Redevelopm​ent Ruling is Worst Possible Outcome

Carl DeMaio Carl DeMaio, Undesignated 21 Comments

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Today’s ruling by the California Supreme Court was the worst possible outcome – as it completely eliminates redevelopment agencies and undermines our ability to invest in economically distressed neighborhoods.  Today’s decision may also impact the city’s General Fund by more than $15 million a year – requiring additional cuts in our day-to-day budget.

This decision goes against the will of California voters who overwhelmingly passed Prop. 22 last year to protect redevelopment projects, and this decision will allow Sacramento to ransack important local funds in order to temporarily patch the massive budget deficit at the state.

San Diego will lose jobs – and many of our most troubled San Diego neighborhoods will lose out on opportunities for revitalization.

I am asking the Mayor and City Council to convene for a special meeting to determine a response.  I also intend to work with officials from across the state on a ballot measure that will restore these important agencies and guarantee that redevelopment funds stay local, where they belong.

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Comments 21

  1. Is this the same Carl DeMaio that was so critical of Nathan Fletcher’s legislation that strengthened San Diego’s redevelopment efforts?

    Have I mentioned recently that DeMaio is nothing more than a demagogue?

  2. Alger:

    Was that Sacramento Pol Nathan Fletcher who worked for “…legislation that strengthened San Diego’s redevelopment efforts?” successful in driving this issue to success in his service to the downtown cronies? I think not.

    Lo and behold! Carl DeMaio says, ” I also intend to work with officials from across the state on a ballot measure that will restore these important agencies and guarantee that redevelopment funds stay local, where they belong.”

    No one will remember that the Sacramento Pol tried and failed. I don’t think he will want to bring that up. Nathan Fletcher, Jerry Sanders and others will jump on to the Carl Demaio state ballot band wagon as will Democrats and Republicans from across the state. DeMaio will be driving the team.

    If Carl DeMaio keeps driving the issues he will win.

  3. Mole,

    Fletcher’s legislation did strengthen San Diego’s Redevelopment efforts. I am not sure he can be held responsible for subsequent legislation (that he voted against) and the game of “chicken” played by the Governor and the redevelopment agencies.

    Let’s be clear. Governor Brown was willing to negotiate (extort) a deal to keep the agencies in business in return for some of the revenue. I don’t believe that he nor the legislature really intended to kill the “golden goose.” However, the redevelopment agencies decided to go for all or nothing and take it to court.

    I doubt this is the final word; in fact, I would bet that a legislative fix is already in the works and it wouldn’t surprise me if Nathan Fletcher isn’t leading the charge.

    In the meantime, your man DeMaio is once again avoiding trying to work with other elected officials (as our representative democracy was intended but he seems unable to do) by going straight to initiative. In this case, however, he doesn’t have an easy target to vilify; in fact, going by the responses on the blogs, his initiative would be on the wrong side of public opinion and would be supportive of something considered even more villainous than his usual union foil, greedy developers and crony capitalism.

  4. The ‘idea’ of redevelopment is reasonable, what it does to people’s property rights and the $ that goes into developer’s pockets is outrageous. Get back to the Constitution and get government out of ‘development’.

  5. http://media.signonsandiego.com/news/documents/2011/12/29/Redevelopment_ruling.pdf

    As seen on the top of Page 4 of the Supreme Court ruling linked above, every since “1910, the Legislature proposed, and the voters approved, a constitutional admendment granting local governments exclusive control over property tax.” (California Constituion, Article XIII,1910).

    Because Redevelopment Agency (RDA) Tax Increment (TI) comes from Property Taxes, all $174 million will stay in the City of San Diego.

    Formerly Redevelopment required the Tax Increment to be shared between the Redevelopment Agencies (the City), the County of San Diego, and local schools (San Diego Unified, School Board, and Community Colleges) through Tax Sharing Agreements.

    Instead of the downtown CCDC staff deciding how to spend the annual $174 million (minus tax sharing payments to the County and schools), the State will allocate funds to the City, County, and Schools. No money will actually leave San Diego, or goes up to Sacramento. There is no State raid on local property tax funding with the death of Redevelopment.

    All former RDA TI consisting of Property Taxes will always stay local. There is no need to pass legislation to keep funds created in San Diego within the City.

    New legislation however, can be created to divvy up the $174 million in former RDA TI funds between the City, County, and local Schools.

  6. La Playa Heritage,

    Are you saying that the State gets no money from property taxes? I am not an expert, but that doesn’t sound correct.

  7. Hi Alger. I do not know except what was written in the Supreme Court ruling on Redevelopment. I believe the State gets its Revenue primarily from Income Taxes and Sales Taxes.

  8. According to that LAO report which says “revenues are allocated to local governments and school districts within the county,” property taxes are allocated from the State to the COUNTY where they came from.

    As usual, the truth lies somewhere in the middle, in this case between what I thought (State keeps some) and La Playa Heritage thought (CITY keeps all).

    Thanks T.A. for the clarification.

  9. Hi Alger.

    What percentage does the State take in Property Taxes?
    How much is some?

    You are correct. Just like now, the State decides how to Allocate local Property Tax percentages between a City, County, School, and special local district. With Redevelopment the City, County, and Schools come up with their own allocation percentages through legally binding Tax Sharing Agreements, which are then approved by the State. Therefore, Allocated by the State by the State-run Redevelopment program. The whole Supreme Court decision on Redevelopment comes to the conclusion that the State of California is in charge of Allocating locally created Property Taxes to local governments, including the City and County of San Diego, and their local schools.

    The link from Thor’s Assistant also defines:

    Property Tax as ” 1% (plus any rate necessary to cover voter–approved debt)… Revenues are allocated to local governments and school districts within the county. ”

    “Proposition 13/June 1978. Makes Legislature responsible for dividing property tax among local entities.”

    “Proposition 1A/November 2004. Restricts state’s ability to reduce local government revenues from the property tax, sales tax, and vehicle license fee.”

    “Proposition 22/November 2010. Reduces the state’s authority to use or redirect state fuel tax revenues and local property tax revenues.”

    “In 1992 and 1993, the state modified the distribution of property taxes to give a greater share to schools (thereby reducing state school spending).”

    “In 2004, the state shifted a greater share of property taxes to cities and counties to offset their losses due to the (1) reduction in the vehicle license fee rate and (2) use of local sales taxes to pay the state’s deficit–financing bonds.”

  10. I remember Prop’s 1A and 22. First we voted that the State couldn’t steal our local tax revenue and then when they kept stealing it anyway, we voted again and told them that we really mean it this time. Another example of just how effective the initiative process is.

    Here’s my fundamental question: If all the property tax revenue stays local whether or not it was created in a Redevelopment District, then why are there claims that eliminating Redevelopment Districts will help the State budget?

    One more point, the court didn’t invalidate the concept of Redevelopment Districts; they simply said that the legislature had the right to eliminate these districts because they had created them in the first place. It would be perfectly legal for the legislature to re-create Redevelopment Districts or something similar and I would bet that is what will happen, and it will happen relatively quickly.

  11. Alger,

    You asked why eliminating Redevelopment Agencies will result in more money for the State at the expense of cities.

    Under the law, the State in effect reimburses school districts for funds “lost” to Redevelopmemt Agencies. By eliminating the Agencies, much of those “lost” funds go to school districts and the State’s reimbursement is reduced.

    With all it’s warts, the fact is that Redevelopment has been a way to keep more tax revenue local and out of the hands of the State. I know many Rostrarians rejoice at the death of these local agencies, but the fact is that the money is not being returned to taxpayers, but is in effect going to the State.

    With that warm and fuzzy thought, I wish everyone a happy and safe new year.

    Jan Goldsmith

  12. Mr. City Attorney,

    Thank you for explaining so well why the argument that redevelopment hurt our schools was complete b.s.

    Don’t count me as one (although I am sure no one would consider me a Rostrarian) who is rejoicing at the death of redevelopment. Quite the contrary, I think, at least until the legislature fixes it, we have simply killed the golden goose.

    Thanks to all who have made this such a great blog to read and learn from. I wish you all a very happy and prosperous new year.

  13. Hi Mr. Goldsmith,

    How about the City of San Diego works with the County of San Diego to access the $26 million siting in the County of San Diego’s Centre City Redevelopment Agreement (CCRA) Trust Fund (66117). The $26 million could get every Homeless person off our streets. Solving Homeless in 2012 cannot be done without the leadership of the City of San Diego.

    http://www.tinyurl.com/20110816a

    The County of San Diego is rich. The County has over $1 BILLION in Reserves. The County notified CCDC last year that they will be using the $26 million in the CCRA Trust Fund for a Water Front Park at the County Administration Center (CAC), and replacement Parking Structure along Pacific Highway. The Homeless could use the money meant to eliminate blight and urban decay for the 6 identified uses approved in the 1992 Agreement for Cooperation between CCDC/RDA and the County of San Diego.

  14. La Playa,

    San Diego’s homeless problem is a disgrace, particularly downtown. The status quo is not good for residents,businesses, tourism or the homeless. Yes, it is a regional problem.

    San Diego lacks a real strategy to deal with this problem. Maybe we should hire Rudy Giuliani for some advice. At the very least, these mayoral candidates should be grilled on what approach they would take.

    As for me, I don’t believe in giving someone a bed without insisting on some level of responsibility, ranging from drug/alcohol/mental health counseling to requiring work such as picking up litter. Absent responsibility, go to jail. Work with the courts on a separate court department to deal with this similar to drug court.

    Money should go for beds, counseling and work supervision to help these people help themselves. But, there must be a strategy, not just “more beds”.

    This is a tough problem that many politicians avoid. That’s why Rudy was special for NYC.

    Jan Goldsmith

  15. Mr. Goldsmith,
    Going back to your comment about the Redevelopment Agencies, I don’t think you are getting the point.

    The state cannot afford these agencies and it seems that the agencies were turning into huge money grabs for private businesses anyway.

    It doesn’t matter if the money stays local or not. We don’t have the revenue because we have a massive deficit. On top of that, the process and philosophy behind the agencies have become higly questionable.

    The agencies are being defended by elected Republicans using arguments that sound a lot like arguments used to rail against federal stimulus plans from Obama.

    Defending the Redevelopment Agencies is a huge departure from Republican ideals when it comes to the scope, role, and cost of government…it makes someone start wondering if there is influence by those who benefit from the money that flows through these agencies.

    Taking it to court and hoping for activist judges is a huge departure in Republican ideals as well.

    Either we believe in something or we don’t. Either government should take a huge role in private business or it shouldn’t. Either we like it when government gets to use our tax money to pick winners and losers or we don’t. Either we want to cut spending or we don’t. Just becuase it benefits people on our side (like campaign contributors) doesn’t make it OK. It’s not OK to be against it when a Democrat does it, but for it when a Republican does it.

  16. Michael,

    My comment did point out that Redevelopment Agencies have
    “warts”. You pointed out some of those warts.

    There is also some good. Redevelopment only diverts tax increment in the project area. Tax increment is the difference between the property tax with the improvements and without.

    When I was mayor of Poway, we used the tax increment resulting from construction of the South Poway Business Park to help fund the roads (including the Scripps Poway Parkway) and offsite improvements needed to make the Business Park happen. What this means is that the investors who built the buildings paid more taxes because the properties were reassed due to the increased value resulting from the building, but that increased property tax revenue was used for that project to help make it happen. It had a similar effect as if there was a tax credit.

    Today, the South Poway Business Park employs thousands, has attracted a variety of businesses and generates a lot of sales tax revenue for my former city. The Scripps Poway Parkway is a major east/west road that benefits the region from Scripps Ranch to Rancho Bernardo.

    With the end of Redevelopment, the tax increment in effect goes to the State. I’m not sure how you pay for the massive roads and offsites needed for such a large project. Redevelopment is one of the few tools available in California that can be used for incentives.

    But, yes i agree that Redevelopment has been misused a lot. I think it needed its wings clipped, but maybe not a stake through its heart.

    As for Republican philosophy, I believe most would prefer taxes to be reduced, but if they’re not reduced at least keep money local. “Warts” aside, Redevelopment tax increment can be kept local and used for the direct benefit of those who pay the tax increment.

    I don’t believe that padding the State’s coffers is a Republican philosophy. I must have missed that plank in the Party platform.

    Jan Goldsmith

  17. We appreciate the City Attorney taking time out of his holiday to engage directly with our readers!

  18. Thanks, Thor.

    It was nice to spend some time on Rostra. I’ll try to do a bit more this year. But, running a large 137 lawyer law firm properly takes a lot of time. I don’t get a chance to chat like this all that much, and I regret that.

    This should be an interesting year. Our city, state and nation need some fixing, but Europe is what really scares me. Hopefully, by this time next year, Europe has not crashed and we are back on the right track.

    Have a great new year. I’ll try to dialogue occasionally.

    Jan Goldsmith

  19. My main comment here would be that we stop using terms like “the state” in discussing CA fiscal matters since so much of what “the state” does is PASS THE MONEY TO OTHER AGENCIES. A $$ goes to Sacramento, gets washed (with some nice transaction costs collected by the bureaucrats) and then sent out again to special agencies, school districts, and the counties.

    Likely the “big winner” from the elimination of RD are certain school districts. Which ones? Who the heck knows (it was once said that only 6 people understand CA’s school financing systems and thus they are not allowed to travel on the same plane). On the surface my guess is both “basic” aid districts that overlap with an RDA (for example, Coronado) and those with a high ratio of formulaic aide (essentially block grants based on attendance) to categorical aide (funds to do particular programs – like low income/English language learners/rural districts/etc).

    This is because approximately 40% of state’s general fund go to schools. More property tax going into individual districts home to eliminated RDAs mean less, as City Attorney Goldsmith notes, backfilling by the state. THAT, in turn, frees up more money to meet past Prop 98 obligations and increase formulaic aide to schools.

    More than you would ever want to know but it doesn’t illuminate to cast these debates as “local vs. State” other than to score political points (and make it a lot harder for voters to understand they face real and significant TRADE OFFS about two compelling and worthy goals)

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