoods no longer have redevelopment, which will be critical to try to invest in those neighborhoods. I hear what the caller is saying. I think it raised it on the politicians' radar screen and part of probably why we're where we're the where we are today. ST. JOHN: A lot of listeners are wondering, what does this mean for the stadium, for example? Elizabeth, you've worked for CCDC. Does this have a big affect on the funding for the possibility of a stadium? I know that's not the only thing. It's just one of the projects that the public sort of is pretty interested in in HULL: I think it does have an impact on all of the projects that CCDC, and the other redevelopment areas in San Diego were looking to proceed with. Thes projects. They aren't going to have a funding source going forward to the extend that there were agency dollars going into them. Agency dollars are used to eliminate light, and to do public improvements. So streets, gutters sewers, fire stations, park, and affordable housing. Those funds are not longer going to be available because those tax increment funds that were going to the agency and CCDC are now going to be diverted to other taxing entities, those funds will no longer be available to assist in the development of a stadium or other projects that the city and the agencies were looking to pursue. ST. JOHN: Right. And there are projects all over the county, like the ballpark up in Escondido. Affordable housing, a huge, why. These are all issues that we'll be exploring on KPBS in the following week. Let's go to another caller right now. Midge from La Mesa. What's your comment? NEW SPEAKER: Hi. Am I on? ST. JOHN: Yes, you are. NEW SPEAKER: Okay. Yes, I'm listening and hearing so many different things including the fact that there were huge scandals with the people running these redevelopment agencies. There were the two main ones. And I thought at the time, oh, for sure they'll probably eliminate these agencies because of the amount of money going into them, the amount of money wasted with these people. And the scandals and I kept thinking, why doesn't each counsel person control a development or pursue the development in their area? Why do we have to have a whole separate entity when we've worked for many years and gotten so far? What is the deal that we have to pay huge salaries to people who turn out to cheat us and take our tax money, and then besides that, the huge salaries go onto all kinds of redevelopment things, including lower housing, more hours for libraries. ST. JOHN: And schools, yes, thank you so much for that question. That's on a lot of people's minds. Councilman Gloria, the city has done a lot already to reform some of what make was talking about,; isn't that right? GLORIA: Well, we have. The individuals I think she's referring to were all terminated am most of those organizations have had their by laws and separating agreements updated to reflect additional oversight, and corrective reform. We were looking to do more, naturally. But I think her question was why can't we individual she go out and invite investment into our distribute. And I have to tell you, I do that all the time. I represent and am proud to represent two project areas, Northpark and City Heights, and I have to say that it's the tools of redevelopment that allow me to make those of interest to people who want to create jobs. So whether it's helping to assemble plots of land, helping to supply the infrastructure the city is responsible for, that can guarantee that a new housing project or commercial development that creates jobs can go in there, those are the kinds of things that I will do, regardless of whether or not redevelopment exists. But they are additional tools that I have to close those deals. To get people to come in and create the jobs to to remove the blight. And without those tools it makes my job significantly harder. We're going to try to find other ways to invite that investment ST. JOHN: Thank you so much. We've got a lot more to talk about, including how this might affect schools, but I'd like to thank our guests. City Council man from San Diego, Todd Gloria. GLORIA: Thank you. ST. JOHN: Thank you for being with us. And Elizabeth Hull, an attorney who's shed some light on the legal implications of this important decision HULL: Thank you.

Coming up on Evening Edition we'll discuss the impact of the redevelopment ruling with Todd Gloria, San Diego City Councilman and chair of the city's ad hoc committee on redevelopment, and Ron Morrisson, mayor of National City.

The California Supreme Court today upheld a new law that will abolish community redevelopment agencies, dealing a blow to San Diego city officials who tried to keep their agency open.
Redevelopment Ruling
California State Supreme Court Ruling
To view PDF files, download Acrobat Reader.

The state's high court also struck down a companion statute that allowed local governments to keep the agencies alive by making payments to the state.

Redevelopment proponents argued that voter-passed Proposition 22, which bars the state from seizing local tax money, invalidated both laws. Redevelopment agencies are funded by the increase in tax revenue created by projects in their areas.

San Diego Councilman Todd Gloria called the ruling "the worst possible outcome."

The move effectively kills the more than 400 redevelopment agencies in the state and Gloria said this could devastate numerous projects in the city. He said unless Sacramento fixes its budget problems, cities will continue to suffer.

"It’s redevelopment this year; it will be something else next year," Gloria said. "And what we need to assure San Diegans is that we will not allow Sacramento to continue to come down here and take away funding from worthy projects like our homeless shelter, like infrastructure repairs, like the creation of affordable housing."

Critics of redevelopment says the agencies have gotten out of control. Gloria says redevelopment may have needed to be reformed, but not completely eliminated.

Supporters of the laws passed by the Legislature earlier this year, including Gov. Jerry Brown, say the money is better used to fund schools and other municipal functions during tight budgetary times. They cite a state analysts report that shows the cost of redevelopment growing without any tangible economic benefit to the state.

Since the court ruling aborted the plan to allow local governments to buy back into redevelopment, the agencies will be phased out when their currently contracted projects are completed.

The agencies not only fund major building projects, like proposed new football stadiums in downtown San Diego and Los Angeles, but spend 20 percent of their income on affordable housing.

San Diego Housing Federation Executive Director Susan Tinsky called for a new affordable housing funding source.

"In the current economic environment, more people are doubling up, living on someone else's couch, or worse yet, sleeping in their cars or on the street each day,'' Tinsky said. "We call on public officials and policymakers at all levels to join in developing and executing a plan to deal with the state's housing crisis now.''

On Wednesday, Councilman Carl DeMaio said he would work with other officials across the state to pass a ballot measure to "absolutely guarantee that redevelopment dollars remain local.''

The city of San Diego and many other local jurisdictions chose to pay the state to keep their agencies open. San Diego was due to pay $70 million.

San Diego officials point to downtown as an example of the success of redevelopment.

Statements From San Diego Officials:

San Diego Mayor Jerry Sanders: “This is a sad day for San Diego. Plain and simple, this money grab by the governor will have severe negative impacts on our neighborhoods and our economy for decades to come. Redevelopment has been an incredibly effective tool for eliminating blight, increasing the affordable housing supply and creating jobs. We’re not going to stand by idly and let the progress our communities are making simply die off; we’ll begin working immediately with our state legislators to pass new laws giving us tools enabling reinvestment in our lower-income communities.”

Coronado Mayor Casey Tanaka:"Today's decision will have many adverse impacts for the citizens of Coronado. In 2008, our voters overwhelmingly voted to support its own local hospital, and consequently, our redevelopment agency put together a plan to help pay for its retrofitting and to help maintain our local hospital to the tune of fifteen million dollars over fifteen years. Today's decision will imperil the last 12 years of this arrangement. It will also harm the ability of our redevelopment agency to continue to provide affordable housing. 20% of all redevelopment monies were required to be spent on affordable housing per state law. In the last 4 years, the city's redevelopment agency put approximately 50 new apartment units ranging from one bedroom to three bedroom units into service for senior citizens of low to moderate income. This would not have occurred without redevelopment. Future units in Coronado will not be produced without the funding and mandate that the state had set with redevelopment law in California. One of the next projects that we were slated to consider is a new senior center. With redevelopment taken away, cities and communities across the state are going to have to cancel or reconsider projects of great import to their communities. The honest truth is that Sacramento is incapable of addressing these needs and redevelopment agencies were an ingenious way for local government to address local problems in thoughtful and direct ways. Now, this tool is gone and it is a certainty that our leaders in Sacramento, who are already in over their heads, will neglect these local issues while scrambling to just keep the ship of state from sinking."

Betty T. Yee, First District Member of the Board of Equalization: “Unfortunately, this decision could eliminate a powerful tool for creatinglocaljobs. Redevelopment has been successful at stimulating economic growth, revitalizing neighborhoods, and generating tax revenues. Despite isolated abuses, redevelopment, the largest economic development program in California, has proven more effective in creating local jobs andencouraging businesses to invest in local communities than tax breaks or other tools.”

City Council President Pro Tem Kevin L. Faulconer: “Redevelopment has been a vital resource in the transformation of downtown and many of San Diego’s older communities. It has been the key to incentivizing private investment and creating affordable housing, parks and necessary public improvements in San Diego’s urban neighborhoods, all the while helping to create jobs and stimulate San Diego’s economy. The short-sighted decision by the State Legislature to take local funds from our neighborhoods and pump them into the bureaucratic black hole in Sacramento is a detriment to our region. While I am disappointed in the Supreme Court’s ruling, I will work hard to ensure community redevelopment projects currently in the pipeline continue. The public benefits that redevelopment brought to our urban neighborhoods are too important to stop. I will be looking for new tools that ensure San Diego’s tax dollars support local economic growth.”

Assemblymember Toni Atkins: "I am disappointed in the overall California Supreme Court ruling today on redevelopment. While I applaud the Court's recognition that the State has the right to determine the future of the redevelopment program that the State initiated, I am very disappointed that the voluntary op-in program was struck down. The legislative intent was to continue successful economic and affordable housing development in communities throughout California, while scaling back some activities enough to help fund education and local government. I pledge to work with Assembly Speaker Perez and my legislative colleagues to find a way to continue the best part of redevelopment activities."

Downtown San Diego Partnership President and CEO Kris Michell: "I'm disappointed, but ready for a fight. The ruling of a court doesn't stop state lawmakers, including our own delegates, from defending tax-base creating resources rather than so egregiously hamstringing struggling local economies which support this state."

District Attorney and Mayoral candidate Bonnie Dumanis:“San Diego is America’s Finest City today in no small part due to the success of our local redevelopment efforts. Sacramento politicians should have left well enough alone, and not interfered with a program that has successfully put local tax revenue to work locally, created jobs, and transformed our city for the better. When the legislature abolished redevelopment agencies earlier this year it did not discriminate between those programs that have worked well – like San Diego’s -- and those that haven’t. Instead, the legislature’s actions have led to today’s Supreme Court decision that leaves us with the worst possible outcome for San Diego. Today’s decision is a major setback to our job creation efforts locally and I call upon the legislature to get back to work in restoring redevelopment as a critical tool to building and rebuilding our cities.”

Corrected:
City News Service contributed to this story.