Redevelopment: California's Community Revitalization And Affordable Housing Program  Eliminated !!

1. Redevelopment:California's Community Revitalization And Affordable Housing Program Eliminated !! Larry A. Rosenthal UC Berkeley NACCED OrlandoOct. 1, 2012

2. California Redevelopment: Summary • Aimed at revitalizing distressed urban areas in California • Agencies given broad powers to pursue community development objectives • Public/private: "tax increment" intended to lure private capital toward distressed urban areas • Often used in tandem with Federal programs for urban revitalization and affordable housing (UDAGs, LIHTCs, 202, CDBGs, NMTCs, even NSP)

3. Post-Prop 13 …& The Mortgage Crisis • Proposition 13 (1977) capped ad valorem taxes and reduced revenue sources for local needs • Fiscal distress and the financial crisis led to Governor Edmund. G. "Jerry" Brown's 2011-12 budget proposal to eliminate redevelopment agencies altogether • California's communities now must grapple with new policy & programmatic realities without traditional tax-increment finance tools

4. How CA Redevelopment Used To Work (i) • Every locality & county empowered to establish its own redevelopment agency • Redevelopment plans adopted to improve designated project area suffering "blight" • Long-range "redevelopment plan" authorized action to improve neighborhoods via new development and rehabilitation

5. How CA Redevelopment Used To Work (II) • Tax increment: majority of new proceeds from project-area property taxes (based on increased valuation) dedicated to redevelopment agency • Theory: but for availability of tax increment finance, private capital would remain on the sidelines • Revenue set-asides for affordable housing (20%), for neighboring jurisdictions (typically 20-30%), and other community development activities • Tool was implemented, and agencies were established, all over California

6. Agency Functions • Redevelopment agencies used their powers toward: • Site acquisition & Land assembly • Legal & administrative costs (including compliance with state monitoring) • Infrastructure upgrades • Environmental cleanup • Financial participation with builders of various projects

7. Evolving Purposes & Uses of Funds (I) • Remediation in inner-city neighborhoods, in concert with Federal urban renewal programs (late 1940's to early 1960's) • First-ring suburbs adapt redevelopment tool for new commercial districts and residential areas (1960's/70's) • State mandates affordable-housing set-asides (mid-1970's) • Proposition 13 (1978) forces communities to consider using redevelopment revenue toward basic expenses, and to steer new development towards retail and other business Timeline Source: Jack Nagle, Esq.

8. Evolving Purposes & Uses of Funds (II) • By 2000s redevelopment agencies regularly:  • Honored affordable housing expenditure requirements, targeting distressed neighborhoods • Facilitated other economic development • Collaborated with new transit-oriented and infill preferences driven by environmental and sustainability concerns Timeline Source: Jack Nagle, Esq.

9. CA Redevelopment:Statewide Impacts as of 2010-11 • >$8 billion total revenue annually; ~$30 billion of outstanding debt • 400 agencies, 750 project areas • 12% of total local property tax • Generated thousands of jobs annually • Added thousands of income-restricted units to the state's housing stock, and rehab'd thousands more

10. As Mayor of Oakland, Jerry Brown Witnessed Policy Abuses • In Oakland and elsewhere, agencies gained power and diverted funds from legislative goals of redevelopment. Known abuses included: • Disregard of affordable housing set-asides • Kickbacks benefiting developers • "Sweetheart" deals and cronyism • Accounting flaws • Payment of executive salaries, including mayor's, out of redevelopment accounts

11. Fiscal Distress Changed Perceptions • Schools funding an ongoing source of red ink in Sacramento • Years after project completion, agency banking tax increment without but for justification • Utilization of new property tax proceeds not seen as necessary for new redevelopment • School need trumps housing and community revitalization as highest priority spending target

12. Governor Brown Acts • War over funds had been underway; legislature took away more than $2 billion since 2008 • Despite the people's enactment of a proposition prohibiting more "takeaways," the Governor acted to eliminate the agencies altogether • Created successor agencies to wind down all redevelopment projects already in the pipeline

13. Aftermath • Redevelopment agencies' litigation proved unsuccessful; state supreme court ruled in Gov. Brown's favor • Tax increment has been repurposed in future years for education and health care • Localities are left to their own devices; several prominent bankruptcies announced this year • E.g., San Francisco's Prop. C would create a new Affordable Housing Trust Fund binding future appropriations from the general fund